LSC Communications to 'Temporarily' Shut Down Baraboo, Wis., Printing Plant, Impacting 393 Workers
Fresh on the heels of filing for voluntary Chapter 11 bankruptcy protection after defaulting on $972 million of debt covenants, LSC Communications has sent a letter to the Wisconsin Department of Workforce Development that it intends to implement layoffs during a 14-day period beginning April 20 of the majority of the workforce employed at its Baraboo, Wis., printing plant. The staff reductions impact about 393 positions in total — 362 hourly positions and 31 salary positions.
"The company is providing as much notice as practicable to affected employees following a sudden, dramatic, and unforeseen drop in business related to the COVID-19 crisis," wrote Rebecca Robertson, VP of human resources of the Chicago-headquartered printer. "Specifically, our retail and catalog customers suddenly, and significantly, decreased purchase orders and cancelled events because they are either shut down or impacted by the loss of sales as a result of stay at home orders issued by Governors across the country." She added that the decrease in volumes is also being impacted by the interruption to customers’ supply chains from other countries that have been significantly impacted by the coronavirus.
Along with the letter, LSC provided a list of job titles and the number of employees currently holding the affected position. The largest number of job titles on the list included bindery material handlers, bindery operators, various levels of press operators and assistants, roll tenders, and forklift operators. The letter also indicated that "there are no bumping rights, and no bargaining representatives representing affected employees at this facility."
According to Robertson, the layoffs are being considered temporary through June 30, 2020, but may be extended beyond that date, depending on market conditions and customer demand at that time. "However, various factors may still affect the timing of any employment separations," she pointed out.
As indicated in its Chapter 11 filing, LSC is the largest book printer in the U.S., and also prints magazines, catalogs, directories, and some direct mail products, as well as manufacturing office products, including filing products, envelopes, note-taking products, binder products, and forms. It has offices, plants, and other facilities in 28 states, as well as operations in Mexico, Canada, and the United Kingdom. It currently has approximately 19,500 total employees worldwide, of which approximately 15,809 employees are said to be located in the U.S.
LSC — a 2016 spinoff of RR Donnelley into three separate companies — was ranked Number 4 on the most recent Printing Impressions 400 annual list of the largest printers in the U.S. and Canada, as ranked by annual sales (click here to view the complete list.)
LSC: Some Market Trends That Led to the Chapter 11 Filing
LSC Communications cited numerous reasons that contributed to its Chapter 11 filing in its petition and first-day pleadings, including:
- Digital migration has substantially impacted print production volume, in particular with respect to printed magazines as advertising spending continues to move away from print to electronic media.
- Catalogs have experienced volume reductions as retailers and direct marketers allocate more of their spending to online advertising and marketing campaigns, and some traditional retailers and direct marketers go out of business in the face of increased competition from online retailers.
- Demand for printed educational textbooks within the college market has been adversely impacted by electronic substitution and other trends such as textbook rental programs and free open source e-textbooks. The K-12 educational sector has seen an increased focus on e-textbooks and e-learning programs, but there has been inconsistent adoption of these new technologies across school systems.
- While the Oct. 30, 2018, merger agreement with Quad/Graphics was pending (which was later terminated by both parties after the U.S. Department of Justice filed an antitrust lawsuit to block the acquisition), LSC was prohibited under the merger agreement from implementing certain plant consolidation and footprint optimization steps identified in a comprehensive review of the business. Additionally, customer uncertainty during the pendency of the merger made it difficult to attract new business, and certain customers chose not to renew contracts in part due to the expected merger with Quad. Finally, the company faced challenges in attracting and retaining employees, who were concerned about how the merger would affect their future employment.
- During its March discussions with creditors, LSC began to see a significant decrease in its available liquidity, driven in part by the long-term industry trends highlighted above and made acute by the severe economic impact of the COVID-19 pandemic.