Total reported sales for the second quarter of 2020 were $2.2 billion, a decrease of 17% compared to the second quarter of 2019. The decrease in revenue was primarily the result of lower sales in the Business Solutions Division (BSD) and CompuCom Division driven by impacts related to the COVID-19 pandemic, combined with lower sales in the Retail Division driven by lower volume and fewer retail stores in service. Product sales in the second quarter were down 15% relative to the prior year period. Service revenue was down 26% in the quarter related to lower comparable sales at CompuCom and sales of service in our BSD and Retail Divisions, all of which were negatively impacted by the COVID-19 outbreak. On a consolidated basis, service revenue represented approximately 14% of total Company sales in the second quarter of 2020. The Company reported an operating loss of $456 million in the second quarter of 2020, compared to an operating loss of $15 million in the prior year period. GAAP operating results in the second quarter included $466 million of charges including $401 million of non-cash asset impairment charges, and $65 million in merger and restructuring costs. Asset impairment charges of $401 million in the second quarter of 2020 included $363 million related to impairment of goodwill and other intangible assets at CompuCom and in the Company’s contract business combined, largely related to the effects of the COVID-19 outbreak on current businesses conditions. Asset impairment charges also included $25 million related to the impairment of operating lease right-of-use (ROU) assets associated with the Company’s retail store locations, with the remainder primarily relating to the impairment of fixed assets. Merger and restructuring costs of $65 million include $6 million associated with the Business Acceleration Program (“BAP”), $51 million associated with restructuring charges related to the recently announced Maximize B2B Restructuring Plan, and $7 million in merger, acquisition and integration-related expenses.
Results for the three months ended June 30, 2020, included: *Net Sales (excluding discontinued operations) — Net sales were $585 million in 2020, down 38% from 2019. Sales declined 36% during the quarter, excluding the impact of the January 2020 sale of the Omaha packaging plant primarily due to the economic impact from the COVID-19 pandemic, and ongoing print industry volume and pricing pressures. *Net Loss From Continuing Operations — Excluding the results from discontinued operations, net loss from continuing operations was $15 million in 2020 compared to net loss from continuing operations of $3 million in 2019. Results for the six months ended June 30, 2020, included: *Net Sales (excluding discontinued operations) — Net sales were $1.4 billion in 2020 as compared to $1.9 billion in 2019, down 26%. Sales declined 25% during the six months ended June 30, 2020, after excluding the impact of the January 2020 sale of the Omaha packaging plant primarily due to the economic impact from the COVID-19 pandemic, and ongoing print industry volume and pricing pressures. *Net Loss From Continuing Operations — Excluding the results from discontinued operations, net loss from continuing operations was $24 million in 2020 as compared to net loss from continuing operations of $16 million in 2019.
*Net sales of $161.4 million decreased 36 percent compared with $253.4 million in the prior year. Technical Products segment sales decreased 28 percent and Fine Paper and Packaging revenues declined 48 percent. The decline in revenues in both segments resulted primarily from lower volumes caused by impacts of the COVID-19 pandemic. *An operating loss of $(58.5) million compared with operating income of $19.8 million in the prior year period. Excluding adjusting items of $59.0 million in 2020 and $3.5 million in 2019, adjusted operating income declined from $23.3 million in 2019 to $0.5 million in 2020 as a result of lower sales and production volumes and related manufacturing fixed cost inefficiencies, partly offset by reductions in manufacturing and selling, general and administrative ("SG&A") costs, and benefits of lower input prices net of selling price changes.
Net sales in the second quarter of 2020 were $1.4 billion, compared to $1.8 billion in the second quarter of 2019. Average selling prices improved approximately 1 percent and increased revenue $18 million. However, lower shipments due to the pandemic negatively impacted sales by $255 million. Unfavorable foreign currency translation reduced net sales by $88 million. Segment operating profit1 was $95 million in the quarter, compared with $236 million in the same period of 2019. Current year profits were impacted $6 million by unfavorable foreign currency translation. The benefit of higher selling prices more than offset incremental cost inflation by $1 million. Reflecting the impact of the pandemic, sales volume in tons declined approximately 15 percent from the prior year quarter and negatively impacted segment operating profit by $84 million. Segment operating profit was negatively impacted by $52 million as lower production levels were partially offset by improved operating performance and cost control efforts. Production levels were down approximately 20 percent from the second quarter of 2019 reflecting required curtailment to comply with government decrees to manage the pandemic, including disruptive lock downs in Mexico and the Andean countries, as well as the company’s effort to align supply with lower demand and manage inventory.
