ImTech announces new patent approval for thermally ejectable UV curable fluids
Years of development work led to the patent and resulted in ImTech providing three industry-leading, UV Curable inks for HP45 cartridges to the industrial printing market.
President and co-inventor, Bill Buskirk stated that "Our development was focused on a market opportunity: printing on non-porous substrates with thermal inkjet technology. Until recently, using thermal inkjet for many direct-part marking or package printing applications was not possible because inks were not available for these types of materials. Our products allow many of these applications to be addressed with the simplicity and low cost of thermal inkjet cartridges and printing technology."
Buskirk went on to state that "broadening the market addressable with thermal inkjet remains a top priority for our product development team.
“ImTech is releasing two new inks for HP45 cartridges demonstrating our capabilities with fast drying solvents for polyethylene and PVC based substrates," he added.
Specialty fluid development remains one of the core competencies of ImTech, a technology development and engineering company focused on the use and application of inkjet in the global industrial market.
ImTech provides specialty inks, printing systems and related consulting and engineering services for inkjet applications. Its products are available worldwide, ranging from piezo and thermal inkjet development and characterization tools to HP industrial coders, bulk systems and inks. As an OEM inkjet partner with HP’s Specialty Printing Systems Division, ImTech is licensed to fill new, original HP 45 cartridges with its own inks. The company’s ink solutions include UV-curable inks for use in TIJ products, as well as application-specific and custom inks.
ImTech’s engineers are recognized industry experts who were instrumental in developing thermal inkjet technology; collectively they have more than 250 years of inkjet and imaging experience and have more than 150 patent authorships. Recently, ImTech was named 40th on the 2010 Portland Business Journal’s fastest growing private businesses in Oregon list, marking ImTech’s third straight appearance.
Global Graphics SA, experts in developing electronic document and printing software and best known LFP market as the developers of the Jaws RIP engine, announces financial results for the second quarter and the first six months of the year ending 31 December 2010.
Global Graphics SA, experts in developing electronic document and printing software, announces financial results for the second quarter and the first six months of the year ending 31 December 2010.
Comparisons for the second quarter of 2010 with the second quarter of the previous year include:
- Sales of Euro 2.2 million this quarter, compared with Euro 2.6 million in Q2 2009;
- An operating loss of Euro 1.2 million this quarter compared with an operating loss of Euro 0.1 million in Q2 2009;
- An adjusted operating loss of Euro 0.7 million this quarter compared with an adjusted operating loss of Euro 0.2 million in Q2 2009;
- An adjusted pre-tax loss of Euro 0.8 million this quarter (or an adjusted pre-tax loss of Euro 0.08 per share) compared with an adjusted pre-tax loss of Euro 0.4 million in Q2 2009 (or an adjusted pre-tax loss of Euro 0.04 per share);
- A net loss of Euro 1.5 million this quarter (or a net loss of Euro 0.14 per share) compared with a net loss of Euro 0.5 million in Q2 2009 (or a net loss of Euro 0.05 per share); and
- An adjusted net loss of Euro 1.0 million this quarter (or an adjusted net loss of Euro 0.10 per share) compared with an adjusted net loss of Euro 0.6 million in Q2 2009 (or an adjusted net loss of Euro 0.06 per share).
Commenting on performance, Gary Fry, Chief Executive Officer, said: "Clearly, the effect of the reorganization that took place in April hit our numbers in the second quarter and the first six months of 2010. This reorganization was successful and has left us with a lower cost base that is manageable on current revenues from existing customers. I have been very proud of how the company and our partners have embraced this change and I believe that we are stronger and more agile going forward.
"Traditionally we enjoy a major bulk order in the second quarter. This customer still has inventory for another quarter and therefore did not need to buy from us during Q2. The lack of this bulk order is the main reason for the drop in sales made in the eDocument segment of the Company's business over those made in the second quarter of 2009.
"I was very pleased to conclude and announce a new five-year partnership deal with HP in May. HP has been a great partner for Global Graphics for many years and our relationship has never been better. We also saw sustained growth from Jaws RIP customers in the wide format segment.
