Standard Register (NYSE: SR) today announced its financial
results for the second quarter. The Company reported revenue of
$164.3 million and a net loss of $0.9 million, or $0.03 per share.
The results compare to prior year revenue of $164.7 million and a
net loss of $0.1 million, a relative break-even on a per share
basis. Through the first half, the Company reported revenue of
$329.2 million and a net loss of $0.4 million, or $0.01 per share.
The first half results compare to last year’s revenue of $332.1
million and a net loss of $0.9 million, or $0.03 per share.
Results of Operations
Core solution revenues within our focus market segments of
healthcare, financial services and industrial grew at double-digit
rates during the quarter. However, expected declines in legacy
products, such as business forms and transactional labels, continue
to challenge progress across all business units, resulting in
relatively flat revenue for the overall Company during the
quarter.
“As we execute our strategy to transition from a document
management, product-focused company to a market-focused provider of
solutions that meet our customers’ strategic needs, we have
demonstrated that these new core solutions can produce organic
revenue growth,” said Joseph P. Morgan, Jr., president and chief
executive officer. “We are making good progress on building a more
sustainable business based on these core growth solutions and are
accelerating development and introduction through our commercial,
healthcare and industrial business units.”
Gross margin as a percent of revenue decreased slightly to 31.0
in the current year quarter from 31.4 for the prior year quarter.
Cost reduction from continuous improvement initiatives were offset
by increases in materials, as well as one-time implementation costs
for new customers during the quarter. Year-to-date, gross margin as
a percent of revenue improved slightly to 31.8 percent in the
current year from 31.7 percent during the prior year, which
included the benefit of more favorable LIFO adjustments. LIFO
inventory adjustments were a favorable $0.3 million for the current
year versus a favorable LIFO adjustment of $1.9 million for the
prior year. Selling, general and administrative expenses, excluding
pension loss amortization, were similar for the current year and
prior year quarter, as well as the year-to-date periods.
Adjusting for pension loss amortization and restructuring
charges, non-GAAP net income was $2.9 million, or $0.10 per share
for the current quarter, compared with non-GAAP net income of $3.3
million, or $0.12 per share for the prior year quarter. Adjusting
for pension loss amortization and restructuring charges, non-GAAP
net income was $7.1 million, or $0.25 per share for the first half
compared with non-GAAP net income of $5.6 million, or $0.19 per
share for the prior first half.
For the first half, capital expenditures were $6.6 million and
are expected to be in the range of $18-21 million for the year, the
majority of which will support the advancement of core growth
solutions. Pension funding contributions were $13.0 million through
the first half and are expected to be approximately $24-30 million
for the year. Non-GAAP cash on a net debt basis was $1.4 million
positive for the first half.
Dialog Medical Acquisition
On July 6, the Company acquired 100% of the ownership interest
in iMedConsent, LLC (dba Dialog Medical) for approximately $5.2
million in cash, plus up to an additional $2.0 million in
contingent payments based upon the performance of the business
through the two-year anniversary of the transaction. Dialog Medical
provides solutions for managing the patient informed consent
process and will be operated as a wholly-owned subsidiary reporting
through our healthcare business unit.
“We will continue seeking opportunities such as the Dialog
Medical acquisition, which provides a complementary suite of
solutions and strengthens our market position,” noted Morgan.
Dividend
On Thursday, July 28, 2011, Standard Register’s board of
directors declared a quarterly dividend of $0.05 per share to be
paid on September 9, 2011, to shareholders of record as of August
26, 2011. The board will consider future dividend payments on a
quarter-by-quarter basis in accordance with its normal
practice.
Conference Call
Standard Register’s President and Chief Executive Officer Joe
Morgan and Chief Financial Officer Bob Ginnan will host a
conference call at 10:00 a.m. EDT on July 29, 2011, to review the
second quarter results. The call can be accessed via an audio web
cast accessible at:
http://www.standardregister.com/investorcenter.
About Standard Register
Standard Register (NYSE:SR) is trusted by the world’s leading
companies to advance their reputations by aligning communications
with corporate standards and priorities. Providing market-specific
insights and a compelling portfolio of solutions to address the
changing business landscape in healthcare, commercial and
industrial markets, Standard Register is the recognized leader in
the management and execution of mission-critical communications.
More information is available at
http://www.standardregister.com.
Safe Harbor Statement
This report includes forward-looking statements covered by the
Private Securities Litigation Reform Act of 1995. Because such
statements deal with future events, they are subject to various
risks and uncertainties and actual results for fiscal year 2011 and
beyond could differ materially from the Company’s current
expectations. Forward-looking statements are identified by words
such as “anticipates,” “projects,” “expects,” “plans,” “intends,”
“believes,” “estimates,” “targets,” and other similar expressions
that indicate trends and future events.