The McClatchy Company announced that the U.S. Bankruptcy Court for the Southern District of New York has approved the sale of substantially all of McClatchy's assets, including all 30 of McClatchy's news organizations, to Chatham Asset Management LLC. Chatham emerged as the successful bidder during an auction held on July 10, 2020. As previously disclosed, Chatham will acquire substantially all of McClatchy's assets for approximately $263 million in a credit bid of McClatchy's first-lien debt, plus new money consideration of approximately $49 million in cash. The transaction is subject to customary closing conditions and regulatory approvals. McClatchy expects to complete the transaction in September.
The U.S. Postal Service is implementing major changes to its delivery operations, effectively eliminating OT for carriers and informing them to leave undelivered items for the next day. This is all part of a cost-saving campaign under new Postmaster General Louis DeJoy, who estimates it will save the cash-strapped agency $200 million per year. Postal workers and unions as you might expect are not happy with the changes, which run counter to their mission to provide timely deliveries. A spokesman said the USPS is “developing a business plan to ensure that we will be financially stable and able to continue to provide reliable, affordable, safe and secure delivery of mail, packages and other communications to all Americans as a vital part of the nation’s critical infrastructure.”
Sustainability has always been a core aspect of our business—present in the products we make and the way we operate. Now, the launch of our new Twentyby30 program will accelerate our efforts across all three dimensions of sustainability: environmental, social and governance. Designed to address issues of critical global concern, Twentyby30 outlines 20 measurable goals to be achieved by 2030 or sooner, with each goal falling within one of the following pillars of action: *Climate Action *Resource Efficiency *Optimum Circularity *Working Together *Never Compromise. With these focus areas, we are pledging to raise our global performance around energy, water, waste, material use efficiency, recycling, employee health and safety (EH&S), Diversity & Inclusion, responsible and ethical sourcing, food contact and chemical safety and other topics. All program pillars are underpinned by responsible governance and ethics, which guide every business decision we make.
DS Smith, a leading sustainable packaging company, and Aquapak, an innovative developer of biodegradable polymer, are teaming up to develop the next generation of packaging solutions. By working together, the two organisations can provide sustainable fibre based packaging solutions that will replace hard to recycle packaging made from combined materials such as cardboard and plastic. After a period of pilot trials with the combined materials, focusing on both performance and recyclability, the partnership will now begin developing practical applications. This includes a range of fibre-based packaging where traditional plastic films can be replaced with Aquapak’s HydropolTM, a biodegradable and water-soluble polymer that will help to improve the recycling process.
ePac Holdings Europe has established two new locations for its digital-only production plants in both Lyon in France and Wrocław in Poland, in line with its previously announced expansion plans into continental Europe. The new manufacturing center in France will be strategically located near Lyon, in the town of Bourgoin Jallieu. Operations will be headed up by Jonathan Schmitt, who is the managing partner at ePac Lyon. The new ePac facility in Poland will be located in Wrocław, where Maciej Plamieniak will take the reins, and like ePac Lyon, orders will be fulfilled by the UK until full manufacturing is online.
Smurfit Kappa has today announced it has been chosen to participate in an innovative energy research project on renewable energy storage. The HYFLEXPOWER project will see Smurfit Kappa’s Saillat Paper Mill in France become the first plant in the world to introduce an integrated hydrogen gas turbine demonstrator. The announcement comes as the European Commission published its ‘Hydrogen Strategy for a Climate-Neutral Europe’ report which outlines the essential role that hydrogen will play within the European Green Deal carbon neutrality and energy transition initiative. The highly innovative research that will take part at the Saillat Mill, which will mainly be funded by the European Commission, aims to prove that hydrogen can be produced and stored from renewable electricity and ultimately replace up to 100 percent of the natural gas currently used by combined heat and power plants.