"During the quarter, we launched version 2.5 of gDoc Fusion which has significant enhancements that our early adopter customers had requested. Web sales are still low but are increasing month on month. Corporate sales are progressing, with signed corporate license plans with customers like the United States General Services Administration (the US federal procurement agency), with the UK Home Office via Fujitsu, and several others. We have also started some bundling offers with Mindjet and Quark that we introduced late in the quarter."
Second quarter 2010 performance
Sales for the second quarter 2010 amounted to Euro 2.2 million compared with Euro 2.6 million in the second quarter 2009, or a sequential decrease of 17.4% at current exchange rates, and of 23.1% at constant exchange rates.
Total operating expenses amounted to Euro 3.3 million this quarter compared with Euro 2.6 million in the same period of 2009 and Euro 3.0 million in Q1 2010. Non-recurring expenses for the second quarter 2010 amounted to Euro 0.5 million, and included expenses of Euro 0.4 million with regards to the reorganization plan of the Company which was implemented in April 2010, and another Euro 0.1 million with respect of allowances for certain doubtful accounts.
The Company reported an operating loss of Euro 1.2 million for this quarter (or a loss equivalent to 54.6% of Q2 2010 sales), compared with an operating loss of Euro 0.1 million in Q2 2009 (or a loss equivalent to 2.6% of Q2 2009 sales).
The Company reported an adjusted operating loss (as defined in the accompanying table) of Euro 0.7 million for this quarter (or a loss equivalent to 33.4% of Q2 2010 sales), compared with an adjusted operating loss of Euro 0.2 million, equivalent to 8.1% of Q2 2009 sales.
The Company reported an adjusted pre-tax loss (as defined in the accompanying table) of Euro 0.8 million for this quarter, compared with an adjusted pre-tax loss of Euro 0.4 million in Q2 2009. Accordingly adjusted pre-tax EPS was a loss of Euro 0.08 this quarter compared with an adjusted pre-tax loss of Euro 0.04 per share in Q2 2009.
The Company reported a net loss of Euro 1.5 million for this quarter (or a net loss of Euro 0.14 per share), compared with a net loss of Euro 0.5 million in Q2 2009 (or a net loss of Euro 0.05 per share).
The Company reported an adjusted net loss (as defined in the accompanying table) of Euro 1.0 million for this quarter, compared with an adjusted net loss of Euro 0.6 million in Q2 2009. Accordingly, adjusted net EPS was a loss of Euro 0.10 this quarter, compared with an adjusted net loss of Euro 0.06 per share in Q2 2009.
First six months performance
Sales for the first six months of 2010 amounted to Euro 4.2 million compared with Euro 5.3 million for the same period of 2009, or a sequential decrease of 21.2% at current exchange rates, and 22.2% at constant exchange rates.
Total operating expenses amounted to Euro 6.3 million for the first six months of 2010, compared with Euro 5.3 million for the same period of 2009. Non-recurring expenses for the first six months of 2010 amounted to Euro 0.5 million, and included expenses of Euro 0.4 million with regards to the reorganization plan of the Company which was implemented in April 2010, and another Euro 0.1 million with respect of allowances for certain doubtful accounts.
The Company reported an operating loss of Euro 2.3 million for the first six months of 2010 (or a loss equivalent to 54.6% of the period's sales), compared with an operating loss of Euro 0.2 million for the same period of 2009 (or a loss equivalent to 3.7% of that period's sales).
The Company reported an adjusted operating loss (as defined in the accompanying table) of Euro 1.8 million for the first six months of 2010 (or a loss equivalent to 43.0% of the period's sales), compared with an adjusted operating loss for the same period of 2009 of Euro 0.5 million (or a loss equivalent to 8.7% of that period's sales).
The Company reported an adjusted pre-tax loss (as defined in the accompanying table) of Euro 2.1 million for the first six months of 2010 (or an adjusted pre-tax loss of Euro 0.20 per share), compared with an adjusted pre-tax loss of Euro 0.6 million for the same period of 2009 (or an adjusted pre-tax loss of Euro 0.06 per share).
The Company reported a net loss of Euro 2.7 million for the first six months of 2010 (or a net loss of Euro 0.26 per share), compared with a net loss of Euro 0.6 million for the same period of 2009 (or a net loss of Euro 0.06 per share).
