Commercial Printing Industry : Year in Review

Safe to say that 2010 provided enough reason to tune out from the news. Partisan politics are polarizing the U.S. government. Economies worldwide are still flagging, and anti-American factions in the Mideast are still conspiring to harm Westerners.

Americans are losing their jobs and homes at an alarming rate. National bitterness is evident on fronts ranging from bailouts for the automotive and financial institutions, to the burdens visited on social services by the influx of illegal immigrants. Those feeling the biggest pinch, the middle class, sense they are being ignored.

In that vein, it is not surprising to note that much of the industry news in 2010 was dominated by the continuing struggle of printers trying to reconcile employee ranks with dwindling press hours. White-collar crime was rampant and, in some instances, theft indirectly led to closures.

Transactions dominated the first quarter, but there was little action in the final six months of 2010. Positive news was at a premium, but there were silver linings in asset purchases.

The year began with both triumph and tragedy. An employee who was being choked to death after getting his clothes caught in the rollers of a press was liberated by his quick thinking co-workers at Sterling Press in Salt Lake City. The man returned to work two days later...his employer inundated by phone calls from printers across the country extending their well wishes.

The circumstances weren’t so fortunate for Cesar Gomez. The 41-year-old died after the one-ton lift truck he was operating at a Houston printing company toppled onto him. Gomez had been trying to maneuver the crane to another location when its base failed and the machine fell over.

The former bookkeeper at shuttered Oregon printer IP/Koke Printing was charged with bilking the firm of more than $1.5 million. Victoria Monfore, 48, pleaded guilty to theft and identity theft crimes, and was sentenced to 24 years in prison. Prosecutors said Monfore wrote herself 234 company checks totaling $1.56 million, with much of the money spent on 30 resorts trips to Las Vegas.

In easily the largest and loudest transaction of the year, Quad/Graphics, of Sussex, WI, obtained Montreal-based Worldcolor for an estimated $1.4 billion. The deal catapulted Quad into the No. 2 position in sales among all North American printers. The combined company also went public in July, trading on the New York Stock Exchange under the symbol QUAD.

Stamford, CT-based Cenveo decided to close down plants in Baltimore; Charlottesville, VA; and Omaha, NE. About 300 employees were let go in the process.

While not on a par with the Quad-Worldcolor combination, a couple of other deals shook the M&A landscape in the early part of 2010. RR Donnelley, of Chicago, agreed to terms with Bowne & Co., New York, in an all-cash deal at an estimated $481 million. But, as the year came to an end, the parties were still awaiting Hart-Scott-Rodino approval from the Federal Trade Commission.

In another impressive deal, IWCO Direct, of Chanhassen, MN, acquired the U.S. direct mail operations of Montreal-based Transcontinental. In all, four facilities switched hands.

Surprisingly, the campaign to have antidumping and countervailing duties assessed against coated paper importers—filed in September of 2009—appears to have succeeded the second time around. By a 6-0 vote, the U.S. International Trade Commission found that certain coated paper from China and Indonesia had been dumped and subsidized, resulting in injury to the domestic paper industry and its employees. Interests representing the importing concerns planned to appeal.

Looking for an effective tool to help pull itself out of a tailspin, the U.S. Postal Service (USPS) outlined an aggressive cost-cutting plan to counter the anticipated $238 billion shortfall over the next 10 years. Maintaining its viability is priority No. 1 in light of the projected loss in volume from 177 billion pieces in 2009 to 150 billion by 2020.

The Postal Service’s problems were confounded further when the Postal Regulatory Commission (PRC) rejected its exigent request for an average 5.6 percent rate increase. The PRC ruled that the USPS could not seek a hike in excess of the inflation rate. At press time, the Postal Service was appealing the decision. The agency would also learn that its postmaster general, John Potter, was retiring by year’s end.

Premier Graphics was sold via an assets auction to Nationwide Graphics of Houston, whose CEO, Carl Norton, had been managing the company since 2002.