Factors that could cause the Company’s results to differ
materially from those expressed in forward-looking statements
include, without limitation, variation in demand and acceptance of
the Company’s products and services, the frequency, magnitude and
timing of paper and other raw-material-price changes, general
business and economic conditions beyond the Company’s control,
timing of the completion and integration of acquisitions, the
consequences of competitive factors in the marketplace including
the ability to attract and retain customers, results of continuous
improvement and other cost-containment strategies, and the
Company’s success in attracting and retaining key personnel. The
Company undertakes no obligation to revise or update
forward-looking statements as a result of new information, since
these statements may no longer be accurate or timely.
Non-GAAP Measures Presented in This Press Release
The Company reports its results in accordance with Generally
Accepted Accounting Principles in the United States (GAAP).
However, we believe that certain non-GAAP measures found in this
press release, when presented in conjunction with comparable GAAP
measures, are useful for investors. Generally, a non-GAAP financial
measure is a numerical measure of a company’s performance,
financial position, or cash flows where amounts are either excluded
or included, not in accordance with generally accepted accounting
principles. We discuss several measures of operating performance
including non-GAAP net income and earnings per share and cash flow
on a net debt basis, which are not calculated in accordance with
GAAP. These non-GAAP measures should not be considered as
substitutes for, or superior to, results determined in accordance
with GAAP.
Management evaluates the Company’s results, excluding pension
loss amortization, pension settlements, restructuring charges, and
asset impairments. We believe this non-GAAP financial measure is
useful to investors because it provides a more complete
understanding of our current underlying operating performance, a
clearer comparison of current period results with past reports of
financial performance, and greater transparency regarding
information used by management in its decision making. Internally,
management and our Board of Directors use this non-GAAP measure to
evaluate our business performance.
In addition, because our credit facility is borrowed under a
revolving credit agreement, which currently permits us to borrow
and repay at will up to a balance of $100 million (subject to
limitations related to receivables, inventories, and letters of
credit), we take the measure of cash flow performance prior to
borrowing or repayment of the credit facility. In effect, we
evaluate cash flow as the change in net debt (credit facility debt
less cash and cash equivalents).
The table below provides a reconciliation of these non-GAAP
measures to their most comparable measure calculated in accordance
with GAAP.
THE STANDARD REGISTER COMPANY
STATEMENT OF OPERATIONS (Dollars in thousands, except per
share amounts) (Unaudited)
Second Quarter Y-T-D 13
Weeks Ended 13 Weeks Ended 26 Weeks Ended 26
Weeks Ended 3-Jul-11 4-Jul-10
3-Jul-11 4-Jul-10 $
164,285 $ 164,682
TOTAL REVENUE $
329,174 $ 332,105
113,381
112,964
COST OF SALES 224,638
226,778
50,904 51,718
GROSS MARGIN 104,536 105,327
COSTS AND
EXPENSES 52,030 50,508 Selling, general and
administrative
104,333 104,653
453 - Pension
settlements
453 -
(251 )
1,026 Restructuring and other exit costs
(177
) 1,458
52,232
51,534
TOTAL COSTS AND EXPENSES
104,609 106,111
(1,328 ) 184
(LOSS) INCOME FROM OPERATIONS
(73 ) (784 )
OTHER INCOME (EXPENSE)
(572 ) (601 ) Interest expense
(1,144 )
(991 )
493 190 Other
income
498 192
(79
) (411 )
Total other expense (646 )
(799 )
(1,407 ) (227 )
LOSS BEFORE INCOME
TAXES (719 ) (1,583 )
(497
) (117 ) Income Tax Benefit
(344
) (660 )
$ (910 )
$ (110 )
NET LOSS $ (375 )
$ (923 )
29,048 28,912 Average
Number of Shares Outstanding - Basic
29,012 28,893
29,048 28,912 Average Number of Shares Outstanding - Diluted
29,012 28,893
$ (0.03 ) $ -
BASIC AND DILUTED LOSS PER SHARE $ (0.01
) $ (0.03 )
