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Commentary & Analysis

FREE - 2003: The Year in Review

SPECIAL NOTE:

By Gail Nickel-Kailing
Published: December 22, 2003

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Please review our special Year in Review report below. We selected some of the most interesting stories from 2003. Thank you and happy holidays,

Randy Davidson, President
and the WhatTheyThink.com team.



January

While the month of January is the dead of winter in most of the country, M&A activity was heating up, the fight for Printcafe began, and a few lawsuits made the news.

On the merger and acquisition side, EFI completed their acquisition of Best GmbH and Scitex closed their transaction to combine Scitex Vision and Aprion Digital. Konica and Minolta revealed plans to merge, at the cost of 4000 jobs. And to top it all off Moore and Wallace announced their upcoming merger.

But the most exciting M&A activity was the battle for Printcafe. Creo kicked off the excitement with an announcement that they would increase their stake in Printcafe to 55% and EFI responded quickly with their own bid for the company.

Legal action was nearly as hot! Lexmark filed a lawsuit to defend their intellectual property rights. However Pitney Bowes was in the spotlight when Stamps.com broadened their infringement claims against the company, just as Pitney Bowes and Neopost settled their suit agreeing to a cross licensing deal.

Attention trivia buffs: a tree-free paper made of 100% sugar cane fibers was introduced by Aluminum & Paper Wholesale and basysPrint sold the largest CTP plate setter in the world exposing plates up to 1515 x 3150 mm. For those of us who are metrically-challenged that is 59 by almost 123  those are big plates!

February

February was “Printcafe Month” as the industry watched closely to see who would win the hand of the most sought after company of the year. This month's Printcafe activities included: write-down of Standard Register's investment, Creo achieving 44% ownership, Creo litigation against Printcafe and EFI, and Printcafe's implementation of a Poison Pill.

Xerox was busy in court as the Federal Court of Appeals ruled that Palm infringed on Xerox patents, and the battle between Xerox and BERTL heated up.

People in the news this month: E.T. Meredith III of the Meredith Corporation passed away. Charlie Cavell delivered his parting words to analysts as the outgoing CEO of Quebecor World.

Ten Notable News Stories in 2003

- Heidelberg reorganization, including resignation of two key executives, divestiture of the Web services group, and potential changes in the joint venture with Kodak.

- The EFI/Printcafe/Creo acquisition saga.

- The merger that won't stop: Moore/Wallace Merger becomes the Moore/Donnelley Merger and once closed will equate to the largest printing company in the world.

- Kodak moves to the forefront as the new force in digital. Scitex sold Scitex Digital Printing to Kodak, and Heidelberg has disclosed negotiations with Kodak that will likely result in changes in the NexPress joint venture.

- Bruce James' plans for GPO becomes clear as he positions the organization for the future.

- EFI's sale of its 1,000,000th Fiery.

- JDF comes to life at Graph Expo with NGP/CIP4/PrintCity and a variety of other interoperability alliances.

- To the disappointment of folks in Waukesha, WI, Sewickley, PA, was chosen as the site for the GATF/PIA headquarters.

- Harry Potter: by far the best thing to happen to the book-publishing industry in years.

- Xerox makes progress in digital as the company strengthens its balance sheet and expects hundreds of iGen3 placements in 2004.

 

For a big company to get bigger, it takes big borrowing! Funding for Moore's acquisition of Wallace included $400 million in bonds, and Georgia-Pacific closed a $1.5 billion offering of senior notes.

People in the news included Marc Fors, httprint's new CEO, and Michel Desbiens, Quebecor World's new CEO.

You'll be asked this in a future game of Trivia Pursuitwhat Hollywood movie featured a Heidelberg press co-starring with a counterfeiter? Catch Me if You Can

March

March saw the end of the Printcafe/Creo/EFI soap opera with Creo increasing its offer to $3 per share and then withdrawing it. The merger agreement was signed and the new owner of Printcafe? EFI.

