Service Point closed
By Ed Avis
Service Point USA closed down on Friday, November 8. The reprographics firm had seven locations and about 100 employees, all who were terminated that day.
“It wasn’t a surprise,” says Brad Homan, who had been operations manager of Service Point USA for the past three years, and held other positions for 12 previous years. “What started the final events was when the banks decided not to play ball anymore.”
Service Point Solutions, which is based in Madrid, Spain, is the parent company of Service Point USA. The firm has struggled with debt, and had asked banks to restructure its debt twice prior to November. It has presented a third plan that is being considered by banks now, according to a company press release.
Despite the parent company’s debt problems, Service Point USA was profitable, Homan asserts.
“On-site services was extremely healthy and the other areas were also profitable,” Homan says. “It was an unbelievable waste.”
Service Point Solutions’ filings with the Spanish equivalent of the U.S. Securities and Exchange Commission, the Comisión Nacional del Mercado de Valores (CNMV), showed that the U.S. subsidiary generated 8 percent of the company’s revenue, which translates to about $4.2 million in Q3 2013.
View From Inside
Service Point Solutions in Spain has not responded to several requests for comment, but Homan provided information about the situation in Service Point USA’s headquarters in Woburn, Massachusetts.
The situation started to look bad in late October. On October 24, after the banks rejected Service Point Solutions’ latest restructuring plan, the company asked for creditor protection and the CNMV stopped trading of the company’s stock.
Shortly thereafter, Homan remembers, Service Point USA president Kevin Eyers met with other managers in Woburn and explained that the Spanish parent company had split the U.S., UK, Swedish, and Norwegian subsidiaries into a separate holding company. Homan remembers that Eyers described this action in positive terms, saying that it meant the holding company could operate with less concern about the parent company’s debt.
“He said it was a good thing, that we were going to take it to the competition,” Homan says.
However, the parent company’s stock soon started trading again, and Homan says the Americans eventually realized that the holding company arrangement did not mean salvation for Service Point USA. Homan says the decision to close the U.S. company was never explained to him, but by early November, the end seemed inevitable.
“By Thursday [November 7] it seemed common knowledge that Friday would be the last day,” Homan says. “We all came in at 8 o’clock and expected that Kevin would call us into a conference room or something to tell us, but instead he sent out an email about it. Then he sent out a human resources person, who went around and gave us all paperwork.”
The email went out at 11 a.m., Homan says, by which time tension was high in the office.
“It was kind of a crazy day. Customers were showing up at the counter asking about their jobs, and vendors who had not been paid were showing up and saying ‘We aren’t leaving until we get paid.’”
Employees were paid their salaries due through that day, and for any accrued vacation time. But they were given no severance.
Homan says he’s not sure why Service Point didn’t try to sell the U.S. company rather than just shut the doors, given its apparent profitability. “That was never explained. I think it was because the cash paid out for payroll was all that was left.”
Doug Magid, president of NRI, a reprographics firm with operations in New York, Boston, Philadelphia, and other cities, says he also is perplexed about the abrupt closure.
"I know in the past they had been profitable," Magid says. "I can also tell you I had approached them through the years telling them that if they wanted to sell the us operation, let’s talk, because I would be interested in buying it."
Service Point USA grew out of Charrette, a highly respected reprographics firm founded in 1964 in Boston. It was probably the largest reprographics provider in the Boston area when it closed.
“It was a sad day for the reprographics industry to lose a competitor like that,” said Michael Cully, president of AIR Graphics, which now probably is the largest reprographics firm in the Boston area. “We competed for 40 years. I was amazed when they closed so abruptly. I never saw that coming.”
In general, the sudden closure of a large reprographics firm, especially one with many facilities management clients, may reflect poorly on the industry as a whole.
But Magid, who has hired two former Service Point employees, says the former Service Point clients he has spoken to have not impugned the industry as whole.
"I think they blame this on Service Point corporate," Magid says. "The clients I've spoken to want to continue working with some of the Service Point people they have worked with, so there were some loyalties that were not damaged by this. I have not heard anything negative about these individuals or the industry."
Service Point USA’s closure has a silver lining for AIR Graphics, NRI, and other reprographics firms competing in their markets, which included Boston, New York, Philadelphia, Washington D.C., and other eastern cities.
“We’ve been contacted by I can’t count how many former Service Point clients,” Cully says. “My outside sales team has been meeting with them all week to transition them. It’s been a crazy week. A lot of business is coming our way.”
Magid reports the same. "We have seen a steady stream of former Service Point clients approaching us and asking for proposals. We've been quite busy."
Service Point USA had a large on-site services business, and those clients presumably have a lot of equipment belonging to, or leased by, Service Point still on premises. Magid says what happens to the equipment if a new provider comes in is still unanswered. "That is still an open question," he says.
Cully says his visits with former Service Point clients have provided a glimpse at what may have caused Service Point’s demise – remarkably low prices.
“Quite frankly what we’ve found when visiting their former clients this week is that their pricing was so damn low, no wonder they went out of business,” Cully says. “They ask me if I can match those prices, and I say, ‘No, I can’t do that. That’s why they went out of business.’”
Service Point Solutions is an international corporation, and the U.S. subsidiary is not the only to suffer from the parent corporation’s financial situation. The French subsidiary was closed two years ago, and the German subsidiary had its management completely replaced earlier this fall.
UPDATE: On November 14, the German subsidiary, Koebcke GMBH, filed for bankruptcy protection in Berlin. The press release said the company employs 140 people across 10 offices. The goal is to restructure the company, rather than close it, the release says.
There has been no word whether the company would restart ServicePoint USA if the debt problem were resolved.
“My personal opinion is I don’t think it’s very likely they could come back from this,” Cully says.
For more information on this situation, including translations of some of the related Spanish-language documents and further commentary, read Joel Salus’ blog, Repro 101.
Galen Moore, web editor of The Boston Business Journal, also has been covering this story. Click here to read that publication’s latest on the topic.