Credit Freeze Slowing Businesses
By Bill Esler -- Graphic Arts Online, 10/3/2008 4:49:00 AM
Printers and their customers suffer as credit lines freeze. Banks have tightened lending rules—and availability of capital. Stocks fell 348 points yesterday and factory orders are in decline. However, the
House passed the TARP (Troubled Asset Relief Program) legislation today, and businesses are optimistic that it will release the flow of credit. General Electric benefited from a $3 billion investment by Warren Buffet and a $12.2 billion stock offering announced yesterday, its business dragged down by customer problems and its GE Capital unit, a significant printing equipment financier and printing industry lending source. GE also sold a print and mailing operation this week to Emdeon, Nashville, likely seeking to divest non-core assets. Printers are experiencing the pain of their customers. American Reprographics predicted last week that results would be dampened by $60 million, a result of a downturn in commercial building among its primary customer base. RR Donnelley said its exposure to financial printing customer Lehman Bros. was around $1 million. The State of California, which hadn't paid printers as a protracted budget battle waged on, yesterday asked the U.S. Treasury for a $7 billion loan; it is unable to go to the markets for money in anticipation of future tax receipts.
Presuming Congress comes to agreement on the economic support, printers will have a few weeks left to take advantage of an economic stimulus package that has been on the books since February. This one allows small businesses to write off an immediate $250,000 (double last year's rate) on the capital investment on equipment put into service this year, plus 50% bonus depreciation deduction on new equipment. PIA reminds printers of the value of the program, and Heidelberg has provided a basic description and examples of its benefits.
Printing equipment supplier group NPES provides a calculator at its site to do a quick estimate of the tax benefit available on equipment invesment. "The 'placed-in-service' date for qualifying equipment purchases is critical to the effectiveness of these tax incentives," notes NPES. "Large capital equipment systems typically require more lead time for engineering and installation than is necessary for smaller acquisitions. Therefore, it is very important to note that the enhanced expensing and bonus depreciation in the legislation will only be available for equipment purchased and placed-in service in calendar year 2008." The reminders are timely, as Graph Expo opens Oct. 26 in Chicago.
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