Standard Register (NYSE: SR), a leader in the management and
execution of mission-critical communications, today announced its
financial results for the second quarter and first half of 2012.
The Company reported quarterly revenue of $155.1 million and a net
loss of $1.1 million or $0.04 per share. The results compare to
prior year quarterly revenue of $164.3 million and a net loss of
$1.0 million or $0.03 per share. Non-GAAP net income after
adjustments for pension loss amortization, pension settlement,
restructuring charges, tax effect of adjustments and deferred tax
valuation allowances was $3.8 million or $0.13 per share for the
second quarter of 2012, a $1.0 million increase from non-GAAP net
income of $2.8 million, or $0.10 per share for the same period in
2011.
Through the first half of 2012, the Company reported revenue of
$312.7 million and a net loss of $6.2 million or $0.21 per share.
The first half results compare to last year’s revenue of $329.2
million and a net loss of $0.6 million or $0.02 per share through
the first half of 2011. Non-GAAP adjusted net income for the first
half of 2012 was $5.7 million or $0.20 per share compared to
non-GAAP adjusted net income of $6.9 million or $0.24 per share for
the first half of 2011.
“Positive sales activity continued in the second quarter and
performance in the aggregate as well as at the business unit level
was in line with our restructuring plan,” said Joseph P. Morgan,
Jr., president and chief executive officer. “Growth in our core
solutions is steady, increasing 3.4 percent in the second quarter.
Legacy sales continue to decline disproportionately as businesses
discontinue the use of certain operational documents. Cost-saving
initiatives associated with our restructuring plan are having a
positive impact on operating income and we are optimizing our
operations while delivering exceptional service to our customers.
Our two business units, Healthcare and Business Solutions, are
focused on adding new customers and fully implementing customer
wins so they will begin contributing to revenue. We can reaffirm
that we expect positive cash flow of at least $5 million for the
year.”
Morgan continued, “In the second quarter, we sharpened our
customer focus and applied what we have learned about market
demand. We are accelerating our investment in the core
technology-oriented solutions that are driving sales across the
markets we serve, specifically healthcare software and services and
marketing solutions software and services, where we can deliver
more value for the customer, produce higher margins and offer a
complete portfolio of solutions.”
Second Quarter Results
Total revenues declined 6 percent to $155.1 million in the
second quarter compared to $164.3 million in the second quarter of
2011. Core solutions grew 3.4 percent, primarily due to increases
in unit sales, while Legacy product declined 11.8 percent. At the
end of the second quarter, approximately 43 percent of revenue was
derived from core solutions sales and approximately 57 percent of
revenue came from legacy products.
Healthcare revenues declined 7 percent for the quarter, to $54.8
million compared to $59.0 million in the prior year quarter.
Operating income for the second quarter was $3.7 million compared
to $3.8 million for the same period in 2011. Growth in core
solutions was offset by declines in unit sales of legacy products,
particularly clinical paper documents. Healthcare Solutions,
technology-oriented products and services within the healthcare
portfolio, grew 14 percent in the quarter, primarily driven by
strong growth in patient information and marketing and
communications solutions sales. New customers and new product
introductions also impacted the quarter and are expected to
contribute to additional core solutions sales in the second half of
2012. As healthcare customers transition to Electronic Medical
Records (EMR), accelerated declines in sales of legacy products
such as clinical forms is expected throughout 2012.
During the second quarter, the company’s Commercial Markets,
Financial Services and Industrial business units were consolidated
into one Business Solutions business unit to more efficiently
develop and market technology-driven products and services across
vertical markets. Business Solutions revenues for the second
quarter was $100.3 million, a decrease of 5 percent compared to
second quarter 2011 revenue of $105.3 million. Growth in core
solutions sales was offset by declines in legacy product sales.
Revenue from core solutions increased by 2.6 percent in the
quarter, primarily due to new customer implementation and organic
growth with existing customers, particularly in critical
communications and on-demand publishing. The legacy decrease is
primarily attributable to documents no longer being used rather
than loss of customers, and to the associated loss of freight and
other service revenues.