The Company reported an adjusted net loss (defined in the accompanying table) of Euro 2.2 million for the first six months of 2010, compared with an adjusted net loss of Euro 0.8 million for the same period of 2009. Accordingly, adjusted net EPS was a loss of Euro 0.22 per share for the first six months of 2010, compared with an adjusted net loss of Euro 0.08 per share for the same period of 2009.
Commentary on the remainder of 2010
Gary Fry continued: "Our strategy is clear: we will win and grow in the market segments that we have committed to work in, namely production printing, office printing and knowledge worker applications. We have reorganized the Company to be financially sensitive to market conditions and to ensure the correct balance of skills required in all areas. We have also recruited some top talent that will enable us to execute on this strategy. Clearly, overall macro-economic conditions have not been kind to us over the past twelve months, and we have now made the changes to adapt to this.
"We are seeing very positive signs of adoption in the new segments and recovery in the traditional segment. We have worked tirelessly to make sure that our OEMs remain at the leading edge and therefore competitive, and will continue to do so. We have some exciting partnerships that will allow greater and faster adoption of both embedded printing and gDoc applications. I expect to see some positive trends during the next two quarters."
Second quarter 2010 conference call details
Global Graphics will hold a conference call today at 10.00 CET about its results for the second quarter and the first six months of the year ending 31 December 2010.
Callers should dial +44 (0)207 162 0177 and quote "reference number 871834, Global Graphics quarterly results conference call" to the operator. The call will be available for replay for 7 working days by dialing +44 (0)207 031 4064 (freephone number UK only: 0800 358 1860), access code 871834.
Third quarter 2010 results announcement
Global Graphics expects to announce its financial results for the quarter and the nine-month period ending 30 September 2010 on Wednesday 20 October 2010 before market opening.
Digital signage streamed through TV screens of all sizes is coming, and it will undoubtedly impact on businesses that use large format print to provide out-of-home visual stimulation and advertising.
In a nutshell, more digital signage surely means less printed signage?
Assuming that is true, how do you, the guy that prints sign and display graphics, replace this lost revenue stream? Can you make money from digital signage systems?
We asked ourselves that very question, and recently visited the Screen Media Expo at Earls Court to see if we could find answers, or spot any potential opportunities - frankly we came away largely unimpressed. I'm going to play devil’s advocate here and concentrate on the negatives…
The distinct impression we took on board overall is that, currently, this is a very disjointed and unfocused market. This was compounded by the fact that we heard from some very good sources that no-one is actually making any money yet, not even the big players.
As said, there is little doubt that electronic displays will have an impact on the digital print market, but I just can't see where ‘we’, being those who supply products and services to the wide-format printing market, can make money from digital signage.
Can we profit from the hardware? I doubt that very much; the underlying ‘display’ technology is based on commodity consumer goods, and these can be purchased at a few dollars above cost on eBay.
What about software? Maybe some people will create niche applications, but our feeling is that any significant developments will quickly be bought up by the big brands. And they’re the companies which, ultimately, will own this market. Let’s face it – the software itself isn’t particularly innovative or clever; it’s simply content streams that already exist in mature forms in other markets.
Then there’s the content… again, I don't think so. Ultimately the content for this market, certainly as it matures, will be created by existing creative agencies and production companies that already produce for TV.
Finally, there’s the underlying network. The only value we see in this market for an entrepreneurial move is in building a niche network where you can corner a market. From here you can build a network structure where customers are paying for usage, bandwidth and views. However many of these niche markets are already tied up – good examples are London cabs, buses, train stations and shopping centres. Many of these contracts, and others like them have already been taken, and you, me or Joe the sign maker won’t get a sniff.
If you can corner a niche market, and create a digital network for it, then maybe, just maybe, you'll make some money. But this will happen probably through being acquired in the future by Google, Amazon, BBC, Sky or any of the other kings of Internet and Broadcast that will ultimately own this market in its entirety.
These are the companies which will have to own it, because they are the only people with the commercial nous to monetise it. That’s because the money will only ever come from big brand advertisers and, for the most part, they will not be dealing with the likes of you and me.
The exception to this is with existing media owners like Clear Channel and JC Decaux, who have installations that they can convert to encompass digital.
