Lanier Worldwide, Inc. Announces Strategic Initiatives
Company Will Take Restructuring Charge to Improve Operating Efficiency Company Reports Third Quarter Earnings
ATLANTA, April 27, 2000 /PRNewswire/ -- Lanier Worldwide, Inc. (NYSE: LR) today reported net income of $52,000 for the third quarter of fiscal 2000 or $.00 earnings per share, which compares with a net income of $15.6 million reported for the same period last year. Revenue for the quarter was $320 million, a 12.7% decrease compared to the same period last year excluding adjustments for divestitures and currency fluctuations. These results were in line with the company's revised expectations for the quarter.
"We are disappointed with our third quarter results and have taken significant actions to address the situation," said Wesley E. Cantrell, Chairman of the Board and Chief Executive Officer. "These actions are focused in three major areas; initiatives to drive growth in our core document management solutions business, improvement in operational efficiencies, and a reduction in debt and associated interest expense."
Actions taken by the company include the following:
* After a careful strategic review, the decision has been made to sell
our voice processing (dictation) business. We have retained Robinson-
Humphrey, a leader in research and investment banking services, to
assist in this divestiture and they are in the process of finalizing
the sales documents. We believe that selling this business is the best
long-term decision for the company, our customers, and employees.
* The implementation of a plan to begin focusing sales resources in major
accounts and selected vertical markets. The number of major account
reps in the U.S. has increased over 20% compared to the same quarter
last year. We expect to more than double the number of major account
and vertical account reps in the U.S. by the end of fiscal 2001.
* The digital product portfolio has been expanded with the introduction
of five new digital copier/printers and multifunction devices since
January 1, 2000. Seven more digital copier/printer introductions are
planned before the end of this fiscal year including three high-speed
segment five digital copier/printers. Segment five copiers account for
an estimated 14% of the industry's total copier page volume and these
new products will dramatically strengthen Lanier's presence in this
important segment.
* Expanded e-business initiatives have been implemented including the
formation of a dedicated web technologies and solutions department to
support our plans. LPSNet, an Internet based print management software
solution, has been developed by Lanier and provides document
productivity and capabilities for our customers. Lanier joined
PricewaterhouseCooper's e.conomy online market place as a provider
partner. Tradeout.com was selected by Lanier to sell surplus inventory
over the Internet. In addition, the company is in the process of
creating a web-based direct sales organization to capitalize on the
strengths of our telemarketing operation, large customer base, and
service infrastructure.
* With this release we are announcing a $25-30 million restructuring
charge that will be taken in the fourth quarter of fiscal 2000 to
improve the company's competitive position and operating efficiencies.
Restructuring activities include redeploying some employees into
revenue generating sales positions. This restructuring charge will be
used for severance costs and the cost of closing facilities and is
expected to impact about 400-500 employees, or 5% of the worldwide
workforce.
* A $50 million securitization of domestic trade receivables was
completed as announced by the company on April 11, 2000. The interest
expense reduction in the first year is anticipated to be $500,000.
* Dedicated professional resources were assigned to resolve the monthly
billing and contract management issues in Europe. We expect these
issues to be mitigated by the end of June 2000 and will address the
systemic issues in fiscal 2001.
* Divestiture of other non-strategic assets is also under consideration.
"There was some positive news this past quarter despite these disappointing results," said Cantrell. Our facilities management business grew 19% in the third quarter and we expect to enhance this organization with expanded sales and consulting resources. Color placements were up 85% and we've just introduced a 22 page per minute color copier/printer ideal for corporate applications. Black and white copier placements in segments 2-4 were up 19% with over 60% of the placements being digital. In addition, we are continuing to develop the HP/Lanier alliance with a concentration in the services area. We're pleased with the progress in some of these critical areas but recognize the ongoing challenges created by the industry transition from analog to digital technology."
Total third quarter revenue of $319.9 million decreased $46.5 million, or 12.7%, year over year, reflecting the currency translation effect of a stronger U.S. dollar ($10.6 million) and divestitures in fiscal 1999 of Lanier's direct sales operations in France and U.S.-based medical transcription business which formerly contributed $10.9 million in revenue. Net of these effects, third quarter revenue decreased $25.0 million or 6.8%. Management believes this was primarily the result of competitive price pressures.
