Panic & Picnic in Q2

The quick switch to a bear market earlier this year has had a direct slowdown effect on the printing industry in general, although pockets of prosperity are keeping some plants busy and a few soaring to record revenue levels.

In a series of interviews conducted by telephone a few weeks ago, small and mid-size printing companies operating in various locales reveal how they are coping with the slowdown and taking an array of actions in response.

"We haven't crunched the numbers yet," says Paul Lauk, vice president in charge of sales for Allen Graphics, Beechwood, Ohio, his family-owned business. "I've heard of other printers that are hurting a lot worse than we are. Everybody seems kind of slower than normal for this time of year, but the printing industry is known for feast or famine. But when five to seven printers [in his area] go out of business in two years, it's more than somebody simply making a bad decision."

Lauk's company has 30 employees, five of whom are family members. They print full-color products such as posters, brochures, and pocket folders; sales reached $4 million last year.

There have been no layoffs at Allen Graphics. "We're careful about the money we spend," Lauk says. "Having five family members counting on their paychecks here means that we won't overbuy or stick ourselves out on a limb."

In California, the pickings also appear to be getting leaner—at least for Charles Bauman, president and owner of Clear Image Graphics, a service bureau and film output house that is feeling the squeeze. Clear Image Graphics is located in Ramona, northeast of San Diego.

"Our business has decreased by 10% since last July," Bauman reports. He adds that the softening has affected at least a dozen area printers he knows, both small and large. As for California's energy crisis, in Bauman's words, "the outage isn't a big deal" for the printers he knows.

But for Mark Hoover, president and chief executive of Bayshore Press, located in Scotts Valley, near California's high-tech Silicon Valley area, the power outages are a very big deal. The rolling blackouts have affected his 35 employees, including those operating the presses in two shifts.

Hoover predicts, "There's going to be a series of power outages this summer and people are going to have to prepare for alternative schedules and strange working hours."

He says five people in the sales department are "more worried" than usual because of a slowdown in print purchasing. Customers, Hoover notes, have not been downsizing their orders so much as "depleting inventories."

Bayshore Press, which has not yet turned to layoffs, will bill about $6.6 million this year, a decline of 10%. "Actually, this doesn't bother me too much," Hoover explains. "Last year, we grew more than 30% from 1999 so if we're down only 10%, there's nothing to panic about."

In the South, the mood is similarly edgy. Phil Scott, owner and president of Scott Lithographing, a shop near Atlanta that mainly serves printing brokers, says the economy "definitely" had a bearing on the slowdown in his company's work; the drop in activity started in December and extended into January, February, and even March.

"I haven't figured out whether the slump results from the new government or the previous government or overall," he says. "I don't know if it's the election or the interest rates. But I think we've talked ourselves into a recession. The dire warnings created fear. I believe we brought this on ourselves."

But business, he says, began coming back in mid-April for Scott Lithographing—and this after Scott had to lay off two full-time people in production at the end of last year. Now, he continues, "We replaced those people and we're back up to par. There may be additions but no cuts."

Scott appears to be optimistic about jobs bounding at an even higher pace in the months ahead. "I think cutting interest rates has helped," he muses. "My experience is, when the economy gets going again, the first thing people do is step up advertising. That's where we come into the game."

Meanwhile, there has been a buzz throughout the industry that equipment sales have been flat for most press manufacturers.

In New England, Brian McMahon, district regional sales manager for Komori America, says orders have been "pretty much flat," adding, "I've seen layoffs [in the industry] but business is going along. People are tightening their belts and sitting tight, waiting to see whether it's either going to go away or come back. The economy hasn't affected Komori yet."

McMahon insists, "I had a good 2000 and came into the new year with positive prospects. Granted, the prospects aren't going into new deals with the enthusiasm that they had last year or the year before, and our pricing has gotten competitive. It's a reflection of the yen and the dollar. It's related worldwide."

He recalls a major recession in 1987: "I didn't make a lot of money selling presses but I survived. Unfortunately, a lot of companies didn't; here in the Northeast, 50 printers went out of business, mainly older plants with obsolete equipment."

Many printers have had to make big changes to deal with the current slowdown and the need to get up to speed with the Internet trade.