So, in summary, it’s an interesting market which undoubtedly will impact on print. But it’s a market where we feel that our skills as printers play no part and can add little value.
No doubt some will try. But, ultimately, I predict a lot of wasted time, effort and money, chasing a dream which doesn't actually exist.
Having said all of that, I very much look forward to someone proving that my negativity is ill-founded and incorrect.
GMG, developer and supplier of high-end color management and proofing solutions, is pleased to announce that the company has been awarded the HP Graphics Solutions Partner Gold level. The enhanced partnership with HP is a testimony of the outstanding proofing and color management solutions of GMG for the digital and wide-format printing segments.
With GMG ColorServer and GMG SmartProfiler GMG offers end-to-end color management for the HP Scitex large-format printers and HP Indigo digital presses to improve color accuracy and consistency in daily production dramatically. Now, it is possible for GMG and HP customers to achieve in an automated process a visual match with offset printing, as an ISO Coated V2 appearance can be produced with their digital or large-format devices.
The wizard driven GMG SmartProfiler and a corresponding measuring device enable users to quickly create individual profiles for the great variety of different substrates used for wide-format applications. Also the regular calibration of a wide range of large-format printers can be done easily with the help of GMG SmartProfiler.
Based on GMG's DeviceLink technology, the GMG ColorServer automatically converts any kind of colors, including spot colors, to the color spaces of the various output devices.
"We are excited about the expansion of our long-lasting relationship with HP in the field of high-end proofing with printers of the HP Z-series, which was the first result of our close technological cooperation", says Paul Willems, CEO of GMG GmbH & Co. KG. "The GMG ColorServer/SmartProfiler color management solution creates additional value to our customers, putting service providers in a position to offer print products with an identical color appearance, regardless of which printing process, press and substrate used. The HP Gold partner status clearly demonstrates the high quality standards the GMG brand stands for and will certainly help to enhance the visibility of our joint solutions and their benefits for printing companies", adds Willems.
Looking back at the global economy in the second quarter of 2010, economic conditions continued improving broadly amid the recovery trend from the second half of 2009. Although the pace of economic recovery in Europe has remained decidedly modest largely due to sluggish consumer spending triggered by the financial concerns of Greece and other Southern European nations, along with deteriorating unemployment conditions, the United States continued to record a recovery in consumer spending along with steady export growth, while Japan saw a rapid increase in exports, mainly to Asian countries. The Asian economies, such as those of China and India, along with other emerging countries, continued to display solid growth.
As for the markets in which Canon operates amid these conditions, within the office equipment market, as had occurred earlier with color-model network digital multifunction devices (MFDs), demand for monochrome models also finally headed toward recovery. Additionally, the market for laser printers achieved a turnaround compared with the previous year. As for the consumer products market, demand for digital single-lens reflex (SLR) cameras displayed healthy growth throughout most all global markets, while demand for compact digital cameras recovered in developed countries and grew steadily in emerging markets, such as those in Asia. With regard to inkjet printers, demand indicates a steady recovery trend with the market size expanding compared with the year-ago period. In the industry and others market, market conditions for semiconductor lithography equipment and liquid crystal display (LCD) lithography equipment were marked by an upturn in order placements, owing to improved sentiment within the semiconductor-device and LCD-panel markets. The average values of the yen during the second quarter and first half of the year were ¥91.96 and ¥91.35 to the U.S. dollar, respectively, year-on-year appreciations of approximately ¥5 and ¥4, and ¥116.34 and ¥120.20 to the euro, year-on-year appreciations of approximately ¥17 and ¥7.