Other M&A activity: Agfa acquired PTL, a UK distributor; Banta bought Qualipak, R.R. Donnelley took Momentum Logistics, Wausau-Mosinee Paper picked up the assets of Laminated Papers, Gretag Macbeth signed a letter of intent to acquire Sequel Imaging, and Mail-Well sold a portion of its Digital Graphics group. A big merger: Riverwood Holding and Graphic Packaging agreed to a $3 billion merger. And the big news of the month? Just a small sale: Kinko's announced it would acquire ImageX for $16.5 million.

More big debt: HP priced a $500 million bond offering and International Paper announced a private placement of about $1 billion in notes.

People in the news - remember last month? Quebecor World's CEO, Michael Desbiens, resigned after just over a month in office.

Just plain interesting – former Vice President Al Gore (and alleged “Father of the Internet”) joined the Apple Board of Directors.

Agfa announced the sale of its 1000th LP82 Ultra Plate Processor and NUR Macroprinters sold its 500th NUR Salsa series wide-format printer.

April

Spring brings out the birds and the bees. This month's mating activity included X-Rite's acquisition of the ccDot meter product line of Centurfax Ltd C. And, the Department of Justice informed UPM-Kymmene that it would file an antitrust suit to block its acquisition of MACtac.

Back to big borrowing  IKON's subsidiary IKON Receivables Funding, issued approximately $852 million of equipment lease-backed notes.

More than a lot! EFI celebrated the sale of its millionth Fiery, MAN Roland has sold 15000 ROLAND 700s, and Creo marked its 5000th CtP installation.

Finally, trivia buffs, here's this month's most interesting company name in the news: Alien Skin shipped Xenofex 2. And that is…? A plug-in offering special effects for Photoshop, Fireworks, Paint Shop Pro, and Photoshop Elements. And if you are ever short of Ps and Qs – Agfa Monotype announced a new Monotype Library Collection of more than 1300 fonts.

May

May is a major earnings month and the numbers were all over the board:

  • Domtar  efficiency gains
  • Canon  record profit
  • Printcafe  revenue down
  • MacDermid  earnings/sales both up
  • Stora Enso  profits up/sales down
  • Moore  earnings more than double
  • Weyerhaeuser  quarterly loss
  • Multi-Color  record results for 2003
  • Agfa  sales down
  • Sappi  increases EPS
  • Bowne  quarterly loss
  • Creo  sales up year over year
  • Baldwin  sales/earnings down
  • Delphax Technologies – sales up
  • Mail-Well  profitable quarter
  • Vertis  sales/income down
  • Merrill Corporation  increased earnings
  • GBC  sales off/profit up
  • Dupont  sales/earnings up
  • Scitex  revenue up/Q1 loss
  • Danka  earnings up
  • Docucorp  record revenues/earnings down

Growing companies need money! Valassis sought to raise $160 million, Georgia-Pacific priced a $500 million senior note offering, and Vertis also offered $250 million of senior notes.

May's interesting news XMPie acquired Nuvisio and PLM will acquire Optium. Avery Dennison and UPM-Kymmene are involved in a price fixing investigation. T/R Systems received two new patents. Syskoplan is SAP's new parter to sell Print.IT after the acquisition of unit inc., and Steeb.

Where are they now? Robert Burton, most recently president and CEO of Moore Corporation, announced the formation of the Burton Management Group, made up of executives he worked with at World Color Press and Moore. We predict he'll be back in the game in 2004.

And in the interesting department, May brought the announcement that Xerox has demonstrated new printing technology that will allow two entirely separate  and detailed images  to be printed on a single piece of paper. One of them will be seen under one color of light and the other under a different color. It's described as a more sophisticated version of the children's trick of using colored cellophane to reveal a secret message.

June

Summer is here and what does June bring? Harry Potter, of course! What did we learn this month about the young wizard? That he's worth a lot of money Scholastic, the publisher, ordered a third printing of 800,000 more volumes. In Canada, the Order of the Phoenix was printed on 100% post-consumer recycled paper, processed chlorine-free. And Amazon achieved record sales of 1.3 million advance orders.

Now, back to our regularly scheduled presentation…June's mergers, acquisitions, consolidations. Heidelberg NA consolidation cost 225 jobs, MAN Roland to cut 540 jobs overseas, Engage filed for bankruptcy, Domtar cut production at four mills, and Workflow Management announced it is looking for financing or a buyer. PLM finished the purchase of Optium, a digital pre-media and large format digital firm and Vertex Network Solutions bought Beehive Software.

