Financial

Adobe reported record quarterly revenue of US$1.38 billion, representing year-over-year growth of 25 percent, for its current fiscal first quarter, fueled by the adoption of cloud-based products.

“Every day, more brands, government agencies and educational institutions globally are choosing to base their digital strategies on Adobe’s content and data platforms,” said Shantanu Narayen, Adobe President and CEO. “Our exceptional performance in Q1 is an indicator of the strong momentum we are seeing across our cloud businesses as we drive the experience economy.”

The company’s Digital Media segment revenue grew by 33 percent year-over-year to a record US$932 million, with Creative revenue growing 44 percent year-over-year to a record US$733 million.

Adobe explains Creative Cloud adoption drove its Digital Media Annualized Recurring Revenue (“ARR”) to US$3.13 billion exiting the quarter, an increase of US$246 million. Adobe Marketing Cloud achieved record revenue of US$377 million that represents year-over-year growth of 21 percent.

Year-over-year operating income for the company grew 78 percent and net income grew 200 percent on a GAAP-basis; operating income and net income both grew 48 percent on a non-GAAP basis.

Cash flow from operations was US$498 million and the company repurchased approximately 1.5 million shares during the quarter, returning US$133 million of cash to stockholders.

“We are pleased to report another record quarter with 25 percent year-over-year revenue growth. Strong Cloud adoption drove record Creative and Marketing Cloud revenue in Q1, and better-than-expected Digital Media ARR," said Mark Garrett, Adobe CFO. “Based on our strong Q1 results and business momentum, we are increasing our annual revenue and earnings targets for the year.”

manroland web systems of Augsburg, Germany, released its 2015 year-end results (December 31, 2015), which the company states as holding a significant increase in profit and market share. With a profit margin of around three percent, the printing press manufacturer’s result increases to 6.2 million euros ($9.6 million Canadian).

The company also reports its market share in new press business for web offset systems grew to 45 percent, while also noting growth in manroland web’s increasing interests in postpress equipment sales, branded as FoldLine and FormerLine.

The incoming orders taken by manroland web grew by more than 10 percent to around 260 million euros in comparison to 2014. The global market share for new web offset printing presses is around 45 percent (36 percent previous year).

The fully completed restructuring measures from 2014 as well as the improved situation in use of capacities have also had a major impact.

“In 2015, the manroland web systems company group generated a positive operating result of 6.2 million euros before interest and taxes (EBIT). An order backlog in new press business of more than 150 million euros gives reason to expect good use of factory capacities and a further increase in profitability for manroland web systems in 2016,” said Jörn Gossé, Managing Director, manroland web.

Not including external personnel and trainees, the company had a total staff of 1,200 worldwide, 1,068 of which are at the Augsburg site. The company is currently training 63 young people in total in various technical and commercial professions and will be offering 16 new traineeship placements starting in September 2016.
Heidelberger Druckmaschinen AG reports it has ended the latest quarter with a positive net result after taxes, and that its net result before taxes after nine months (April 1 to December 31, 2015) reached the break-even point. Based on these numbers, the German press maker explains, following its recent realignment, it is on track to record a positive net result after taxes for financial year 2015/2016.

“We’ve made good progress with our goal of ensuring long-term profitability at Heidelberg. Our new portfolio is more closely geared toward stable market segments, is more profitable, and creates the conditions for further growth,” said Heidelberg CEO Gerold Linzbach.   

Group sales were 16 percent up on the equivalent nine months of the previous year at €1.802 billion (previous year: €1.552 billion). This figure includes positive exchange rate effects amounting to €93 million.

Heidelberg explains the successful integration of the newly acquired PSG Group made a substantial contribution to the higher sales, while the Heidelberg Services segment accounted for almost half of the company’s sales after nine months.

At a regional level, Heidelberg states sales were well up in North America and Europe, while Eastern Europe and Latin America remained stable. In the third quarter, however, Heidelberg explains subdued market development in China was reflected by a fall in orders. Total incoming orders in the reporting period were significantly higher than in the previous year at €1.904 billion (previous year: €1.780 billion).            