Amid the effects of the strong yen, net sales for the quarter totaled ¥970.4 billion (U.S.$11,027 million), an increase of 22.2% from the year-ago period, and ¥1,725.9 billion (U.S.$19,612 million) for the first six months, a jump of 16.5%, owing to strong sales of such consumer products as digital SLR cameras, a strong recovery in sales of laser printers among office products, the turnaround within the industry and others market, and the impact of consolidation arising from corporate acquisitions, such as that of Océ N.V. Although the appreciation of the yen had a significant impact, the quarterly gross profit ratio rose 5.5 points year on year to 49.0%, and improved 5.4 points to 48.9% for the first half, mainly reflecting the launch of new products and ongoing cost-cutting efforts, along with heightened production turnover accompanying ramped up production. As a result, gross profit rose by 37.6% to ¥475.4 billion (U.S.$5,402 million) for the second quarter and increased by 31.0% to ¥843.9 billion (U.S.$9,590 million) for the six months ended June 30, 2010. Despite the impact of consolidation, Group-wide efforts to thoroughly cut spending contributed to an improvement in the operating expenses to sales ratio of 0.5 points to 37.3% for the quarter, and of 1.8 points to 37.3% for the first half of the year. Consequently, operating profit climbed approximately 2.5 fold to ¥113.4 billion (U.S.$1,289 million) for the quarter, and approximately 3.1 fold to ¥200.3 billion (U.S.$2,276 million) for the combined six-month period. Other income (deductions) recorded an increase due to an improvement in foreign currency exchange losses and earnings on investments in affiliates, leading to income before income taxes for the second quarter of ¥112.7 billion (U.S.$1,280 million), an approximately 3.2-fold increase year on year, and ¥201.5 billion (U.S.$2,290 million) for the six months ended June 30, 2010, an approximately 3.5-fold leap from the corresponding period of the previous year. Net income attributable to Canon Inc. surged approximately 4.3 fold to ¥67.6 billion (U.S.$769 million) for the quarter, and 3.7 fold to ¥124.4 billion (U.S.$1,414 million) for the first half.
Basic net income attributable to Canon Inc. stockholders per share for the quarter was ¥54.67 (U.S.$0.62), an increase of ¥42.03 (U.S.$0.48) compared with the corresponding quarter of the previous year, and ¥100.68 (U.S.$1.14) for the first half of 2010, a year-on-year increase of ¥73.67 (U.S.$0.84).
Results by Segment
Looking at Canon's quarterly performance by business sector, within the Office Business Unit, while sales volume of color network digital MFDs increased by 39% boosted by the recovery in demand for office equipment along with the introduction of new image RUNNER ADVANCE-series products, sales volume for monochrome models increased by 21% reflecting the recovering market conditions. Laser printers, which suffered sluggish sales in the corresponding quarter of the previous year largely due to an adjustment of inventory levels, realized a significant increase in sales volume of 103%, almost double that of the previous year. Consequently, despite the significant effects of the strong yen, second-quarter sales for the segment totaled ¥521.9 billion (U.S.$5,931 million), growing 31.3% year on year, and ¥931.1 billion (U.S.$10,580 million) for the six months ended June 30, 2010, an increase of 19.9%. Operating profit increased 98.0% to ¥83.8 billion (U.S.$952 million) for the second quarter, and 72.8% to ¥155.9 billion (U.S.$1,771 million) for the combined six months of the year, mainly as a result of expanded sales and the sharp rise in the gross profit ratio.
Within the Consumer Business Unit, sales volumes of such new digital SLR cameras as the competitively priced EOS Digital Rebel T1i (EOS 500D) and the new EOS Digital Rebel T2i (EOS 550D), along with the EOS 5D Mark II and EOS 7D advanced-amateur models, sustained healthy growth. As for compact digital cameras, the Company launched four new ELPH (IXUS)-series models and five new PowerShot-series models, boosting sales volumes particularly in emerging markets. Consequently, sales volume for digital cameras recorded a year-on-year increase of 9%. With respect to inkjet printers, sales displayed solid growth, particularly in Asia, amid the market recovery, contributing to an increase in sales volume of 4%. Although the appreciation of the yen had a strong impact, sales for the segment rose 9.8% year on year to ¥364.0 billion (U.S.$4,137 million), and 14.0% to ¥654.3 billion (U.S.$7,435 million) for the six-month period. Operating profit increased by 71.6% to ¥66.9 billion (U.S.$761 million) for the quarter, and 101.3% to ¥114.3 billion (U.S.$1,298 million) for the first half, largely reflecting increased sales and the rise in the gross profit ratio.