$ 0.05 $ 0.05 Dividends
declared for the period
$ 0.10 $ 0.10 MEMO:
$ 5,270 $ 6,192 Depreciation and amortization
$ 10,620 $ 12,279
$ 6,069 $ 4,668
Pension loss amortization
$ 12,142 $ 9,336
SEGMENT OPERATING RESULTS**
(Dollars in thousands) (Unaudited)
Second Quarter
Y-T-D 13 Weeks Ended 13 Weeks Ended 26
Weeks Ended 26 Weeks Ended 3-Jul-11
4-Jul-10 3-Jul-11 4-Jul-10
REVENUE $ 43,174 $ 43,406 Financial Services
$ 86,480 $ 88,120
41,640
44,256 Commercial Markets
81,971
85,907
84,814 87,662 Total Commercial
168,451 174,027
59,051 59,003 Healthcare
119,723 123,264
20,420
18,017 Industrial
41,000
34,814
$ 164,285 $ 164,682
Total Revenue
$ 329,174 $
332,105
GROSS MARGIN $ 12,716 $
13,431 Financial Services
$ 25,859 $ 26,776
11,574 11,727 Commercial Markets
22,761 22,058
24,290 25,158 Total Commercial
48,620 48,834
20,972 21,461 Healthcare
43,544 45,002
5,499
4,885 Industrial
12,051 9,619
143
214 LIFO adjustment
321
1,872
$ 50,904 $
51,718 Total Gross Margin
$ 104,536
$ 105,327
NET LOSS BEFORE TAXES
$ 1,359 $ 2,370 Financial Services
$
3,050 $ 3,467
(330 ) (393
) Commercial Markets
(623 )
(2,532 )
1,029 1,977 Total Commercial
2,427 935
3,824 4,062 Healthcare
8,507 8,024
(401
) (663 ) Industrial
388 (1,537 )
(5,859
) (5,603 ) Unallocated
(12,041
) (9,005 )
$ (1,407 )
$ (227 ) Total Net Loss Before Taxes
$ (719
) $ (1,583 ) **Prior year data has been
revised to reflect the reclassification of certain customers
between segments
BALANCE
SHEET (Dollars in thousands)
(Unaudited) 3-Jul-11
2-Jan-11 ASSETS Cash and cash
equivalents
$ 554 $ 531 Accounts and notes receivable
110,144 122,308 Inventories
31,189 29,253 Other
current assets
22,814 20,953 Total
current assets
164,701 173,045 Plant and equipment
70,085 74,149 Goodwill and intangible assets
8,736
8,822 Deferred taxes
99,574 102,996 Other assets
11,028 10,819 Total assets
$
354,124 $ 369,831
LIABILITIES AND
SHAREHOLDERS' EQUITY Current portion long-term debt
$
1,456 $ 1,467 Other current liabilities
73,929 77,296
Deferred compensation
6,363 6,306 Long-term debt
40,887 42,926 Retiree healthcare obligation
4,849
4,931 Pension benefit obligation
169,500 185,174 Other
long-term liabilities
6,932 6,883 Shareholders' equity
50,208 44,848 Total liabilities and
shareholders' equity
$ 354,124 $ 369,831
CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars
in thousands) (Unaudited)
26 Weeks
Ended 26 Weeks Ended 3-Jul-11
4-Jul-10 Net loss plus non-cash items
$
20,806 $ 20,337 Working capital
8,792 184
Restructuring payments
(961 ) (3,450 ) Contributions
to qualified pension plan
(13,000 ) (13,500 ) Other
(4,126 ) (4,036 ) Net cash
provided by (used in) operating activities
11,511
(465 ) Capital expenditures, net
(6,555 ) (4,346 ) Acquisition
- (2,460 )
Proceeds from sale of equipment
19
65 Net cash used in investing activities
(6,536 ) (6,741 ) Net change in
borrowings under credit facility
(1,328 ) 9,570
Principal payments on long-term debt
(721 ) (777 )
Dividends paid
(2,925 ) (2,909 ) Other
34 61 Net cash (used in)
provided by financing activities
(4,940 )
5,945 Effect of exchange rate
(12 ) (25 ) Net change in cash
$
23 $ (1,286 )
RECONCILIATION OF GAAP TO NON-GAAP MEASURES (Dollars
in thousands, except per share amounts) (Unaudited)
Second
Quarter Y-T-D 13 Weeks Ended 13 Weeks
Ended 26 Weeks Ended 26 Weeks Ended
3-Jul-11 4-Jul-10 3-Jul-11
4-Jul-10 $ (910 ) $ (110 ) GAAP
Net Loss
$ (375 ) $ (923 ) Adjustments:
6,069 4,668 Pension loss amortization
12,142 9,336
453 - Pension settlements
453 -
(251 )
1,026 Restructuring and impairment charges
(177 )
1,458
(2,490 ) (2,261 ) Tax
effect of adjustments (at statutory rates)
(4,931
) (4,286 )
$ 2,871
$ 3,323 Non-GAAP Net Income
$ 7,112
$ 5,585
$ (0.03 ) $ -
GAAP Loss Per Share
$ (0.01 ) $ (0.03 )
Adjustments, net of tax:
0.13 0.10 Pension loss amortization
0.25 0.19
0.01 - Pension settlement losses
0.01 -
(0.01 ) 0.02
Restructuring and impairment charges
-
0.03
$ 0.10 $ 0.12
Non-GAAP Income Per Share
$ 0.25
$ 0.19 GAAP Net Cash Flow
$ 23 $ (1,286
) Adjustments: Credit facility paid (borrowed)
1,328
(9,570 ) Non-GAAP Net Cash Flow
$
1,351 $ (10,856 )
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