Wallace 1Q Results: Sales Down from Last Year but Up from Last Quarter
Press release from the issuing company
LISLE, Ill.--Dec. 11, 2001--Wallace has reported its first quarter financial results of $0.29 per diluted share. Before restructuring charges, earnings per share was $0.32, compared to the street estimate of $0.31.
On a comparative basis, before restructuring charges and after eliminating goodwill amortization and its resulting impact on the tax rate, the prior year's first quarter net earnings was $0.46 per diluted share, and $0.31 in the immediately preceding quarter. Restructuring charges in the current quarter were approximately $2.6 million (or roughly $0.03 per share), versus $0.4 million in the prior year's first quarter. First quarter revenue was $409.2 million, down $20.1 million or 4.7% from the first quarter of the prior fiscal year, but up $3.5 million or 0.9% over the immediately preceding quarter.
The company elected to adopt Financial Accounting Standards Board issuance SFAS No. 142, "Goodwill and Other Intangible Assets,'' in its current fiscal year. As a result, goodwill amortization is no longer being recorded in the company's results. The impact of the adoption of the new standard resulted in increased actual earnings per share in the current quarter, and on a proforma basis for the prior year quarters, of roughly $0.04 to $0.05 per share. Due to the application of SFAS No. 142, the company believes that partial impairment losses for goodwill will arise in its commercial print division. The company is currently undertaking valuations to conclusively determine if there is a partial impairment, and will report the results of the impairment test by the end of its second quarter. The definitive amount of the loss will be known by the end of its fourth quarter, and will be reported as a change in accounting principle in the current fiscal year.
The company also previously announced a number of restructuring and cost reduction measures, including the closing of six manufacturing facilities, one distribution and fulfillment center, one multi-use facility, workforce reductions in excess of 10% of total employees, and other cost reduction projects. It is anticipated that the aggregate charges associated with the restructuring, most of which will be recorded in the second quarter, will approximate $35 million, with cash charges representing about one-half of that range. However, projected proceeds from the sale of assets will lower the net impact on cash flow in the current fiscal year to approximately $8 to $10 million. The restructuring actions are anticipated to save the company approximately $13 million annually, and will be coupled with incremental cost reduction initiatives, identified by the company's operating leaders, that will save an additional $20 million on an annual basis.
"The actions that have been announced will improve our performance and better position the company for future growth and enhanced financial results,'' said David Jones, Chairman of the Board and Chief Executive Officer. "These actions will also help us weather the downturn that is affecting the economy in general and is impacting our customers across the board. They will ultimately make Wallace a stronger company, better able to support our customers, and better able to provide our shareholders with the financial returns they expect and deserve.''
"Companies have to continually reduce their cost structures and work to offset cost increases with efficiencies and cost reductions,'' added Mike Duffield, President and Chief Operating Officer. "In addition to our restructuring actions, our operating leaders have also identified approximately $20 million in cost reduction opportunities in various areas, including waste reductions, process improvements, overhead reductions and purchasing savings. Detailed action plans have been developed to capture these opportunities.''
Total debt at the end of the first quarter was $267.4 million, down $20.7 million from the fourth quarter. The total debt to total capitalization ratio was lowered to 31.4%, versus 33.2% at the end of the fourth quarter. The company also purchased $4.5 million or roughly 300,000 of its shares in the first quarter. "In the first quarter we continued to pay down debt, coupled with share repurchases,'' said Vicki Avril, Senior Vice President and Chief Financial Officer. "Cash flow generated from operations remained strong in the current quarter.''
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