In the Industry and Others Business Unit, independent business-related sales of Group subsidiaries increased in line with the turnaround in business conditions while sales volume of LCD lithography equipment grew appreciably, stimulated by the revival of the market. Sales volume of semiconductor lithography equipment, while remaining at a low level, also gained modestly. As a result, sales for the segment grew 27.5% to ¥108.9 billion (U.S.$1,238 million) for the quarter and 11.6% to ¥191.3 billion (U.S.$2,173 million) for the combined six months. Operating loss improved by ¥2.7 billion (U.S.$31 million) to ¥5.4 billion (U.S.$62 million) for the quarter and totaled ¥8.4 billion (U.S.$95 million) for the six-month period, a turnaround of ¥15.4 billion (U.S.$175 million) year on year owing to expanded sales combined with a reduction in expenses.
During the first half of 2010, cash flows from operating activities totaled ¥348.6 billion (U.S.$3,961 million), an increase of ¥159.9 billion (U.S.$1,817 million) from the year-ago period, mainly due to the significant increase in profit. Although investments, such as for the acquisition of shares of Océ N.V. to strengthen the printing business, increased substantially, capital investment was focused on items relevant to introducing new products, which led to a year-on-year decrease of cash flows from investing activities of ¥41.3 billion (U.S.$470 million) to ¥177.0 billion (U.S.$2,011 million). Accordingly, free cash flows totaled ¥171.6 billion (U.S.$1,950 million), an increase of ¥201.2 billion (U.S.$2,287 million) from the corresponding year-ago period.
Cash flows from financing activities recorded an outlay of ¥150.6 billion (U.S.$1,711 million), mainly arising from the dividend payout coupled with the partial repayment of borrowings of Océ N.V. Cash and cash equivalents decreased by ¥23.3 billion (U.S.$265 million) to ¥771.7 billion (U.S.$8,769 million) from the end of the previous year due to the foreign currency translation adjustments stemming from the strong yen.
As for the outlook in the third quarter and thereafter, although developed countries, especially in Europe, face uncertainty regarding future prospects due to such factors as fiscal challenges and employment problems, those economies appear to be steadily headed for recovery with China and other emerging nations, which are expected to fuel global growth, likely to continue enjoying healthy expansion.
In the businesses in which Canon is involved, within the office equipment market, demand for such products as color network digital MFDs and laser printers are projected to head toward a full-fledged recovery. With respect to the consumer products market, demand for digital SLR cameras and compact digital cameras is expected to achieve solid growth while sales of inkjet printers will likely expand gradually in response to the economic turnaround. As for the industry and others market, demand for semiconductor lithography equipment is expected to regain momentum as device makers begin investing again while demand for LCD lithography equipment is also expected to increase sharply as LCD panel manufacturers gear up to boost production.
With regard to currency exchange rates for the third quarter onward, on which Canon’s performance outlook is based, despite the effects of the financial concerns of Greece and other Southern European nations, along with uncertainty over future interest rate policies for major countries and other factors, Canon anticipates exchange rates for the period of ¥90 to the U.S. dollar and ¥110 to the euro, representing appreciations of approximately ¥1 against the U.S. dollar, and approximately ¥23 against the euro compared with the previous year. Upon taking into consideration current business sentiment based on these foreign exchange rate assumptions, Canon maintains its previous projections: net sales of ¥3,750.0 billion (U.S.$42,614 million), a year-on-year increase of 16.9%; operating profit of ¥360.0 billion (U.S.$4,091 million), a year-on-year increase of 65.9%; income before income taxes of ¥360.0 billion (U.S.$4,091 million), a year-on-year increase of 64.1%; and net income attributable to Canon Inc. of ¥240.0 billion (U.S.$2,727 million), a year-on-year increase of 82.3%.
In the first half of 2010 total revenues amounted to € 1,289.9 million (31 May 2009: € 1,333.7 million), a decrease of 3.3% compared to the first half of 2009. Excluding exchange rates effects, the decrease was 3.5%. The sale of printing systems (non?recurring revenues) decreased organically by 2.2%. Revenues from service, inks, toners, media, rental, interest and business services (recurring revenues) decreased organically by 4.0%. The share of color continues to grow and now accounts for 33% (31 May 2009: 30%)
Gross margin The relative gross margin was 36.9% (31 May 2009: 37.2%). The normalized gross margin was 38.2% (31 May 2009: 37.3%). The increase was the result of several factors. Compared to the first half year of 2009 the changes in currency exchange rates caused a positive hedge variance of € 3.1 million, leading to a gross margin increase of 0.3% point. The gross margin increase for DDS and WFPS in total amounted to 0.6% points. The increase was mainly due to the better utilization of the supply centers in Venlo and Poing and the savings program. The gross margin includes a total of € 16 million integration costs following Océ's decision to impair tooling and inventories due to changes in the product portfolio from certain OEM suppliers to Canon.