Heidelberg’s EBITDA excluding special items as at December 31, 2015, increased to €119 million (previous year: €80 million), while EBIT excluding special items doubled to €65 million (previous year: €29 million). The Heidelberg Services segment is still on target to achieve the planned EBITDA margin of nine to 11 percent. Regional weaknesses, especially in China, mean the Heidelberg Equipment segment has not yet been able to reach the expected EBITDA target margin of four to six percent.

Heidelberg’s pre-tax result after nine months reached the break-even point (€0 million; previous year: €–92 million). The net result after taxes for the third quarter improved by €60 million to €7 million (previous year: €–53 million) and the nine-month figure of €–7 million, explains Heidelberg, was better than the €–95 million recorded for the equivalent period of the previous year.  

The company’s free cash flow after nine months was €–37 million (previous year: €–16 million), based primarily on restructuring costs and the PSG acquisition. The net debt for the quarter under review was at €282 million (March 31, 2015: €256 million).

“We have created the financial scope to finance acquisitions and invest in growth and innovation. In the future, we will keep working on further optimizing our financing framework and ensuring the continued strategic development of Heidelberg,” said CFO Dirk Kaliebe. 

Langley Holdings plc, the engineering and industrial group that controls manroland Sheetfed, released its annual results for the year ended 31 December, 2015.

The group reported a pre-tax profit of €106.7 million ($167 million Canadian) on revenues of €874.5 million ($1.37 billion Canadian). Langley Holdings also reported it had zero debt and close to €330 million of cash reserves at year end.

During his Chairman’s Review, Tony Langley said 2015 had been a “significant milestone” for a number of reasons. manroland Sheetfed, the largest of the group's five divisions, in revenue and employee terms, was in positive territory for the fourth year in succession, since acquiring the printing press builder in early 2012.

Langley Holdings, however, pointed to Piller, which develops electrical systems for data centres, and ARO, which develops automobile welding machinery, as its principal revenue drivers of 2015, with both Piller and ARO posting near record profits.

Claudius Peters, the group's plant machinery builder, was in line with modest expectations due to widely sluggish cement and steel markets, according to Langley. Druck Chemie, the chemicals producer, which completed its first full year in the group, and Bradman Lake, the packaging machinery specialist, both reported what Langley Holdings describes as satisfactory results.

Tony Langley also noted the company had opening order books totaling €300 million, stating that he expects 2016 will be a successful year and that the group will continue to search out new acquisition opportunities.

Langley Holdings plc was founded in 1975, by Tony Langley, and currently employs around 4,300 people worldwide.
Transcontinental Inc. announced it is transferring its marketing product printing activities from Transcontinental Québec to other plants in its network, principally to Transcontinental Interglobe in Beauce, Quebec.

The reorganization is to result in the closure of the Transcontinental Québec plant located in Quebec City by April 30, 2016. The plant closure will result in approximately 140 layoffs.

“Conditions in the print market are changing and we must continuously adapt,” said Jacques Grégoire, President of TC Transcontinental Printing. “In this context, we need to review our equipment utilization to better optimize our platform. We regret having to make this decision which affects our employees and would like to thank them for their dedication to our organization.”                                        

TC Transcontinental currently has over 8,000 employees in Canada and the United States, generating revenues of $2.0 billion in 2015.

Xerox, during its year-end financial presentation, announced a new plan to separate into two independent publicly traded companies, Document Technology and Business Process Outsourcing.

The Document Technology company, according to Xerox, will focus on document management and document outsourcing, while the Business Process Outsourcing (BPO) company will focus on helping clients improve the flow of work by leveraging Xerox’ expertise in managing transaction-intensive processes and applying technology to automate and simplify business processes.

The Document Technology company alone would have generated approximately US$11 billion in 2015 revenue. The BPO company would have generated approximately US$7 billion in 2015 revenue. Xerox notes more than 90 percent of the BPO revenue to be annuity based. Xerox states it is focused on attractive growth markets including transportation, healthcare, commercial and government services.

The leadership and names of the two companies will be determined as the separation process progresses. “I am confident that the extensive structural review we conducted over the last few months has produced the right path forward for our company,” said Ursula Burns, chairman and chief executive officer of Xerox. “We will now position the companies for success and execute our plan to separate them in the shortest possible timeframe while continuing to focus on achieving our 2016 goals.”

