The LVI bankruptcy has engendered a high level of chatter throughout the industry. Undoubtedly, LVI’s visibility in becoming a print optimization resource has played a central role in piquing people’s interest in its failure.
Conspiracy theories have arisen – largely because of Toby LaVigne’s involvement with both LVI and HubCast. I don't think there's anything sinister about the HubCast offer for LVI, though the connections between the two companies have everyone looking for a plot. For what it's worth, I know Toby well and Toby's not that kind of guy. More to the point, Toby, as the sole owner of LVI, will lose far more than anyone else in the LVI bankruptcy.
HubCast seems to be the only logical bidder for LVI, but I would guess that the creditors will have to get comfortable with the dimensions of LVI's smoldering crater before they can seriously evaluate any offer for the company's remains. Without knowing anything about the offer or about LVI’s underlying financial condition, it seems to me unlikely that LVI would have sufficient value to a third party to encourage a competing bid.
The LVI bankruptcy is a tragedy on many levels – not just for the financial losses everyone will suffer, but also for the mistrust it has engendered. And it seems even more of a tragedy because they had a very good idea that wasn't implemented as well as it might have been.
Looking for greener pastures has never been more urgent than in today's industry environment. It's just crucial to remember that you still have a herd of elephants grazing in your backyard, and if you don't feed them every day, they’re likely to flatten your house.
That’s why it’s crucial for printers to realize that it would be much easier if they were starting from scratch in building a digitally-adapted business. Achieving the transition while operating as a traditional printer is a daunting task – and it’s befuddled some very able people.
Perhaps the old joke about Creation can be applied to our industry: The question has been asked: How could God have created Heaven and Earth in only six days? The answer: It was easy. He didn’t have an installed base to defend.
I’ve just revised my book - The Graphic Arts CEO – Facing Reality and Getting Results. Virtually all the lessons focus on the need to make wholesale changes in most printers’ business models without endangering the businesses’ well-being.
To make a healthy and profitable transition, you need a 360 degree plan that remembers to feed the elephants while never forgetting that your objective is to get out of the circus business.
That’s exactly what the WhatTheyThink Print CEO Forum will focus on. Held on September 11-12, just before PRINT’09, the Forum will examine what profit-leading companies are doing to face reality and get results. There won’t be any pointy-headed theories, just practical ideas from people who are addressing the same relentless issues you face every day. You might find the Forum just the recipe you need for developing a profitable plan for your business.
Discussion
By Adoniram on Jul 22, 2009
Having much more experience with LVI's VDP operations than their big iron, I can say that they were exceptionally helpful and forward thinking at the operational level. It's very upsetting to see this occur, because LVI seemed to be investing in about the only area where print can be competitive (VDP) on a local, small business level. I would loathe to think that other CEO's will see the LVI bankruptcy and trend towards their traditional operations - that will be the death knell for the industry.
By Patrick Berger on Jul 22, 2009
Bankruptcy why is it so prevalent? Our company has always used the philosophy can we still afford it if our business revenues dives by 40%.
Being financially sound when times are good is everyone's goal. The problem is business always has hill and valleys surviving on the hills are a cake walk. It's those you can survive the valleys who will be tomorrows new leaders.
If any lending institution had any smarts they would look at what if diminished revenue streams occur and what will be the impact on ability to pay down the debt.
Example: You have sales of 500,000 per month and your obligations are 10% of revenue 50,000. Now say your revenue drops to 300,000 per month and you still have the 50,000 obligation which is now 17% of revenue can you survive.
If you are at 500,000 a month sales and at 15% or 75,000 of revenue are obligations what happens at 300,000. 75,000 represents 25% of revenue can you survive?
No matter how cool the technology, service or the owners good intentions is it doesn't make any difference when it is unable to generate sufficient cash flow.
By Michael J on Jul 22, 2009
If outfits like CitiGroup, Bears, Lehman can make the same mistake, it's not so hard to figure out how smart people can make bad decisions.
Finally the Fed came in a ran stress tests. Most everybody hated it. But it's pretty much exactly what Patrick is describing.
By D. French on Jul 22, 2009
Editor's Note. This comment was left by someone on the “Lavigne Press” computer network.
I am also a customer of LVI.
A few key points:
1) LVI is still operating. They continue to do a great job for me. So, to categorize a Chapter 11 reorganization as a 'failure' or a 'smoldering crater' seems a bit harsh. LVI, like many companies, apparently needs to restructure to create a stronger business for the future.
2) I am pretty sure that Toby LaVigne is not the sole shareholder at LVI. In fact, I believe that Chris Wells does own a percentage of the company. Additionally, the first time I have ever heard the name Toby LaVigne has been through this bankruptcy coverage. Obviously the company was having some issues, but it certainly wasn't due to lack of passion from the top (at least the top as we saw it). There are very few people in this business who, like Mr. Wells, have the vision, and the ability to communicate that vision so effectively.
