Printers' Investments Show Commitment

Roger Ynostroza -- Graphic Arts Online, 11/1/2000

Many of the printing industry's largest companies are continuing their high levels of capital expenditures, spending money for new equipment, expanded facilities, and production improvements--and investing in the future. These expenditures, indicated by data voluntarily supplied on questionnaires completed by top managers for this year's official ranking of the leading firms, are impressive when calculated as a percentage of annual sales for the most recent fiscal year.

(See the GAM 101 form that follows page 48 in this issue.)

Two-thirds of the companies revealed their capital expenditure figure, and while measuring gross sales is not as useful as measuring profitability, the fact is that just 27 firms are publicly held while all the privately held companies are notoriously close-mouthed about the subject.

Sales barely budged for some

In any event, a closer examination shows that major printers certainly are not reluctant to spend money. Keep in mind that these high levels of spending have taken place during a period when, of 102 reporting companies (there was a tie for the #101 spot this year), 17 posted either no year-over-year revenue gain or a negative figure, plus an additional 27 companies had year-over-year sales gains of just 1% to 5%.

To complete the picture, 20 companies' revenues for the most recent fiscal year were up between 6% and 10%, 27 firms' revenues increased between 11% and 20%, and 10 companies' sales reportedly jumped 21% or more from one year to the next, including three whose revenues increased a whopping 51% or more.

Among companies at the very high end of the scale, capital expenditures generally hover around 4% to 5% of sales (of the top 10 printers in the ranking, involving companies billing a billion dollars or more in the last fiscal year, six reported their investment figures). Remarkably, for the two largest printers, Quebecor World and R.R. Donnelley & Sons Company, such spending amounts to more than a quarter-billion dollars each.

Which is why, in this elite group, investments made by Quad/Graphics really stand out: on sales of just over $1.5 billion, Quad spent more than $200 million--equivalent to upwards of 13%, or two to three times the average. This is hardly an exception: last year, Quad's spending was equivalent to more than 20% of sales.

Among the top 50 companies are a few standouts in terms of expenditures (listed in rank order): Consolidated Graphics (10%), Publishers Press (9%), The Lehigh Press (8%), Japs-Olson (15%), St. Ives (13%), PBM Graphics (10%), Rhodes Printing (9%), Continental Web Press (11.6%), and L.P. Thebault (14.7%).

Printers in the second half of the list are no slouches either, including these half-dozen companies: Williamson Printing (11.7%), Strine Printing (25%), Toppan Printing Co. America (9%), Times Printing (22%), Challenge Printing (15%), and Hickory Printing (22%).

Even among the 15 printers in the "Bubbling Under" category--companies whose annual sales weren't quite high enough to qualify for a ranking in the main list--a lot of money was spent in the last year on capital projects. Three exceptional examples, which coincidentally bought web presses and perfect binders, are C.J. Krehbiel (26%), Ripon Community Printers (11.6%), and Dickinson Press (17%). In sum, capital investments reported by 65 companies this year totaled well over $1.5 billion.

Testimony to commitment

Here's a figure that represents a kind of testimony to commitment: just about 20% of all the companies reporting their capital expenditures did so even though--some might say, because of--year-over-year sales levels that either fell, were flat, or rose only a few percentage points.

Obviously, we'd like to track participants' precise expenditures over time; absent that, however, it's quite reassuring to see such commitment and yet not really so surprising, given the capital-intensive nature of the printing industry.