Spokane Journal of Business

Printer maker turns new page

Output Technology Corp. completes reorganization, places bets on new product

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Output Technology Corp., the resilient Spokane manufacturer of high-speed computer printers, views 1999 as a clean sheet of paper upon which it hopes to imprint the first lines of its next chapter as a company.

It wont be Chapter 11.

Earlier this month, company officials say, Output made its final payment to creditors in the five-year reorganization it began in early 1994 upon emerging from Chapter 11 of the U.S. Bankruptcy Code. The highly unusual plan repaid creditors 100 percent of what they were owed, plus interest, and Output even repurchased stock from two venture-capital firms that once had tried to wrest away control of the company and liquidate it.

Company officials now want to turn a new page, and say they believe they have taken solid steps to position the Spokane manufacturer for the future.

Last month, Output launched into the marketplace a new printer that represents the first totally new line of products the company has introduced in nearly a decade. Called the OTC6500, the $39,000, high-speed, continuous-form laser printer is expected to grant the company entry into a lucrative, high-end market dominated by much-more expensive machines.

Output also recently recruited as its sales and marketing chief Carl Grotheer, a veteran of the computer-printer industry and former vice president for business development at Genicom Corp., a big Virginia-based maker of high-performance printers.

This is a pivotal year, says Steven Benner, Outputs vice president and chief operating officer.

Though the 15-year-old company beat conventional odds by completing its five-year reorganization plan, it has languished most of this decade. In 1992, the year prior to its bankruptcy filing, Output posted sales of about $35 million, and its plan had projected 1998 revenues of $48 million. Today, though, the companys sales are below $20 million, says Benner, who declines to be more specific.

Still, Output has remained profitable throughout its reorganization, and has kept its employment level relatively stable, currently at 107 people. And it did that, he says, while still investing in the development of a new product.

There are very few American companies that still develop non-impact printers from the ground up, says Grotheer, who says he was attracted to Output partly because of the prospects he believes the new OTC6500 has in the industry. Its a significant accomplishment for OTC to have done that while in reorganization.

New technology

The OTC6500 is a horse of a laser printer. Unlike the desktop printers found in most office settings, this one is about the size of a four-drawer filing cabinet, uses continuous-form media, and belts out 65 pages per minuteabout eight times faster than the typical desktop printer. Rated to handle 1 million pages per month, its targeted at high-volume users that might run the machine 24 hours a day, seven days a week, producing such things as mailing labels, bar-code stickers, or rebate checks.

Output created the machine by marrying electron-beam imaging technology developed by another printer maker, with a unique, warm-offset press fusing technology it developed itself here in Spokane. The result is what Output claims is a very fast, very efficient, very reliable printer that because of its fusing process can print on a wide range of materials, including polyester stickers and glossy event tickets.

Even priced at nearly $40,000, the printer can be marketed as a low-cost alternative to some faster but much more expensive printers. Some printers in that target market print at speeds of 200 pages per minute, but can cost half a million dollars or more, Output says.

The customers for this product will be very large customers, says Grotheer.

The new product required Output to develop new sales channels, since the expected type of customers for the device usually seek out specialized vendors when theyre shopping for one, he says. Output has done that, by selling the printer directly to such vendors, rather than first through distributors, as is the case with the companys other product lines.

The printer will be marketed first in North America, which continues to account for about 80 percent of Outputs sales, but will be introduced in Europe this spring and in Asia and Latin America later, Grotheer says.

Though today its just one printer, the OTC6500 represents a new line of printers, Benner says. The company is working to develop additional models that could include higher speeds or perhaps the capability of printing on two sides of a sheet of paper simultaneously. Output also is likely to pursue original-equipment manufacturer (OEM) relationships with larger manufacturers that might want to put their name on variations of the printer.

Four other lines

Output continues to make its TriMatrix Series printers, the three-head dot-matrix printers capable of speeds of up to 1,450 characters per second and upon which the company was founded back in 1984. Its other lines include the Demand Series, a dot-matrix unit used in lower-volume settings, the EuroLine Series, which are high-volume, line printers for heavy data-processing environments, and the LaserMatrix Series, Outputs first entry into continuous-form laser printers, which are capable of speeds of up to 24 pages per minute.

Currently, says Benner, the TriMatrix and LaserMatrix lines account for the bulk of the companys sales.

Outputs longtime president, Lou Sims, says its been too long since the company has introduced new products, and it has suffered because demand for its impact printers has declined. Too high a percentage of the companys revenues now are the result of the sale of consumables and replacement parts, rather than the sale of new machines, Sims says. He says the company hopes the OTC6500 will turn that around.

Were pretty much banking our future on that new product, he says.

The company makes all of its printers here, at its plant at 2310 N. Fancher, near Felts Field, though for sales within India it has printers assembled by a contract manufacturer in that country, to avoid tariff restrictions.

Benner says Outputs manufacturing employment here is expected to grow, but not dramatically, and he says its not likely that Output would consider off-shore manufacturing to save costs, since labor currently is a relatively small part of the overall cost of its printers.

A difficult time

Perhaps accounting for its stability during the reorganization, Output has retained the core of the board of directors it assembled in 1993 in part to help win approval of its reorganization plan. It included well-known Spokane businessmen Wendell Satre and Larry Stanley, as well as business consultant Frank Storey. Sims and Benner also are on the board.

The board had taken harsh steps to right the ship, slashing the companys work force at the time by a third, abandoning a failed product line Output had spent $4 million to develop, and shutting down its European sales subsidiary, which had offices in Great Britain, France, and the Netherlands.

Sims says the company since then has been operating very lean. We cut out everything that wasnt essential, he says. Some tax refunds and other small windfalls helped it to stay in the black during the reorganization.

Weve kept the jobs of 100 people alive that were imminent to be lost just six years ago, says Sims. And we paid everybody off. Thats an honorable achievement.

Shaun Cross, the Spokane attorney who handled Outputs reorganization case in Bankruptcy Court, says, Its pretty amazing. Ive always thought that the Output Technology Chapter 11 was an extraordinary case that had great potential to succeed. That fact that they made 20 quarterly payments, on time, and have made their final payment is proof of that. Its a tribute to the company, the shareholders, and the creditors committee.

Still, Sims describes the past few years as very difficult, and says that with the debt now completely repaid, the company can reconcentrate its efforts on building sales again.

Were certainly glad to have that behind us, he says.

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