Standard Register to Reorganize, Expects to Layoff 2400
Press release from the issuing company
(DAYTON, OHIO), January 25, 2001... Standard Register (NYSE: SR) today announced a Renewal Plan aimed at revitalizing the Company, taking advantage of growth opportunities and creating increased shareholder value.
The four-step plan, which includes Restructuring, Reorganization, Performance Improvement and Growth Initiatives, aims to create Total Shareholder Return of 30 percent per year over the next three to four years. Long term, the goal is to position the Company for sustained earnings growth.
In June 2000, following four quarters of declining earnings, the Standard Register Board of Directors elected Dennis Rediker chief executive officer and charged him with developing a plan to revitalize the Company. What followed was an intensive review of the Company’s products and services as well as the market segments and customers Standard Register serves.
“We found that Standard Register had overinvested in a business model that was not consistent with the rapidly changing nature of the marketplace,” says Rediker. “As a result, the Company must undergo significant restructuring to ‘disinvest’ in those segments of the business that are not providing an adequate return and to invest more heavily in those areas that provide growth opportunities.”
Earlier today the Company reported lower fourth quarter and total year earnings. “The results are in line with the expectations previously communicated,” says Rediker. “The results further underscore the need for the Company’s change in direction.”
The Company-wide restructuring, which has already begun, will result in a smaller but more profitable company, says Rediker. Standard Register ended the year with an $81.5 million balance sheet write-off and a $7.4 million pre-tax restructuring charge for the closing of its Dayton plant, both of which occurred in the fourth quarter of 2000. In restructuring the business, Standard Register expects to see revenue reductions of 18-20 percent or $235-300 million of low-margin business and Company-wide layoffs that will affect approximately 2,400 employees-nearly 30 percent of the workforce. As a part of the Plan, production capacity will also be reduced by roughly 30 percent. In order to support these actions, Standard Register will take a first quarter 2001 restructuring charge of $109 million. In total, the actions are expected to result in approximately $125 million in annual cost savings for the Company.
While this restructuring will be extensive, the Company intends to complete this portion of the Plan by the end of 2001.
In addition to restructuring, 2001 will see the Company reorganized into four Strategic Business Units (SBUs)-Document Management, Fulfillment Services, Labels and Label Systems, and SMARTworks.com. The change to SBUs allows each unit to have a dedicated management team that is accountable and focused on growth opportunities while helping to drive performance, productivity and continuous improvement for Standard Register.
Document Management: The mission of the Document Management SBU is to manage the traditional business to sustain value while incubating new opportunities and helping our customers migrate to Electronic Document Management Systems (EDMS). Large document management accounts will continue to be served by the Document Management SBU.
Fulfillment Services: The Fulfillment Services SBU will invest in high growth market segments while building on our fast growing digital color, kitting and variable digital imaging businesses.
Labels and Label Systems: The Labels and Label Systems SBU will continue to provide stock and specialty custom labels while increasing its focus on the growing label systems market opportunity.
SMARTworks.com: SMARTworks.com was created as a wholly owned corporate subsidiary in June of 2000 and is establishing a leadership position in the print segment of the rapidly growing e-procurement marketplace.
“One of the major benefits of shifting to an SBU model,” says Rediker, “is that we now have the opportunity to attract highly qualified, proven business leaders, who will bring fresh perspectives to the Company, to serve as presidents of the new Strategic Business Units.”
The performance improvement segment of the plan deals with improving operating performance through a series of initiatives including intensifying account management, reducing the cost of quality, reducing working capital and redefining incentive plans.
* Chief Operating Officer Peter Dorsman plans to use Six Sigma to drive improved performance. Six Sigma is a business process that allows companies to dramatically improve their bottom lines by designing and monitoring everyday business activities in ways that minimize waste and resources while increasing customer satisfaction. Robert Crescenzi joined Standard Register in January as Vice President-Six Sigma, to head up the continuous improvement effort. Bob has more than 15 years of involvement with Six Sigma, is a Baldridge Award Examiner, and brings a wealth of experience from General Electric and Compaq Corporation, where he most recently served as Vice President, Customer Satisfaction & Quality.
* Dedication to customer-driven marketing will allow the Company to develop expanded relationships with current accounts as well as replicate account success with like customers.
* Increasing asset effectiveness involves reviewing and improving areas such as Accounts Receivable, Cash Management, Inventory Management, Liability Management and Capital Assets.
* Shifting the field sales incentive system to one that emphasizes profit generation over volume.
Today, two thirds of the Company’s revenue comes from declining market segments and the remaining one third comes from markets with growth potential. The target of the growth initiatives is to shift that ratio so that by 2004, more than two thirds of the Company’s revenues will come from growth markets. All four SBUs have identified specific growth initiatives that will kick off in 2001, including Distribution Labels, Document Consulting, Fulfillment Services and E-Procurement.
Distribution Labels: The Distribution Labels market is currently valued at $493M with a CAGR of eight percent. The Company already provides shipping labels to a number of large customers, and as more consumers move to on-line shopping, opportunities in this market will grow exponentially.
Document Consulting: As customers look to implement electronic document management, this $295 million market, with a CAGR of greater than 10 percent, has significant growth potential. Standard Register has been successful in implementing its Less Paper StrategyÒ approach to document management in a number of large accounts, and intends to expand its role in this market by leveraging the intellectual capital that already exists in the organization.
Fulfillment Services: Fulfillment Services, which refers to billing statements, benefit booklets, invoices, membership cards and kitted packages-most of which contain variable data, is a $3.7 billion market today with CAGR of 20 percent. Standard Register, through its digital imaging technology, has been a player in this market for some time, and will continue to expand products and services in order to grow faster than the market.
E-Procurement: SMARTworks.com will significantly accelerate the acquisition of channel partner agreements, which allow companies to resell the SMARTworks e-procurement and management platform to their customers. One large channel partner can potentially provide access to thousands of users.
“While we are restructuring and positioning the Company for growth, we intend to deepen our relationships with our customers,” says Rediker. It is also important to note, he adds, that the Company is building on existing strengths by adding new capabilities that are responsive to customers’ needs to improve their performance in the new economy.
The New Standard Register
Once complete, the Renewal Plan will deliver a revitalized company with increased Total Shareholder Return coupled with improved performance and growth opportunities. The Company aims to achieve 4th Quarter 2001 Earnings Per Share (EPS) of $0.45, up 40 percent over the same period in 2000, excluding non-recurring charges. By 2002, the target is to achieve the “high water mark” set in 1997 when EPS from continuing operations was $2.22 for the year. “Our goal is to become known as the leader in providing innovative approaches that leverage the information associated with our customers’ business processes to increase their profits,” says Rediker. “And with that in mind, we are in a position to deliver value to both our customers and our shareholders.”
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