"Our niche was part of the industry that was badly cannibalized by the Internet," says Lori Carlson, who is in charge of new media and prepress operations for Capital Printing Co., Austin, Tex., a company that prints magazines for trade groups.

"We're business-to-business and found that some of our customers' print budgets migrated to Web site development, which in turn hurt us," she explains. "How did we cope? We started about a year ago, when we got involved with the Internet."

Carlson, who was tapped to direct the new media division last year, says Capital Printing is still producing trade association magazines. "But the page counts and color requirements have gone down. Instead of 72 pages, it's 48," she notes.

"On the other hand, there's been no cutting of staff here," she reports, adding that it's too soon to tell how things will play out.

Carlson continues, "My instinct is that our new media division will continue to grow. It's been successful thus far. There are five new people and several accounts. We have existing clients that are ready to develop Web sites. Furthermore, they're interested in beefing them up and engaging in cross-media publishing, that is, taking content and developing it for Web and print at the same time."

Her company, family owned, with 50 employees, had print sales last year of about $7 million, which Carlson regards as fairly stable "given the fact that we've lost a ton of print work. We're measuring our success by the fact that we didn't go under. Some people have ditched their titles altogether. I feel that we're all shooting from the hip and playing the game as it comes."

In Carlson's view, the most devastating thing a printing company can do is "fixate" on an outcome because business is so up in the air and changing so rapidly. She concludes, "It's important to be flexible and not be afraid to make a change. This is an exciting time to be in the business because of that. I don't think the Internet should feared."

Often, though, it's difficult not to feel fear about the downturn. Frank Dubai, sales and marketing director for Ponte Graphics Co., Phoenix, reports that his small, family-owned stationery engraving business has had to make sharp reductions in personnel and had to ask remaining staff members to shoulder their jobs.

"We went through a growth spurt not long ago so we hired people," he says. "But in the last year, six people had to leave. Most were recent hires; two had been here for two years. The bottom line: we couldn't afford them and we had other people who could pick up the slack."

He says the company operates one shift, with some overtime and some Saturday work. "As the economy tightened, [customers] spread out their buying," says Dubai. "Where they might have bought 10,000 letterheads, then reordered when they dropped to 2,000 or 3,000 on the shelves, now they're waiting until they're down to 500. Obviously this puts pressure on us to be efficient in producing on time."

Dubai says that when Ponte Graphics began feeling a slowdown as early as in April 2000, the company started being "proactive." He explains, "One of our big accounts, a financial investment company, lost some of its major loans; as soon as we saw this, we made adjustments so we were not dependent on them for monthly income."

While he thinks that some people believed the gravy train would continue forever, he says, "If you're not in tune with the economy and what customers are buying and selling, you're going to be hurt."

Then there are the printing managers who say they have scant reason to worry.

At Sandy Alexander, an annual report printer in Clifton, N.J., Frank Stillo, chairman and chief executive, and Vincent Pinzone, senior vice president and general manager, say that the company set an all-time sales record in the first quarter, traditionally the company's busiest season.

Says Stillo, "Yes, we'll probably slow down a little around October like we always do, but this was a great start to the new year for us."

In a similar vein, Eric Bielawski, a lawyer who is president of the family-owned White Eagle Printing Company in Trenton, N.J., says his company, which has 35 employees, has not "felt any downturn in the economy. We had our best year last year and we're beating the pace this year."

He adds, "With a new eight-up imagesetter we just bought, we think we're faster than printers with computer-to-plate because their plates take longer to expose. We can output a complete set of film in 20 minutes."

Bielawski has shifted people around to perform film stripping for an on-demand clientele at his 14,000-square-foot plant (which he intends to expand soon by 12,000 square feet) "but that was because of the new technology and not the economy."

Bielawski continues, "I feel our business is built on strong core values. We have a loyal clientele in pharmaceuticals and other industries that do well in economic downturns. Our customers haven't suffered; in fact, we get referrals from them."

At the same time, Bielawski is hoping that the slowdown will provide a chance to buy new equipment for less. "There's always an opportunity to negotiate a better price at a time when companies are not selling as many presses," he says.