3) LVI's concept of print optimization is alive and well with a number of people I know who continue to use their services. I would offer that the idea was implemented very well, considering the difficulty of making any change happen in this industry, but the traditional side of the business became an albatross that required drastic action to fix.
4) From the outside looking in, it seems to me that Chris Wells did an outstanding job leading change not just at LVI, but for the entire industry. He has always been a source of the latest and greatest for our company, and seems to have been very active in the industry as a whole promoting a new way of doing business. How many people commenting on this event actually owe a debt of gratitude to LVI?
LVI is and has been a company with lots of hardworking, dedicated people. We have noticed absolutely zero change in the day to day service, quality and responsiveness. I hope everyone gives them the chance to work through this reorganization and not make it a foregone conclusion that the company is already dead and buried.
By Adoniram on Jul 22, 2009
All good points, but good leadership is more than weighing obligations against revenue, particularly in market contractions. If the print industry continues to experience 9% contraction quarter over quarter and you do "traditional print", it doesn't matter how much padding you have; your business model is non-functional.
At some point, you either have to invest in some degree of futureproof process/technology/service or diversify. Financial instruments will still exist a century from now. Most of print will not. Showing that print has value will require a great deal of effort in the future and retreating into core services is probably not the best long term strategy.
By Patrick Berger on Jul 22, 2009
It doesn't matter what industry you are in obligations will always be there. Good leaderships recognizes the percentages and will almost always try something to maintain cash flow to meet the obligations and maintain a profit. Leadership who recognizes contraction and positions his company to take advantage of other companies unawareness will still be around.
By John on Jul 23, 2009
I'm constantly amazed everytime I read of a BK and the comments from all very smart people- witness the discourse here. The overarching theme typically revolves around the need to invest in new technology as the panacea. That simply is not true. The companies that have closed or filed Chap 11 had inherent, underlying issues that affected their ability to pay debt in ties of reduced revenue. It had little to do with the doom forecast of print today. All of these companies still had customers- or in some cases made a fundamental mistake of relying on one or two super large customers as the mainstay. The point is, they didn;t go under because print is dead. They went under for financial reasons and decisions that were based on a model of higher revenues then they currently had. 80% of business is business. Instead of following the herd and getting scared reading the comments of many who sit in a proverbial ivory tower, we need to examine our own individual operations and make the necessary changes for success. But chasing software and new boxes, etc in the hopes of finding success is a fools errand. Make those investments based on sound business practices and not out of fear.
By Chuck on Jul 23, 2009
To Bob Rosen, I ask: please explain why "HubCast seems to be the only logical bidder for LVI", and how these two companies fit together at all without the Toby LaVigne connection? Does Hubcast own other print manufacturing assets? I thought they are a network of printing sites that are all independently owned? Are they changing their business model or now planning to compete with their network partners? They say they are a "digital" network on their website, so how do LVI's offset assets fit into that equation? The lack of answers to these questions and others are what is generating "conspiracy theories". But of course, none of this my business or anyone else's except Toby, Chris, their creditors and shareholders!
By Barry on Jul 23, 2009
I don't have access to the balance sheets, but you have to assume that Toby Lavigne is the most logical choice because he is in control of the Hubcast warchest (funding).
One of the problems with today's economy is that the private equity groups, the venture capitalists of yesterday...are sitting on their hands.
A lot of money was wasted, but jobs were created; and new ideas...good and not so good...were given a chance to grow.
Maybe more importantly...all of that investment in new ideas created demand for print!
By Scott K on Jul 23, 2009
To everyone who is spending time here, I find all this cannon fodder about LVI nauseating.
Mixed in with pontification and advertising, you should all be ashamed of your behavior.
CEO Forum? Please. Any real CEO understands that this is out of bounds.
It feels like Michael Jackson Coverage, and this is the National Enquirer.
Unless you are on the inside, truly on the inside, none of us have a clue as to what has really happened here, or what will happen in the end. And guess what?
IT it really nobody's business, other than the shareholders and the creditors of LVI.
Sometimes bad things happen to good people. I have to believe that is the case here, given my own experience.
I have been in a similar situation. When I left a company that I built several years back, the press, reported that I personally was trying to organize its dismantling and pushing it to bankruptcy for some personal plot, revenge or gain.
That enraged me at the time, because I guaranteed a very large loan for the company upon my resignation as CEO. Right or wrong.
The note was paid back, the company did not go belly up, and in fact is doing quite well today.
All of my "friends" in the industry turned on me.
