Ahem! The Sheridan Group already has $165 million of private equity debt at 10.25% interest.

Sheridan posted an $8 million loss in 2006 due to the cooked books of its Dingley Press acquisition (which included “revenue recognition, asset valuation, derivative instruments and stock option accounting” issues).

Had a bookkeeper whistle blown Dingley’s sauteed books before Sheridan reported them to the SEC, Dingley’s previous owner would almost certainly be attending Sheridan Board meetings by telephone — from jail! — instead of in person.

Tragically, these debt-ridden private equity printing industry ‘rollups’ simply serve as vehicles for ‘executive looting’ at the expense of the worker bees within the acquired companies.

The CEO of The Sheridan Group paid himself over $1 million, in 2003, to manage his massive debt. Nobody in Sheridan management ever had anything to do with printing. They came from Noxell, the Noxema and Cover Girl makeup division of Procter & Gamble which is headquartered a mile up the road.

The Group’s current management will retire wealthy, leaving the acquired companies saddled with huge debt.

Eventually the Sheridan Group will probably embarrass Champ Sheridan (who is a real printer) by being auctioned off by its frustrated NYC private equity owners — who have already strongly incentived the CEO to find them a buyer so they can unload the company.

Quebecor, Sheridan, Cenveo, Printcafe … these rollup debt disasters are the ego-driven “Field of Dreams” of wannabes who cruelly damage the printing industry.

End of Sermon.

The gravure operations are the jewel in the crown here in the US. They are still anchored by the long-term contracts and have a technologically competitive production network. RRD should get the gravure operations in a scenario where the entire company is parted out in partnership with private equity. The offset operations for magazine and catalogs have been starved for capital for years and forced to compete on price in select niches with lackluster customer service. (despite the best efforts of some valiant employees). The M-3000 equipped locations should be sold-off to an offset leader and the balance shuttered with the possible exception of short-run magazine locations that might have a stable of contracts. The book plants should be sold to either the Sheridan Group or Jim Conway at Courier Inc – Courier has the management team to turn around those elements that can still be saved.

Just my two cents, if it turns out that they are on the market and they get picked up by private capital instead of another printing company, it will be very interesting to watch what happens next.