Wallace Provides 4Q Outlook, Weakness to Carry Beyond Calendar Year
Press release from the issuing company
LISLE, Ill.-Aug. 30, 2001--Wallace, the leading national provider of comprehensive total print management products and services, today announced that fourth quarter results will be lower than expected. The company anticipates reporting fourth quarter earnings of $0.14 per diluted share, versus $0.26 in the prior year's quarter. Included in the current quarter's number is approximately $9.5 million (or $0.14 per share) of charges related to re-evaluating company estimates of reserves in light of current economic and business conditions.
"We are operating under the assumption that economic conditions will continue to be weak and are forecasting that this weakness will carry beyond this calendar year,'' said David Jones, Chairman and Chief Executive Officer. "The adjustments to reserves being made this quarter are part of our on-going efforts to ensure our balance sheet remains strong.''
Total revenues for the quarter will be approximately $386 million, down $19 million or 5% from the prior year (before restatement of freight expense per EITF Issue 00-10). While revenues for Wallace's Forms and Labels segment roughly met expectations, revenues from Wallace's Integrated Graphics segment were much lower than anticipated, due primarily to lessened demand for commercial print items such as catalogs, brochures, and other related marketing collateral, mainly because of the continuing economic downturn. Local or transactional business was most adversely impacted during the quarter, from both a volume and margin perspective.
"We are continuing to experience very competitive conditions in the marketplace, especially in the commercial print area,'' said Mike Duffield, Wallace's President and Chief Operating Officer. "As a result, we are focusing on improving top-line revenue opportunities across all product lines by leveraging our Total Print Management strategy. The sales organization alignment that was announced last quarter is providing better focus and coordination in the field, and our mix of contractual business continues to increase.''
"The installation of enhanced systems has provided us with better information to more effectively manage the business. Beyond actions that have already been taken in the current quarter, including workforce reductions and management changes, we are evaluating other cost reduction actions, production process improvements, plant consolidations, and further reductions in our overall work force. We anticipate that any changes will improve performance while not sacrificing long-term growth opportunities.''
Cash flow generated by operations exceeded expectations in the quarter. The total debt to total capitalization ratio at the end of the quarter was approximately 33%, versus 36.9% at the end of the third quarter. "Wallace has made very good progress towards reducing working capital. Extraordinary efforts to identify and address slow moving inventory are beginning to show results,'' said Vicki Avril, Senior Vice President and Chief Financial Officer. "Greater awareness of return on invested capital is driving the company to be more focused on the balance sheet. We believe that our balance sheet is strong and that we have increased our financial flexibility. We are positioning ourselves to take advantage of the economic upturn that will eventually take place.''
Operating cash flow remains very strong and will improve prospectively as the focus on working capital management continues and the economy gradually rebounds. "Wallace stock is currently trading at less than four times EBITDA (earnings before interest, taxes, and depreciation and amortization expenses),'' added Jones. "We sincerely believe this company and its stock have tremendous upside potential.''
Wallace will issue a press release on Wednesday, September 12, that will provide additional details regarding its fourth quarter, and will hold a conference call and webcast to discuss those details on Thursday, September 13, at 9:00 AM Central Time.
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