All of the reporting at the time was simply not true, but the press jumped all over it and assasinated me in the business community through "freedom of speech".
That one incident had hurt my reputation for years after that, all because a bunch of armchair experts thought that "they knew me", my intention and my motives. To this day, nobody knows the real story.
Perhaps all of you armchair experts could give these guys a break, and give them a little respect for what they had accomplished in the past, and give them the benefit of the doubt.
Other than make interesting editorial, none of us have a clue as to the reality of the situation other than your own.
Manage your own reality, or you, like Toby Lavigne, me, and others, could find yourself on the sharp end of the sword yourself someday with experts coming out of the wood work to assasinate you, your character, your reputation, and your intent.
Unless you have experienced it, you have no right to comment on it.
It disgusts me to see how so many people seem to take pleasure in someone else's misfortune.
Mind your own business, not someone else's.
By Adoniram on Jul 23, 2009
@John - This is of course true. None of us is in an ivory tower right now, if anyone is, good for them. That's a unique place to be given the current economy and channel trends. And I would imagine that most providers that go under follow your example precisely; the books aren't balancing out, just like many other businesses in other industries. But the opposite is also true - investment into new technology was not the straw that broke the camel's back. I'm not suggesting that technology is a panacea, I'm suggesting that other providers, decision makers, and CEOs should not take LVI's branding and misinterpret it as strategy.
Correlation is not the same as causation but it's easy to confuse the two, particularly in a time of economic pressure. I personally believe that this downturn is going to be a defining moment for the industry at large. Many will see houses sink into the ocean and come to the conclusion that it's too risky to build a house next to the ocean, instead of understanding that the risk must be leveraged in some way - to continue the metaphor - through excessively sound foundations. My core point is: a balance sheet MUST be the core focus but it must also not hinder your long term strategy, in fact, it must enable you to execute your long term strategy. Otherwise, you're just staying afloat and I do think that most would agree now that the print industry is not going to look the same five years from now as it does today.
By Grover Daniels on Jul 29, 2009
Very interesting posts, with lots of emotion.
It's fair to say I did not see any of you in Court the 2 times I've been there during the Bankruptcy hearings. Tale of the tape...LVI has excellent representation, as does HubCast. They are going to get this deal done because they are clearly more prepared then anyone else in the room. The unsecured creditors have a lawyer that spends his time telling the judge how much vacation he's had, the US Trustees have a lawyer who wants to get something done that does not include liquidation, and TD Bank has a lawyer, who has not said a sinlge word; they must be happy with their haircut,($850,000 from $1.2MM) and carve out amount, (if anything).
I only wish all of you would get the transcripts of the July 19 and today's hearings.
I have learned one thing, the lawyers, the bankers, HubCast, and the hired turnaround person are collecting large guaranteed fees.
Judge Rosenthal is well prepared, and an excellent listener. His job it seems to me is to make sure the transfer of assets from LVI to HubCast is legal. They will be legal, but not in the best interest of anyone, except Toby and Chris, and the big fee folks.
I predict a shut down of LVI very soon after the transfer of assets, and the business and customers moving to an existing "un-named" printer in the HubCast network. Won't be us, the VC guy said "we have nothing to talk about"....Stay tuned.
That's why this "unfortunate" LVI Bankruptcy is so interesting to us CEO's.
By Michael J on Jul 29, 2009
Thanks for the update..Just one question about "... the lawyers, the bankers, HubCast, and the hired turnaround person are collecting large guaranteed fees."
I get the "lawyers, bankers, turnaround person"..but how does Hubcast get a guaranteed fee?
By Grover Daniels on Jul 29, 2009
Good question MJ. HubCast has asked the Court for $75,000 in reimburesable expenses and $25,000 in potential DIP finacing fees. Assuming the Judge agrees, they are entitled to get $75,000 reimbursed for the documented expenses they have to buy LVI, plus an additional $25,000 in DIP charges. So, if they buy LVI, they will "pay" $100,000 less then anyone, if they do not buy LVI, they will take that $100,000 money out upfront from the purchaser, assuming the Judge approves both requests. If there is no deal, I assume they get a preference after TD Bank, but that may not be correct.
Today, we learned that HubCast has agreed in their Asset Purchase Agreement to assume a $725,000 Loan from LVI to Toby, and $223,000 in deferred lease payments from LVI to Toby Co.
Like I said, HubCast is well prepared (and paid) to get the Toby/Chris deal done.
Which, I truly hope is in everyone's best interest.
By Mike Fullerton on Jul 30, 2009
Patrick
You are correct,
the basics of business will never change.
But to build a business and to be innovative you have to extend your resources.
Some times you loose but if you keep at it you will win.
We hopefully learn from ours and others mistakes??
Discussion
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