Operating expenses Operating expenses as a percentage of total revenues amounted to 38.1% (31 May 2009: 35.9%). Normalized operating expenses amounted to 36.0% (31 May 2009: 36.0%), due to the savings program. In constant currencies operating expenses declined by € 16 million. Net R&D capitalization amounted to € 20.1 million which is € 5.1 million lower compared to the first half year of 2009 (€ 25.2 million). The integration cost recorded under operating expenses amounted in total to € 27 million due to the fact that Océ impaired intangible assets related to supply contracts with certain OEM suppliers as well as to the expected harmonization of Océ IT systems with Canon. Additionally, Océ incurred advisory fees related to the Canon transaction. Operating income The operating income amounted to ? € 15.9 million (31 May 2009: € 17.1 million).
Operating income as percentage of total revenues amounted to ? 1.2% (31 May 2009: 1.3%). Normalized operating income as percentage of total revenues amounted to 2.1% (31 May 2009: 1.4%).
Finance expenses Finance expenses (net) amounted to € 58.2 million (31 May 2009: € 19.3 million). Océ, through Canon, has refinanced both the multicurrency revolving credit facilities and the United States Private Placements. The total finance expenses related to the repayment of borrowings and the unwind of interest rate swaps amount to € 40 million. The refinancing by Canon does not include financial covenants or commitment fees and is at more favorable interest margins than the aforementioned facilities. The positive effect from the refinancing is not included in the above mentioned integration cost and will be visible in finance expenses from the third quarter onwards.
Taxation In the first half of 2010 taxation amounted to ? € 26.9 million (31 May 2009: € 1.2 million). The income tax effect of in total € 20 million results from the abovementioned items, from changes in the valuation of tax assets and liabilities and from reassessments of tax risks. With respect to the valuation of tax assets, as a consequence of the change of control, tax assets in Germany and the United States were (partially) forfeited due to local tax laws.
Net income (loss) Net loss for the six months ended 31 May 2010 amounted to ? € 100.8 million (31 May 2009: € 1.0 million net income). Net loss per ordinary share attributable to holders of these shares amounted to ? € 1.21 (31 May 2009: ? € 0.01). For the first half year the total effect of integration cost on reported net income amounted to ? € 103 million.
Intangible assets Due to the integration with Canon, Océ has impaired supply contracts with certain OEM suppliers, internally developed software and purchased software for a total amount of € 22.5 million.
Inventory and property, plant an equipment The gross margin includes a total of € 16 million integration cost following Océ's decision to impair tooling and inventories due to changes in the product portfolio from certain OEM suppliers to Canon.
Borrowings As a result from the integration with Canon, the US Private Placements have been redeemed and the drawings under the multicurrency revolving credit facility have been discontinued. Both have been replaced with loans of Canon. The early redemption of the US Private Placements caused a loss of € 20 million.
Derivative financial instruments Due to discontinuation of the drawings under the multicurrency revolving credit facility (see borrowings), Océ has unwound its interest rate swaps which were intended to hedge (cash flow hedge) the drawings under the multicurrency revolving credit facility. As the forecasted transactions of the hedge are no longer expected to occur, Océ has reclassified the loss accumulated in the hedge reserve of € 20 million to the income statement.