Consolidated gross margin as a percent of revenue was 30.0
percent compared to 30.9 percent for the second quarter of 2011.
The decrease reflects decreased volume in legacy sales, somewhat
offset by savings from ongoing restructuring activities and other
cost-saving initiatives. Selling, general and administrative
(SG&A) expenses declined 13 percent in the quarter.
In the second quarter, Standard Registered announced that it had
received notice from the New York Stock Exchange (NYSE) that it was
not in compliance with listing requirements related to market
capitalization and stock price averages. The Company delivered a
plan for returning to compliance regarding market capitalization
within 18 months. On June 25, 2012, the Company announced that it
had received notice from the NYSE that its plan had been accepted.
The plan is currently being implemented.
First Half of Year Results
Total revenues declined 5 percent to $312.7 million compared to
$329.2 million for the first half of 2011. Legacy product unit
volume continued to decline faster than growth in core solutions.
Core solutions grew 3.1 percent in the first half of 2012 while
legacy solutions declined 10.4 percent.
Healthcare revenues declined 7 percent to $111.8 million from
$119.7 million in the first half of 2011. Operating income for the
first half of 2012 was $6.3 million compared to $8.5 million for
the prior year. Technology-oriented core solutions grew 14 percent
in the first half of 2012 driven by growth in patient information,
primarily from Dialog Medical (which was acquired in July 2011) and
new customer implementations in marketing and communications
solutions. Revenues from legacy products continued to decline as
more hospitals adopt EMR.
Business Solutions revenues declined 4 percent to $200.9 million
from $209.5 million in the first half of the prior year. Operating
Income increased by 18 percent to $3.3 million from $2.8 million
driven by increases in core solutions and savings initiatives. The
growth was somewhat offset by declines in legacy product sales. As
previously announced, the loss of a portion of business from a
large financial services customer due to the customer’s
restructuring is expected to total $18 to $20 million in 2012. The
transition of the customer is proceeding slower than anticipated
with a decrease in sales in the first half of 2012 of $5.7
million.
Consolidated gross margin as a percent of revenue was 30.3
percent in the first half of 2012 compared to 31.7 percent for the
same period in 2011. Decreases in sales of legacy forms was the
major component of the margin decline. SG&A expense declined 8%
in the first half of 2012, to $95.6 million from $104.3 million in
the prior year. SG&A expense in 2011 includes a credit of $2.1
million from amortization of prior credits related to the
termination of the postretirement healthcare benefits plan.
Capital Expenditures, Restructuring Plan and Pension
Contribution
Capital expenditures for the full year of 2012 are expected to
be $9 million to $11 million. Through the first half of 2012,
capital expenditures were $1.2 million. During the second half of
2012, the Company expects investment to be focused on supporting
core solutions growth and increasing efficiencies with management
reporting systems and customer service and support.
In January 2012, the Company announced a strategic restructuring
plan expected to result in an estimated $45 million in annual
savings. The Company has identified additional savings initiatives
and currently expects savings of approximately $60 million by the
end of 2013. Costs associated with the restructuring program are
expected to be approximately $11.5 million by the end of 2013.
Standard Register originally expected to make contributions to
the Company’s qualified pension plan of approximately $27 million
in 2012 and in the first half of the year has contributed $13.5
million. Based on provisions of the highway reauthorization
legislation signed into law in July, the Company has updated
pension funding expectations for 2012 through 2014. Previously,
pension plan contributions for 2012 through 2014 were expected to
total $112 million. With relief provided by the Moving Ahead for
Progress in the 21st Century Act (MAPS-21), commonly called the
highway bill, the total contribution for the same period is
expected to be lowered by $17 million to $95 million. Currently,
the Company expects contributions to total $23 million in 2012, $30
million in 2013 and $42 million in 2014.