The spring time spelled the winter of publishing life for Graphic Arts Monthly, which closed down after covering the commercial printing industry for 82 years. GAM was among 23 titles folded by Reed Business Information, a division of Reed Elsevier.

Genesis Press, Greenville, SC, was awarded a $14.5 million judgment in its court case against The Hartford. Genesis was unable to get the insurance company to pay for its losses stemming from a 2008 fire. The Hartford tried unsuccessfully to prove that relatives of the printing company’s owners had conspired to burn down their nearly bankrupt company in order to collect the insurance money.

Agfa Graphics signed a purchase agreement to obtain the assets of the Pitman Co., a U.S distributor of prepress, industrial inkjet, pressroom and package printing products and systems. The deal bolstered Agfa’s U.S. revenues to more than $500 million, and helped Agfa to enter new markets.

The 25th anniversary of the Printing Impressions/RIT Printing Industry Hall of Fame was celebrated with the installation of four new inductees: Joe Metzger, president of Metzgers Printing + Mailing; Ed Garvey, president and CEO, The Garvey Group; Joan Davidson, group president of Sheridan Publication Services; and Gary Garner, president and CEO of GLS Companies.

In a more or less expected move, Quad/Graphics announced that five plant closures and 2,200 lost jobs would result from the consolidation phase of the Worldcolor integration. Plants in Tennessee, Mississippi, Ohio and Nevada were to close by year’s end.

A tragic accident at a Quad plant in Dickson, TN, carried its own silver lining. Bruce Mitchell died in an Aug. 13 explosion, but his quick thinking may have saved the lives of others. He was able to reach a shutoff valve to prevent more of the highly flammable toluene from escaping into the plant.

Also around this time Koenig & Bauer AG (KBA) mourned the loss of longtime president Dr. Hans-Bernhard Bolza-Schunemann, who died at the age of 84. He had more than 250 patents to his credit and played a large role in numerous technological advances for the press manufacturer.

Vistaprint’s controversial third-party membership discount programs received the seal of approval by the U.S. court of appeals, which affirmed a lower court’s 2009 dismissal against the online printer and two of its third-party merchants. The lawsuit alleged that Vistaprint violated the Electronic Funds Transfer Act, among others, in conjunction with third-party membership discount programs that Vistaprint offered customers on its Website. But, the court sided with Vistaprint in finding that the site’s pages and discount programs were clearly written and not deceptive.

The owner of Digital Pre-Press International (DPI) and his plant manager were charged with involuntary manslaughter and labor code violations stemming from the 2008 death of Margarita Mojica, a pregnant woman who was crushed to death by a box creasing and cutting machine. A post-accident inspection yielded 14 citations totaling $81,000 in fines for not properly training workers. Mojica’s family and DPI previously settled out-of-court in a wrongful death lawsuit.

In a later announcement, Quad/Graphics closed a plant in Quebec and reduced its Canadian workforce by more than 300 in an effort to create a more efficient, flexible manufacturing platform. The printer also announced that it was investing $23 million in its infrastructure over the next year.

On a plus note for printers investing in equipment during 2010, President Obama signed into law the Small Business Bill H.R. 5297, which temporarily extended bonus depreciation and increased the small business expensing limit. This enabled printers to take advantage of the 50 percent bonus depreciation deduction on new equipment purchased and placed into service during 2010. The law also increases the small business expensing limit to $500,000.

Quad/Graphics finished the year with a flourish. It received $46 million in assistance from the state of Wisconsin to help create jobs, then acquired the highly respected HGI Co. (nee Hi-Liter Graphics) of Burlington, WI, in early November.

While 2010 was a modest step up from its predecessor, the industry still finds itself awash in capacity, dealing with smaller and smaller print runs, and thinking long and hard about what role inkjet digital printing will play in the near future.

The “new normal” may be taking hold but, as you’re well aware, there’s nothing normal about this industry. PI