For 2011, capital expenditures were $21.5 million the majority of which supported the advancement of the Company’s core growth solutions. These expenditures consisted of $14.2 million in cash and $7.3 million in capital leases. In addition, the Company acquired 100 percent of the ownership interests of iMedConsent, LLC for $4.9 million in cash. Related to this acquisition a $0.7 million note payable will be paid over two years and, up to an additional $2.0 million in contingent payments will be made based upon the performance of the business through the two-year anniversary of the transaction. Pension funding contributions were $25.0 million for 2011. Non-GAAP cash on a net debt basis was negative $11.6 million for the year.
For 2012, the Company is planning to spend $9-11 million in capital expenditures to further support its core solutions offering and is planning to contribute at least the minimum requirement of $27 million for Pension funding.
Strategic Restructuring Program
On January 23, 2012, the Company announced a strategic restructuring program to better align resources in support of its growing core solutions business and to reduce costs to offset the impact of declining revenue in its legacy operations. The restructuring is expected to result in an estimated $45 million in annual savings and the elimination of 12 percent to 15 percent of its workforce over the next 6 to 9 months. Costs associated with the restructuring program reduced fourth quarter 2011 earnings by $5.5 million pre-tax, or $0.11 per diluted share. The balance of the costs will reduce 2012 earnings by approximately $1.5 million pre-tax, or $0.03 per diluted share.
Deferred Tax Valuation Allowance, Pension Valuation and Postretirement Healthcare Plan Termination
During the fourth quarter the Company recorded a non-cash charge to tax expense of $89.5 million to establish a valuation allowance against certain deferred tax assets, which reduced earnings per diluted share by $3.08. The action is necessary under accounting standards that require recording a valuation allowance when it is more likely than not that a portion of the asset will not be realized. The valuation allowance will be maintained until sufficient evidence exists to support its reversal.
Additionally, the Company recorded a non-cash actuarial loss of $80.5 million to other comprehensive income within equity as a result of actual pension asset performance as compared to actuarial assumptions and liability increases caused by continued declines in the discount rate. The recording of this loss has no impact on 2011 earnings and pension amortization for 2012 is expected at $5.8 million per quarter or $23.0 million for the full year.
During the third quarter, Standard Register terminated its postretirement healthcare plan effective December 31, 2011. The elimination of these benefits triggered a one-time favorable $20.2 million pre-tax impact to earnings due to the elimination of $5.1 million of accumulated postretirement benefit obligations recorded as a long-term liability on the balance sheet and a net credit of $15.1 million for the immediate recognition of previously unrecognized prior service credits and actuarial losses that resided in accumulated other comprehensive income and deferred tax liabilities. Going forward, the Company will no longer amortize the unrecognized prior service credits and actuarial losses that have been favorably impacting pre-tax earnings by $1.0 million per quarter or $4.0 million annually.
Change in Inventory Accounting Method
In the fourth quarter of 2011, the Company changed its method of accounting for inventory from using a combination of the LIFO method and the FIFO method to using the FIFO method for all of its inventories. The Company believes the new method of accounting for inventory is preferable because the FIFO method better reflects the current value of inventories, is used by key users of financial statements including the Company’s lenders which use FIFO to value the collateral and to calculate its borrowing capacity and compliance with debt covenants, enhances comparability with industry peers, and provides consistency across all of operations regarding the method of accounting used for financial reporting. All prior periods presented have been adjusted to apply the new method of accounting.