Xerox also announced a new three-year strategic transformation program targeting a cumulative US$2.4 billion savings across all segments. The program is inclusive of ongoing activities and US$600 million of incremental transformation initiatives. The company expects US$700 million in annualized savings in 2016.
FASTSIGNS International Inc. of Texas reports surpassing its 600th-franchise-location milestone, which was achieved before the end of 2015. The company states that over the past 12 months it signed more than 50 franchise agreements, opened more than 40 units and reached global revenues of US$400 million – an all-time high for the company.

“Robust franchise expansion will continue in 2016 domestically and in key international markets,” said Catherine Monson, CEO of FASTSIGNS International. “Our company is experiencing a high demand in franchise sales globally due to the rising worldwide need for visual communications and digital signage technology.”

Monson continues to explain FASTSIGNS opened its first centre in Dubai this past June and continues to seek growth opportunities in Central and South America, Southeast Asia, Europe, India, Mexico, the Middle East and the UK. “All told, we expect to open another 60 to 70 locations in 2016, as well as finalizing master franchise agreements in two new countries,” she said.

FASTSIGNS’ Co-Brand program accounted for 20 percent of the franchise agreements signed in 2015, which is described as a significant increase from prior years. Launched in 2012, the FASTSIGNS Co-Brand program – for a down payment of $10,000 – allows independent businesses with print-related services to add the FASTSIGNS brand and solutions, while retaining control of their existing business.

The Franchise Grade Top 500 list ranked FASTSIGNS as the top sign and graphics franchise and No. 19 overall out of 2,387 franchise systems for transparency during the franchise sales process, corporate support, training, revenues and growth. Entrepreneur magazine’s “Franchise 500” list of America’s top franchise opportunities has placed FASTSIGNS in its top 100 for four consecutive years.
On Tuesday of last week, creditors voted on Web Offset’s restructuring action, which was first submitted in July 2015 as a Notice of Intent to file a Proposal within Canada’s Bankruptcy and Insolvency Act (BIA).

John Bacopulos, CEO of Ironstone Media, which controls Web Offset, based in Pickering, Ontario, reports around 98 percent of the creditors involved in the July filing voted in favour of the company’s restructuring plan. Unsecured creditors were owed approximately $3.2 million and accepted a deal worth approximately $0.25 on the dollar.

This is the second Notice of Intent to file a Proposal under the BIA involving the company in a little more than three years, after Ironstone Media filed an action in March 2012.

Ironstone Media was founded in 1961 and has remained focused on the publishing industry, including earlier efforts to move with the digitization of printed content.

The company continued to operate uninterrupted during its 2015 BIA filing and will now push forward under its restructuring plan.
The United States Postal Service reported a net loss of US$5.1 billion for fiscal year 2015 (October 1, 2014, to September 30, 2015). The net loss, according to the USPS, is largely due to certain statutorily mandated payments over which the Postal Service has no control. Behind the loss, total revenue was $68.9 billion (all dollar amounts in U.S. figures) for the year, an increase of approximately $1.1 billion from 2014.

“We achieved controllable income in excess of $1 billion for the second consecutive fiscal year giving us some limited flexibility to make critical investments in the future of the organization,” said Postmaster General and CEO Megan Brennan. “To maintain this success we will need to continue our efforts to grow the business and drive operational efficiencies. However, we will also need the enactment of legislation that makes our retiree health benefit system affordable and that provides increased pricing and product flexibility.”

Controllable income for 2015 was $1.2 billion compared to $1.4 billion last year. Controllable income is defined as net loss excluding expenses related to the mandated prefunding of retirement health benefits, actuarial revaluation of retirement liabilities and non-cash workers’ compensation adjustments, which are factors largely outside of management’s control.

The USPS explained its large net losses continue, and controllable operating expenses increased $1.3 billion from last year. This was the result of a combination of factors, according to the USPS, including higher compensation costs attributable to increased benefits expenses and additional work hours partly associated with growth in the more labor-intensive shipping and package business.

“Adding to the financial pressures that the Postal Service will face in the short term is the fact that the exigent surcharge authorized by the Postal Regulatory Commission in 2014 will need to be rolled back in approximately April of 2016,” said Chief Financial Officer and Executive Vice President Joseph Corbett. “This surcharge has provided an additional estimated $3.5 billion in revenue since its inception, and will provide a total of $4.6 billion in additional revenue at the time when the commission will require us to eliminate the surcharge.”

