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FLEXO Magazine : October 2012
Industry Indicators 2012 MAY BE BEST YEAR TO BUY nEW TECHnOLOGY This year may perhaps be the best year to buy new technology from the standpoint of obtaining significant and certain tax savings that can help pay for a new investment, according to NPES—the Association for Suppliers of Printing, Publish- ing and Converting Technologies. Competing tax bills (H.R. 8 and S. 3412), along with a Senate Finance Committee proposal (JCX-67-12) allow for 50 per- cent Bonus Depreciation through Dec. 31, 2012. Under Internal Revenue Code (IRC) Section 179, a taxpayer may deduct the cost of certain property placed in service for the year, rather than depreciate those costs over time. The maximum dollar amount that may be deducted in 2012 and phase-out threshold is $125,000 and $500,000 respectively. Both are currently set to revert to the original un-indexed amounts of $25,000 and $200,000 respectively for taxable years beginning in 2013 and thereafter. • H.R. 8 , the Job Protection and Recession Prevention Act of 2012, would have no effect on Section 179 expensing in 2012, but would set it in 2013 to $100/year with a $400,000 phase-out; indexed for inflation this is $127/year with a $510,000 phase-out. • S. 3412, the Middle Class Tax Cut Act, would have no effect on Section 179 expensing in 2012, but would increase it in 2013 to $250/year with an $800,000 phase-out, with no stated indexing. • JCX-67-12, the Senate Finance Committee proposal, would increase Section 179 expensing in 2012 to $500/year with a $2 million phase-out, and continue at that level through 2013, with no stated indexing. In all three proposals, off-the-shelf computer software would continue to be eligible for Section 179 expensing. The likeli- hood of the House and Senate achieving agreement and enacting a law that President Obama would sign is uncertain at best in the current, highly charged election-year atmosphere. Therefore, NPES maintains, “Manufacturers and buyers would do well to consider the benefits that can be derived from investments this year under current law. ” In that regard, see: www.npes.org/Calculator .aspx for NPES’ 2012 Tax Calculator. 2012—2013 Ratios Show Printing Industry Profits Increasing The printing industry reported profits of 1.8 percent in 2011, compared to 1.4 percent in 2010, according to the recently completed 2012–2013 Printing Industries of America Ratios Survey. Improving economic conditions helped the print industry pick up steam for the second year running. At this rate the industry earned approxi- mately $1.5 billion in total profits in 2011, which is above the $1.2 billion profit from the prior year. Profit leaders—printers in the top 25 percent of profit- ability—saw profits increase slightly to 9.6 percent as compared to 9.5 percent in the prior year. This increase brings profit leaders almost to pre-recession profit lev- els. Prior to the recession, profit leaders reported profits in the 10.1 –9 .7 percent range. For all printers, the aver- age profit of 1.8 percent is slightly more than the rate earned in 2003, two years after the last recession. According to PIA 2012 survey results (2011 fiscal year- end numbers), materials accounted for the largest single cost category for the typical printer—approximately 35.5 percent of sales. Paper alone consumed more than one- in-five sales dollars last year. Other major costs incurred by printers last year included factory payroll at 24.8 percent of sales (down from 24.9 percent in 2010), factory expenses of 17.6 percent of sales (down from 18.0 percent in 2010), and administrative and selling expenses at 19.6 percent of sales (up from 19.4 percent in 2010). Vertis/SGS International Agreement to Strengthen Both Firms Vertis Holdings, Inc. and SGS International, Inc. an- nounced an agreement through which SGS will further augment its complete, design-to-print packaging solutions with the purchase of additional prepress packaging equip- ment, data files and certain related assets from Vertis. Vertis had previously announced its intention to exit the prepress packaging business in order to focus on growing its core businesses—direct marketing, advertis- ing inserts and large format printing. Hank Baughman, president and chief executive officer, SGS , stated, “SGS provides critical services that ensure customers are able to obtain or produce consistent, high quality packaging materials. We look forward to continuing to expand our business through this transaction to better serve our customers.” 84 FLEXO october 2012 www.flexography.org PRESSInG ISSUES