Lawsuits and legal issues continued to crop up. The SEC fined former Xerox executives $22 million to settle a fraud case, Banta settled the Mentor Media suit and took a $4.6 million charge, and a class action suit was filed that alleged misleading IPO information against Printcafe.

Scitex was in the news as the company appointed Nachum (Homi) Shamir as CEO and president and also sold 3 million Creo shares.

Finances for June, included big borrowing by Xerox, EFI and Danka. Xerox completed a $3.6 billion recapitalization. Danka raised $175 million. EFI raised $200 million for acquisitions and stock buy back plans and exercised an option to purchase 2.1 million shares of Printcafe stock.

Other activity on the stock markets included a Quebecor World repurchase of 10 million shares at CDN$24.00, and MAN Roland shareholders approved a squeeze out of minority shareholders.

July

A quiet month around the industry, July brought a few M&A announcements, some investment news, and a quarterly earnings roundup. Enovation acquired London Litho, X-Rite picked up Monaco Systems, and Extensis added DiamondSoft. A couple of divestitures: Avery Dennison sold its European package label operation to CCL, and AOL Time Warner handed off its DVD/CD printing, packaging, and distribution business to Cinram for a cool $1.05 billion.

On the investment side, Scitex invested $5 million in its subsidiary Scitex Vision, and  shades of the 90s!  Mimeo closed a $5.5 million financing round. The downside: Corel reduced its workforce by 9%.

People on the move this month: Thomas B. D'Agostino, Sr., the Chairman of the Board of Directors, has resigned from the Board and as Chairman amid allegations of misuse of funds. John Campanelli was named president of RR Donnelley's print business and Michael C. Ferrara was named CEO of X-Rite.

The earnings reports included the usual ups and downs, but for those interested in big numbers: IBM's second quarter results indicated sales of $21.6 billion!

August

August  the dog days of summer, had its share of interesting activities. SAVVIS snapped up WAM!NET's commercial business group, Matthews International (Pittsburgh) acquired Reproservice Eurodigital GmbH Munchen, and Radius Solutions bought London-Based, Isys. Business activity included new companies making their appearances and one shutting down.

Two new online print providers made their debuts this month: PrintingPages.com, which targets targets graphic designers and do-it-yourself business owners, and KoolPrint, which offers free professional graphic designing with printing for only the price of printing.

And Shira, a creator of automated preprint production and workflow management solutions for the print on-demand, prepress, printing and publishing markets, shut its doors.

On the legal side, a jury awarded ColorGraphics damages against Graphic Press for negligent interference with prospective economic advantage.

Faces change in the graphic arts industry, and this month R.R. Donnelley Chairman and CEO, Bill Davis, announced his retirement. James Langley, a former HP senior executive, was given the reins at Kodak as President, Commercial Printing, a new business unit which includes Kodak's Encad subsidiary and its NexPress and Kodak Polychrome Graphics joint ventures. Kamar Aulkh was appointed President of Quark, and Mats Nordlander was named President of Papyrus and Executive Vice President, Stora Enso's Merchants Division.

August financial announcements included Canon's report of $1 billion net income for the first half of the year. Scitex sold its remaining Creo shares. At the same time, Baldwin took on debt in the form of a new $20 million revolving credit facility.

September

September – the end of summer – brought Seybold 2003 once again to San Francisco. This year the excitement was a bit too much. A bomb threat cleared the hall and brought the day to a premature close. No bomb threat at Graph Expo 2003 though, which was the most successful Graph Expo of recent years.

Early fall M&A activity took on new life and a number of acquisitions were announced. Creo acquired a plate manufacturing facility; EFI bought T/R systems; Vio picked up Portland PMS (a digital asset systems integration company); Unisource added Graphic Communications (a paper broker); and Pitney Bowes acquired DDD, a service company providing fulfillment services, secure mail processing, messenger services, logistics support, and record and information management.