For 2015, total USPS mail volume of 154.2 billion pieces fell slightly from 155.5 billion pieces in 2014, as First-Class Mail and Standard Mail volume decreased by 2.2 percent and 0.3 percent, respectively. Shipping and Packages volume increased 14.1 percent.
Heidelberger Druckmaschinen AG of Germany states it is on course after the first half of its financial year 2015/2016 with increased sales over the previous year’s corresponding period. Group sales after six months increased to €1.162 billion compared to the previous period at €996 million. Heidelberg reports sales were up in all regions except Eastern Europe, where they remained stable. Incoming orders in the period under review improved to €1.323 billion (previous year: €1.167 billion).

“After the first half of the current financial year, we are on course to achieve our targets for the year,” said Dirk Kaliebe, CFO and Deputy CEO of the company. “As in previous years, we are expecting a further increase in sales and in the result in the second half of the financial year.”

Heidelberg also reports EBITDA, excluding special items, totaled €79 million (previous year: €53 million) and EBIT excluding special items €43 million (previous year: €19 million). Both these figures benefited from income from the takeover of consumables distributor European Printing Systems Group (PSG), amounting to some €19 million in the current financial year, compared with income of €18 million from the Gallus transaction in the previous year.

At €–30 million, Heidelberg’s free cash flow in the period under review remained at the same level as in the previous year. The company’s net financial debt at September 30 increased slightly to €284 million (March 31, 2015: €256 million). As at September 30, 2015, the Heidelberg Group had a global workforce of 11,753 plus 473 trainees (previous year: 12,393 plus 550 trainees). This includes around 380 new employees from the acquisition of PSG.

The U.S. Postal Service reported a net loss of US$586 million for the third quarter of fiscal 2015 (April 1, 2015 to June 30, 2015), which is actually a reduction of US$1.4 billion from the net loss of US$2 billion for same period last year. The world’s largest mail system, however, saw double-digit growth in shipping and package revenue.

Operating revenue of the U.S. Postal Service (USPS) was $16.5 billion (all figures in US dollars) for the third quarter of 2015, essentially unchanged from the same period last year. The USPS ended the second quarter of fiscal 2015 (January 1, 2015 to March 31, 2015) with an operating revenue increase of $223 million, or 1.3 percent, over the same period last year, but also recorded a net loss of $1.5 billion for the quarter.

In the third quarter of 2015, shipping and package revenue and volume increased by 10.6 percent and 13.4 percent, respectively, from the same quarter last year. “The continued growth of our shipping and package services is a direct result of the Postal Service’s continued efforts to offer consumers more choice, excellent value and reliable service in a growing and competitive marketplace," said Postmaster General and CEO Megan Brennan. “We are investing in our network and continually enhancing our services to best compete for America’s shipping and package delivery business.”

Total mail volume of 36.8 billion pieces in the third quarter of 2015, however, decreased by 738 million pieces from 37.5 billion pieces. A price increase impacting certain mail classes went into effect on May 31, 2015; however this was offset by declining mail volumes as First-Class Mail and Standard Mail volumes fell 2.6 percent and 2.1 percent, respectively, compared to the same period last year.

 “The combination of growing package revenues and improved productivity gains were not sufficient to offset mail volume declines and inflationary pressure, largely due to contractual increases in operating expenses, including wages, benefits and transportation." said Chief Financial Officer and Executive Vice President Joseph Corbett. "This underscores the need for a combination of continued sales growth, productivity gains and legislation to ensure the Postal Service can return to financial health and meet its public service obligations.”

Graphic Packaging International Canada, a subsidiary of Graphic Packaging Holding Company headquartered in Atlanta, Georgia, has closed its thermo mechanical paperboard mill in Jonquiere, Quebec.

The company states its decision was made after a thorough assessment of the facility's manufacturing capabilities, associated costs and market demand for its products. The closure will affect approximately 140 employees.

"The closing of the Jonquiere facility was a difficult decision. We are working closely with the affected employees to provide support and assistance," said Mike Doss, President and Chief Operating Officer.

The company anticipates one-time costs of $4 to $5 million in the second half of 2015 related to this closure. Graphic Packaging Holding Company is one of the largest producers of folding cartons and holds a leading position in coated unbleached kraft and coated recycled board.
The United States Postal Service ended the second quarter of fiscal 2015 (January 1, 2015 to March 31, 2015) with an operating revenue increase of $223 million, or 1.3 percent, over the same period last year. The organization, however, also recorded a net loss of $1.5 billion for the quarter (all figures in US dollars).

