Wallace: 2Q Loss Partly Blamed on Kmart Bankruptcy, Restructuring On Track
Press release from the issuing company
LISLE, Ill.---March 13, 2002--Wallace, the leading national provider of comprehensive total print management products and services, today reported its second quarter pro forma financial results of $0.31 earnings per share, before restructuring and other one-time charges. Pro forma earnings for the same period last year were $0.47. Incorporating the restructuring and the other one-time charge results in a $0.18 loss per diluted share. Revenues for the quarter were $397.1 million compared to $441.7 million for the second quarter last year.
In the current fiscal year, the Company adopted the provisions of Statement of Financial Accounting Standard No. 142, "Goodwill and Intangible Assets'' ("SFAS No. 142''). As a result, retroactive to the beginning of the year, the Company recorded a $144.1 million cumulative effect charge from the change in accounting principle, net of tax, or $3.47 per share, for goodwill impairment in the Commercial Print business.
"We have made very significant progress in our restructuring and cost reduction efforts and are on schedule with our plans,'' said David Jones, Chairman of the Board and Chief Executive Officer. "Commercial print is under the direct leadership of Michael Duffield, and integration of this operation is moving aggressively forward.''
Vicki Avril, Wallace Senior Vice President and Chief Financial Officer, explained that the Company's reported results for the quarter were affected by some one-time charges. "We had two unusual events in the second quarter. The majority of the charges related to our restructuring efforts occurred in this quarter. Also, a provision was taken for accounts receivable and inventory exposures as a result of Kmart's bankruptcy filing. These items resulted in a $33.1 million pretax, one-time charge in the quarter.''
"We remain on schedule with the restructuring as outlined last November. The remaining facilities will be leaner and better scaled to optimize efficiencies which will increase margins and provide a platform for future growth of both products and services,'' said Mike Duffield, President and Chief Operating Officer. The Company expects the restructuring to generate approximately $13 million in annual cost savings.
David Jones also commented on the Company's long-term strategy. "We are focused on three strategic elements including restoring profitability and effectiveness, accelerating growth through focused selling of our complete capabilities, and creating new growth engines for the future through small acquisitions and ''in-house" developments. We continue to broaden print management to provide solutions for customers' information and communication needs.''
For the quarter, Wallace generated $24.3 million in cash from operations. Management stated there is a continued focus on driving cash flows from operations and careful management of the balance sheet. On a trailing twelve-month basis, working capital as a percent of sales remained constant with prior year balances, slightly below 15%. Total debt at the end of the quarter was $246.6 million, down $20.8 million from the first quarter.
Avril commented that the Company expects financial conditions to remain unchanged for the remainder of the fiscal year. The Company expects that, after adjusting for closed facilities, revenues will remain relatively flat but there will be benefits to earnings due to positive impacts from restructuring and cost savings. For the second half of the fiscal year ending July 31, 2002, Wallace anticipates diluted earnings per share between $0.70 and $0.75 before the remaining restructuring charges, which are estimated to total $4 million to $6 million. This projection accounts for seasonality of the business where typically the first half is stronger than the second half of the year.
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