The cash flow before financing activities (free cash flow) amounted to ? € 124 million (31 May 2009: ? € 48 million), a decrease of € 76 million compared to the first half of 2009. The cash flow from operating activities amounted to ? € 78 million, a decrease of € 83 million compared to the first half of 2009 (€ 5 million). This decrease was largely due to integration cost and to lower cash flows from both inventories and accounts receivable. This was partly compensated by a higher cash flow from creditors. The cash flow from investing activities amounted to ? € 46 million (31 May 2009: ? € 53 million). The cash flow from financing activities amounted to € 112 million (31 May 2009: € 177 million). The decrease was largely due to the refinancing of both the multicurrency revolving credit facilities and the United States Private Placements by loans of Canon. The cash dividend distributed to holders of ordinary shares was nil (31 May 2009: nil). The cash dividend paid to holders of financing preference shares relating to the financial year 2009 was nil (31 May 2009: € 2.0 million).
SBUs results first half year 2010
Digital Document Systems (DDS)
Revenues in DDS decreased by 3.9% to € 718.3 million (31 May 2009: € 747.6 million). On an organic basis revenues decreased by 3.9%. The share of color in revenues increased to 28% (31 May 2009: 25%) driven by Océ's production color continuous feed systems. Non?recurring revenues amounted to € 227.4 million (31 May 2009: € 233.5 million), an organic decrease of 2.8%. Recurring revenues amounted to € 490.9 million (31 May 2009: € 514.1 million), an organic decrease of 4.3%. The market deterioration resulted in lower print volumes and subsequently lower revenues in Office and black & white continuous feed. DDS grew its revenues in production cutsheet and continuous feed color.
Wide Format Printing Systems (WFPS)
Revenues in WFPS amounted to € 343.4 million (31 May 2009: € 353.8 million), an organic decrease of 4.4%. The share of color in revenues increased to 47%. (31 May 2009: 45%). For example as result of the newly?introduced Océ ColorWave 300 and Océ CS2400 color systems for the Technical Documentation market. To further strengthen its color portfolio for the wide format Graphics Arts market, Océ launched in June the high?speed Océ Arizona 550 XT flatbed printer which has double the speed of the Océ Arizona 350 XT systems.
Non?recurring revenues amounted to € 122.0 million (31 May 2009: € 120.7 million). Organically, nonrecurring revenues decreased by 1.0%. Recurring revenues amounted to € 221.4 million (31 May 2009: € 233.1 million), an organic decrease of 6.2%.
Océ Business Services (OBS)
Revenues in OBS amounted to € 228.2 million (31 May 2009: € 232.3 million), an organic decrease of 1.1%. Revenue growth in Europe continued. The United States is facing a decline in the traditional Mail business, which could only partly be compensated through growth in new services.
Integration with Canon
Canon and Océ announced on 16 November 2009 that they had reached conditional agreement to combine their printing activities through a fully self?funded, public cash offer.
On 28 January 2010, Canon and Océ jointly announced that Canon will make a fully self?funded public cash offer for all the issued and outstanding ordinary shares of Océ at an offer price of € 8.60 per share. Canon obtained control over Océ on 9 March 2010, owning 77,41% of the share capital.
Canon and Océ
Canon and Océ will work towards creating the best combination in the printing industry. The priorities for 2010 remain unchanged and encompass growth through cross selling opportunities, the co?operation in technology and product development and the preparation of the next step in the integration. In the second half of 2010 we expect the first commercial results via cross?selling of Canon products in Océ channels and vice versa.
Océ and Canon are currently assessing the adequacy of all change of control related items and are in the process of evaluating valuation principles. As a consequence, additional entries or changes in Océ's assets and liabilities may be processed.
The assessment concerns the identification of the principal risks, which were subdivided into five groups. The following three groups of risks related to the three strategic pillars:
1. Lack of sufficient distribution power.
2. No full line competitive products and services portfolio.
3. Failure to implement the Operational Excellence program successfully.
The two additional groups of principal risks were:
4. A (temporary) significant decline in the demand for products and/or services.
5. Risks relating to the cash flow or the availability of liquid funds or financing.
Risks in second half year of 2010
In our view, the nature and potential impact of the risks as mentioned in the 2009 Annual Report will not be materially different for the second half of 2010 for groups 1, 3 and 4.
In addition the following should be noted:
- For strategic pillar 2: The risk has decreased due to introduction of own new products as well as access to full Canon assortment.
- Regarding financial risks: Canon, being our parent company since March 2010, refinanced the external loans. As a Canon subsidiary, Océ is no longer restricted by external covenants as described on pages 98 and 99 in the 2009 Annual Report.
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