Conference Call
Standard Register’s President and Chief Executive Officer Joseph
P. Morgan, Jr. and Chief Financial Officer Robert Ginnan will host
a conference call at 10:00 a.m. EDT on Friday, July 27, 2012, to
review the second quarter results. The call can be accessed via an
audio webcast accessible at
http://www.standardregister.com/investorcenter.
About Standard Register
Standard Register (NYSE:SR), celebrating 100 years of
innovation, 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, financial services, 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 press release contains 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 could differ
materially from the Company’s current expectations.
Factors that could cause the Company’s results to differ
materially from those expressed in forward-looking statements
include, without limitation, our access to capital for expanding in
Core solutions, the pace at which digital technologies erode the
demand for certain legacy products, the success of our plans to
deal with the threats and opportunities brought by digital
technology, results of cost containment strategies and
restructuring programs, our ability to attract and retain key
personnel, variation in demand and acceptance of the Company’s
products and services, frequency, magnitude and timing of paper and
other raw material price changes, the timing of the completion and
integration of acquisitions, general business and economic
conditions beyond the Company’s control, and the consequences of
competitive factors in the marketplace, including the ability to
attract and retain customers. 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. For more information, see the Company’s most recent Form
10-K and other filings with the Securities and Exchange
Commission.
Non-GAAP Measure 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 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
deferred tax valuation allowances. 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 COMPANYCONSOLIDATED
STATEMENTS OF OPERATIONS(Dollars in thousands, except per share
amounts)(Unaudited)
13 Weeks Ended1-Jul-12
13 Weeks Ended3-Jul-11 26 Weeks
Ended1-Jul-12 26 Weeks
Ended3-Jul-11 $ 155,067 $
164,285 TOTAL REVENUE $ 312,716
$ 329,174 108,473
113,524 COST OF SALES
217,921 224,959
46,594 50,761 GROSS MARGIN 94,795
104,215 COSTS AND EXPENSES 45,380
52,030 Selling, general and administrative
95,595
104,333 - 453 Pension settlements
983
453 1,490 (251
) Restructuring and other exit costs
2,612
(177 ) 46,870
52,232 TOTAL COSTS AND
EXPENSES 99,190 104,609
(276 ) (1,471 ) LOSS
FROM OPERATIONS (4,395 ) (394 )
OTHER INCOME (EXPENSE) (685 )
(572 ) Interest expense
(1,389 )
(1,144 ) 23
493 Other income
39
498 (662 ) (79 ) Total
other expense (1,350 ) (646 )
(938 ) (1,550 ) LOSS BEFORE
INCOME TAXES (5,745 ) (1,040 )
197 (554 )
Income tax expense (benefit)
502
(472 ) $ (1,135 )
$ (996 ) NET LOSS $
(6,247 ) $ (568 )
29,198 29,048 Average Number of Shares
Outstanding - Basic
29,157 29,012 29,198
29,048 Average Number of Shares Outstanding - Diluted
29,157 29,012 $ (0.04 )
$ (0.03 ) BASIC AND DILUTED LOSS PER
SHARE $ (0.21 ) $ (0.02
) $ - $ 0.05 Dividends
per share declared for the period
$ 0.05 $
0.10 MEMO:
$ 6,148 $