The increase in operating revenue was driven by a 14.4 percent growth in shipping and package volume. The net loss for the quarter was $1.5 billion compared to a net loss of $1.9 billion for the same period last year. Excluding a retiree health benefit prefunding expense, the net losses would have been $44 million and $447 million, respectively, for the quarters ended 2015 and 2014.

Operating expenses declined by $160 million from the same quarter last year driven in part by what the USPS describes as favorable trends in workers’ compensation expense. Controllable income in the second quarter was $313 million, an increase of $52 million over the same period last year. Controllable income is defined as net income excluding retiree health benefits prefunding expense and expenses for interest rate and other non-cash workers’ compensation expense, which are factors outside of management’s control.

“We’re pleased with the increase in our controllable net income compared to the same period last year, which demonstrates that our cost containment and revenue strategies are delivering results,” said Postmaster General and Chief Executive Officer Megan Brennan.

First-Class Mail and Standard Mail volumes declined 2.1 percent and 1.1 percent, respectively, during the second quarter compared to the same period last year. For its most recent quarter, total mail volume of 37.7 billion pieces declined by 420 million pieces from 38.2 billion pieces for the same period last year.

“Shipping and package services are a key business driver, however, operating margins in this business are lower than in mailing services,” said Chief Financial Officer and Executive Vice President Joseph Corbett. “And, while we’re pleased to see a small increase in controllable income, to improve our margins, we’ll need to make investments in our network infrastructure and delivery vehicles.”

The Postal Service ended the quarter with $6.1 billion in unrestricted cash, representing 22 days of operating cash. The USPS explains, that because it has reached its borrowing limit of $15 billion, the current level of available liquidity is not sufficient to support both operations and prefund retiree health benefits.
Standard Register Company on March 12 announced that it and its subsidiaries filed voluntary petitions under Chapter 11 of the Bankruptcy Code in the United States.

The company also announced that it is pursuing a sale process and has entered into an acquisition agreement with an affiliate of Silver Point Capital L.P., a private investment firm managing approximately US$8.5 billion in combined assets. The agreement was submitted to the Bankruptcy Court on March 12.

Under the proposed purchase agreement, Standard Register’s assets will be sold for approximately US$275 million plus the assumption of certain liabilities. The sale agreement contemplates a Court-supervised auction process, which is designed to facilitate a competitive sales process.

“Standard Register has a fundamentally stable underlying business with a large, diverse customer base and a strong portfolio of solutions that include integrated communications, product marking and decoration (labels), document management, promotional marketing and technology/professional services, but our ability to invest in growth has been hampered by our debt structure and legacy liabilities," said Joseph Morgan Jr., President and CEO, of Standard Register.

Silver Point is an existing secured lender of the company and, in combination with Bank of America, has agreed to extend US$155 million in financing in the form of a debtor-in-possession (DIP) credit facility. Standard Register states the DIP facility should provide ample liquidity to facilitate its sale process and to fund operations.

Standard Register states it believes that the sale to Silver Point Capital will right-size its balance sheet by significantly reducing its outstanding indebtedness and other liabilities. “In response to the traditional print market decline, Standard Register repositioned itself as a market-focused, integrated communications provider where today, the majority of both revenue and profit are being derived,” said Morgan.

Engineering group Langley Holdings plc, the parent company of Manroland Sheetfed after its acquisition in 2012, published its IFRS Annual Report & Accounts for the year ended 31 December, 2014.

Langley reported a profit before tax of €100.6 million on revenues of €779.4 million. Chairman Tony Langley said that the group's divisions had performed in line with or ahead of expectations. Manroland Sheetfed, Langley’s largest division in terms of revenue and employees, reported a small profit.

Piller, the producer of power protection systems for data centres and Claudius Peters, the plant machinery constructor, performed in line with expectations while the other businesses division, principally Bradman Lake, the packaging machinery specialist, also had what Langley classifies as a satisfactory year.

Langley also acknowledged the contribution made by the group’s 4,000 employees and welcomed around 300 employees of the newly acquired DruckChemie group to the family of businesses.

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