Total third quarter gross margin decreased $28.6 million to $112.6 million from $141.2 million last year. As a percent of revenue, total gross margin for the quarter decreased 3.3 percentage points year over year to 35.2% of revenue. Of the overall decline in gross margin, $2.8 million stemmed from divestitures previously mentioned, $3.4 million arose due to currency translation and $2.4 million was attributable to the strengthening of the Japanese yen against the U.S. dollar and Euro currencies. The remainder of the decline primarily reflects ongoing price competition for unit placements.
To combat margin declines, management continued to reduce selling and administrative expenses in the third quarter, which amounted to $91.0 million and reflected a 15.7% decrease year over year. The reduction was principally attributable to a restructuring program instituted and completed in fiscal 1999, lower commission expenses related to lower sales, and lower payments under the company's bonus and profit sharing plans.
Interest expense increased $8.3 million for the third quarter to $14.9 million from $6.6 million for the third quarter of fiscal 1999, reflecting the impact of spin off related debt costs.
Earnings before interest, taxes, depreciation and amortization totaled $40.3 million for the quarter with depreciation expense being $23.5 million and amortization expense of $1.7 million. Third quarter net income decreased to $52,000 from $15.6 million for the third quarter of fiscal 1999 as a result of revenue and gross margins declines and additional interest and other expenses incurred as a result of the spin-off from Harris Corporation.
"Our debt is already much more manageable," said James MacLennan, Executive Vice President and Chief Financial Officer. "It has been decreased by approximately $51 million in the past quarter, primarily through operations cash flow and improved cash management. We completed a $50 million securitization of domestic trade receivables and expect to complete a further $200 million securitization of lease receivables by the end of June 2000. The proceeds from these facilities will be used to pay down the $250 million term- loan tranche of our $900 million credit facility and significantly reduce our interest expense."
With 1,600 sales and service locations worldwide, Lanier Worldwide, Inc. and its dealer and distributor network form one of the largest global providers of document management solutions. Every day, Lanier and its dealers and distributors help customers in more than 100 countries create, enhance and distribute high-quality documents with greater speed, efficiency and economy. Lanier maintains an intense customer focus-called Customer Vision(R)-and employs DOCutivity(R), a document lifecycle approach designed to improve business productivity. Lanier's comprehensive document management solutions portfolio includes digital color copier/printers, black-and-white digital copier/printers, multifunction devices, digital dictation systems, print-on- demand applications and a variety of outsourcing services. Lanier also develops specialized solutions for the healthcare and real estate industries. Lanier was founded in 1934, and is headquartered in Atlanta, Georgia, U.S.A. For more information, please visit Lanier's Web site at www.lanier.com.
This press release contains "forward-looking" statements within the meaning of the federal securities laws. These statements can be identified by reference to words such as "expect," "believe," "anticipate", "plan", or similar expressions. It is important to note that these statements involve a number of risks, uncertainties and other factors that could cause Lanier's actual results to differ materially from those projected in such forward- looking statements. Additional information concerning such matters is contained in Lanier's Registration Statement on Form 10, as amended, filed with the Securities and Exchange Commission on October 22, 1999, and other documents subsequently filed with the SEC, all of which are available from the SEC.
Note: For further information, please contact Brad Nelson, Vice President, Investor Relations, at 770-621-1076 or James MacLennan, Executive Vice President and Chief Financial Officer at 770-621-1078.
LANIER WORLDWIDE, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
For The Quarter Ended
March 31, April 2,
2000 1999
REVENUE:
Product sales and rentals $172,310 $199,225
Service income 136,805 157,653
Finance income 10,784 9,565
319,899 366,443
COSTS AND EXPENSES:
Cost of product sales and rentals 127,778 136,121
Cost of service 79,481 89,112
Selling and administrative expenses 91,051 107,941
Interest expense 14,926 6,597
Other - net 6,579 1,641
319,815 341,412
Income before income taxes 84 25,031
Income taxes 32 9,447
NET INCOME $52 $15,584
Weighted average number of shares outstanding 83,025
Basic earnings per share $0.00
Weighted average number of shares
outstanding assuming dilution 83,356
Diluted earnings per share $0.00
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SOURCE: Lanier Worldwide, Inc.
CONTACT: Bradford L. Nelson, Vice President, Investor Relations, 770-621-1076, or bnelson@lanier.com , or James MacLennan, Executive Vice President and Chief Financial Officer, 770-621-1078, both of Lanier Worldwide, Inc. |