5,270 Depreciation and amortization
$ 11,970
$ 10,620 $ 5,773 $ 6,069
Pension loss amortization
$ 11,558 $
12,142 SEGMENT OPERATING
RESULTS(Dollars in thousands)(Unaudited)
13 Weeks
Ended1-Jul-12 13 Weeks
Ended3-Jul-11 26 Weeks Ended1-Jul-12
26 Weeks Ended3-Jul-11 REVENUE $
54,763 $ 59,051 Healthcare
$ 111,813 $ 119,723
100,304 105,234 Business
Solutions
200,903 209,451
$ 155,067 $ 164,285 Total
Revenue
$ 312,716 $ 329,174
NET LOSS BEFORE TAXES $ 3,774 $ 3,824
Healthcare
$ 6,342 $ 8,507
2,613 628 Business
Solutions
3,285 2,815
(7,325 )
(6,002 ) Unallocated
(15,372 )
(12,362 )
$ (938 ) $ (1,550 )
Total Net Loss Before Taxes
$ (5,745 )
$ (1,040 )
CONSOLIDATED BALANCE SHEETS(Dollars
in thousands)(Unaudited)
1-Jul-12 1-Jan-12
ASSETS Cash and cash equivalents
$ 756
$ 1,569 Accounts receivable
108,893 113,403 Inventories
49,464 48,822 Other current assets
10,947
9,058 Total current assets
170,060 172,852 Plant and equipment
$
63,573 $ 73,950 Goodwill and intangible assets
13,934
14,479 Deferred taxes
23,991 23,996 Other assets
5,840 8,584 Total assets
$
277,398 $ 293,861
LIABILITIES
AND SHAREHOLDERS' DEFICIT Current liabilities
80,986
83,443 Deferred compensation
3,463 5,777 Long-term debt
58,963 60,149 Pension benefit obligation
219,050
236,206 Other long-term liabilities
7,097 7,339
Shareholders' deficit
(92,161 ) (99,053 )
Total liabilities and shareholders' deficit
$
277,398 $ 293,861
CONSOLIDATED STATEMENTS OF CASH FLOWS(Dollars in
thousands)(Unaudited)
26 Weeks Ended1-Jul-12
26 Weeks Ended3-Jul-11 Net loss plus non-cash
items
$ 21,290 $ 20,485 Working capital
4,983
9,113 Restructuring payments
(3,646 ) (961 )
Contributions to qualified pension plan
(13,500 )
(13,000 ) Other
(5,919 ) (4,126
) Net cash provided by operating activities
3,208
11,511 Capital expenditures, net
(1,239 ) (6,555 ) Proceeds from sale of equipment
64 19 Net cash used in
investing activities
(1,175 )
(6,536 ) Net change in borrowings under credit facility
(55
) (1,328 ) Principal payments on long-term debt
(1,352 ) (721 ) Dividends paid
(1,500 )
(2,925 ) Other
(5 ) 34
Net cash used in financing activities
(2,912 )
(4,940 ) Effect of exchange rate
66
(12 ) Net change in cash
$ (813
) $ 23
RECONCILIATION OF GAAP
TO NON-GAAP MEASURES(Dollars in thousands, except per share
amounts)(Unaudited)
13 Weeks Ended1-Jul-12
13 Weeks Ended3-Jul-11 26 Weeks
Ended1-Jul-12 26 Weeks
Ended3-Jul-11 $ (1,135 ) $
(996 ) GAAP Net Loss
$ (6,247 ) $ (568 )
Adjustments:
5,773 6,069 Pension loss amortization
11,558 12,142
- 453 Pension settlement
983 453
1,490 (251 ) Restructuring charges
2,612 (177 )
(2,865 ) (2,490 ) Tax effect of adjustments (at
statutory tax rates)
(5,978 ) (4,931 )
564 -
Deferred tax valuation allowance
2,796 -
$ 3,827 $
2,785 Non-GAAP Net Income
$ 5,724
$ 6,919
$ (0.04 )
$ (0.03 ) GAAP Loss Per Share
$ (0.21 ) $
(0.02 ) Adjustments, net of tax:
0.12 0.13 Pension
loss amortization
0.24 0.25
- 0.01 Pension settlement
0.02 0.01
0.03 (0.01 ) Restructuring charges
0.05 -
0.02 - Deferred tax valuation allowance
0.10 -
$
0.13 $ 0.10 Non-GAAP Income (Loss) Per
Share
$ 0.20 $ 0.24
GAAP Net Cash Flow
$ (813 ) $ 23
Adjustments: Credit facility paid
55 1,328
Non-GAAP Net Cash Flow
$ (758 )
$ 1,351
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