Meanwhile back in the courthouse, Presstek filed suit against Fuji for patent infringement, and also Presstek was named defendant in a securities class action suit. International Paper, Weyerhaeuser, and Georgia-Pacific settled their own anti-trust class action.

On the move – companies and people: httprint shifted its headquarters to the UK exiting North America. Stora Enso North America laid off 700. Kodak hired Barry Lathan (a former Xerox executive) as CEO of Encad, and International Paper CEO, John Dillion, announced his retirement.

October

Graph Expo coverage ran through September into October and kept everyone on his or her toes. This year's conference was the “JDF Expo,” and alliances and associations stepped forward to promote interoperability on a number of fronts. Networked Graphic Partners took on a life of its own as Creo pulled back and turned the alliance over to 27 member companies. The Print Council was formed to bring a focus for a variety of “Preference for Print” to promote the use of print over other media alternatives.

A couple of Heidelberg announcements caught the industry's attention. The company commented on its negotiations with Goss regarding Heidelberg's web division, and its discussions with Kodak concerning each other's equity position in the 50/50 NexPress joint venture that could put the joint venture onto another footing in the near future.

The last half of the year put companies in a buying mood. MeadWestvaco acquired Day Runner, Polestar acquired httprint, Group 1 purchased the assets of Sagent Technology, Extream Software bought Connexion Informatique, and ROI Technologies got American Label Company.

October's borrowers were Kodak, with an offer of approximately $500 million of senior notes, and Presstek completed a new $50 million credit facility. Vio added to its early funding rounds with an additional $3 million for new development.

November

Well, it's final! The new GATF/PIA headquarters is … Sewickley, PA, the home of the original GATF headquarters.

As the year cooled down in November, there was plenty of M&A activity. Scitex put Scitex Digital Printing up for sale. Colonial Printing acquired Colormark, Emtex purchased Opserver, and Forestweb snapped up Reel Time.

Shareholder activity in November was up. Good news for shareholders of Multi-Color Corporation, a 3 for 2 stock split was announced. Document Sciences repurchased 740,024 shares of its stock from Xerox and EFI announced a $50 million share repurchase plan.

In other financial news, Domtar issued $350 million of notes, Quebecor offered $500 million senior notes, and Consolidated Graphics amended its existing credit facility to provide for $150 million.

On the downside, Weyerhaeuser closed its fine paper operations in Longview, WA, and Perry Judd's in Waterloo, WI, announced that 237 would be let go as a result of the loss of a TIME contract.

Bill Ray, President of Technical Association for the Graphic Arts (TAGA), was right when he spoke in September about “printed transistors using modified commercial printing techniques to create integrated circuits and computer processors for applications ranging from novelty electronics to disposable computers.” The Palo Alto Research Center (PARC) announced that it has created the first jet-printed plastic transistor arrays. Can disposable computers far behind?

December

Heidelberg set the commercial print industry on its ear when the company announced that it will cut 1000 jobs, divest its web division, and reposition its digital operations. At the same time Holger Reichardt, Director for Marketing, Sales and Service at Heidelberg, and Wolfgang Pfizenmaier, President, Heidelberg Digital LLC, resigned from the Heidelberg Management Board.

As speculation is made that Kodak will take on more of the NexPress joint venture, Kodak solidified its position in digital printing with the acquisition of Scitex Digital Printing for $250 million. Other acquisitions announced in December included Moore Wallace's purchase of Payment Processing Solutions, technortrans acquisition of Baldwin Technology, and Transcontinental's takeover bid for Optipress along with the purchase of direct marketing firm CC3.

Another long time industry player, Perry Judd's will close its Waterloo WI plant entirely and 585 will lose their jobs. Last month, the company expected to shut down about half of the operation as a result of the loss of a long-time TIME Inc. contract.

Banta  one of few companies with more than one female director on its corporate board - lost 50% of its feminine representation when Ursula Burns of Xerox resigned.

Financial maneuvering: IKON Office Solutions announced that GE will acquire the company's $1.8 billion leasing portfolio, Georgia-Pacific closed a $500 million senior notes offering, and International Paper announced its own offering of $1 billion senior notes.

They'll be more excitement in 2004... stay tuned.

 

 

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