Standard Register (NYSE: SR) today announced its financial
results for the first quarter of 2014. The Company reported revenue
of $228.5 million and a net loss of $7.1 million or $0.83 per
diluted share. The results compare to revenue of $141.6 million for
the first quarter of 2013 and net income of $4.7 million or $0.80
per diluted share.
Adjusted EBITDA, which excludes certain items as detailed in the
attached reconciliation, was $13.2 million compared to $12.2
million for the first quarter of 2013.
Results for the first quarter of 2013 do not include results
from WorkflowOne, which Standard Register acquired on August 1,
2013.
“Although we are not satisfied with the overall results,
first-quarter revenue increased in a number of our growth
solutions,” said Joseph P. Morgan, Jr., president and chief
executive officer. “We are investing in the growing areas of our
business and have a healthy pipeline. However, many of our
solutions have long sales cycles and lengthy customized
implementations, which delay realization of revenue. Throughout
2014, we will be focused on driving sales of our entire portfolio
into our large customer base. The acquisition brought us many new
opportunities and the integration is proceeding on track with, and
in some respects ahead of our internal plan.”
First Quarter ResultsTotal revenue increased 61 percent
to $228.5 million compared to $141.6 million in the 2013 first
quarter. On a pro forma basis, including WorkflowOne revenue for
the first quarter of 2013, the Company would have reported revenue
of $253.7 million.
Gross Margin as a percentage of revenue was 27.3 percent,
compared to 29.6 percent for the first quarter last year. Unit and
volume decreases, and costs associated with integration of the
acquisition contributed to the decrease in gross margin. Selling,
general and administrative (SG&A) expenses were $58.7 million
compared to $34.7 million for the first quarter last year. The
increase is primarily attributable to the acquisition and
integration.
The Company incurred $5.5 million of additional expense in the
first quarter of 2014 related to executing the acquisition,
restructuring and integration. Capital expenditures were $3.6
million compared to $3.9 million in the first quarter last year.
The Company expects to invest approximately $15 to $21 million in
2014 capital expenditures.
Standard Register contributed $5.9 million to the Company’s
qualified pension plan in the first quarter of 2014 compared to
$5.8 million in the first quarter last year. Total pension
contributions to meet minimum funding requirements for 2014 are
expected to be $42.0 million compared to contributions of $24.7
million for 2013.
Standard Register operates two business units: Healthcare and
Business Solutions.
Healthcare revenue was $64.8 million, an increase of 31 percent
over revenue of $49.5 million in the first quarter of 2013.
Technology-enabled patient information systems continued a
double-digit growth rate in the first quarter, however regulatory
changes in requirements for distribution of printed materials, and
a large kitting project in the first quarter of 2013 also impacted
the overall comparable business unit results. Operating profit was
$1.9 million compared to $2.1 million in the 2013 first
quarter.
Business Solutions revenue was $163.7 million, an increase of 78
percent over revenue of $92.1 million in the 2013 first quarter.
The increase was attributable to business added from the
acquisition and growth in revenue from Mexico-based label
manufacturing operations. Declines in demand for traditional
printed forms and transactional documents continue to outpace
growth in the other solutions in the business unit performance.
Operating profit was $1.4 million compared to $2.9 million in the
2013 first quarter.
First Quarter Highlights
- The acquisition integration process is
proceeding on track with internal plans and the Company is
beginning to realize expected synergies. In the first quarter of
2014, systems and data centers were integrated, headcount reduced,
three production facilities closed and three warehouse facilities
closed.
- The first of two high-speed ink jet
presses was installed in Sacramento, California. The second, larger
press was delivered to Columbus, Ohio, early in April. Both are
expected to contribute to customer communications solutions sales
during 2014.
- An efficient consolidation of the
Dayton workforce into one headquarters location will result in
significant savings as the lease of the former WorkflowOne offices
has been assigned.
- Standard Register Healthcare launched
an innovative SMARTworks® EffectiveResponse solution for patient
follow-up, an important accountable care requirement for healthcare
providers.
- The Company’s Mexico-based operations
received a supplier award from Carrier Mexico for superior quality
performance, including 100 percent on-time delivery.
- Standard Register’s Product Marking and
Labeling launched the first on-demand labeling solution to allow
businesses to order durable UL/CUL approved digital labels online
economically, regardless of volume, to address a significant pain
point for the industry.
Conference CallStandard 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, April 25, 2014, to review the first quarter results. The
call can be accessed via an audio webcast at
http://www.standardregister.com.
About Standard RegisterStandard Register (NYSE:SR), is
trusted by the world’s leading companies to advance their
reputations and add value to their operations by aligning
communications with corporate brand standards. Providing
market-specific insights and a compelling portfolio of workflow,
content and analytics solutions to address the changing business
landscape in healthcare, financial services, manufacturing,
transportation and retail 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 StatementThis 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 ability
to successfully integrate the acquired assets or achieve the
expected synergies of the WorkflowOne acquisition, access to
capital for expanding in our solutions, the pace at which digital
technologies and electronic health records (EHR) adoption erode the
demand for certain products and services, 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 Measures Presented in This Press ReleaseThe
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
Adjusted EBITDA 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 uses Adjusted EBITDA, defined as earnings before
interest, taxes, depreciation and amortization and excludes pension
benefit cost, restructuring and impairment charges, acquisition and
integration expense and certain acquisition fair value and other
miscellaneous adjustments, to evaluate the Company’s results. 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. The Company’s debt covenants are also based on the
Adjusted EBITDA calculation.
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 $125 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 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
CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per
share amounts) (Unaudited)
13 Weeks Ended
13 Weeks Ended Mar 30, 2014
Mar 31, 2013
TOTAL REVENUE $ 228,489 $ 141,620
COST OF SALES 166,023
99,700
GROSS MARGIN
62,466 41,920
OPERATING EXPENSES Selling,
general and administrative
58,679 34,736 Acquisition and
integration costs
2,697 1,107 Asset impairments
436 —
Restructuring and other exit costs
2,806
626
TOTAL OPERATING EXPENSES
64,618 36,469
(LOSS)
INCOME FROM OPERATIONS (2,152 ) 5,451
OTHER INCOME (EXPENSE) Interest expense
(4,988
) (624 ) Other income (expense)
163
(1 )
Total other expense (4,825 ) (625
)
(LOSS) INCOME BEFORE INCOME TAXES (6,977
) 4,826 Income tax expense
151
127
NET (LOSS) INCOME $
(7,128 ) $ 4,699 Average
Number of Shares Outstanding - Basic
8,590 5,872 Average
Number of Shares Outstanding - Diluted
8,590 5,906
BASIC (LOSS) INCOME PER SHARE $ (0.83 )
$ 0.80
DILUTED (LOSS) INCOME PER SHARE
$ (0.83 ) $ 0.80
MEMO:
Depreciation and amortization
$
9,196
$ 5,066
SEGMENT OPERATING
RESULTS (In thousands) (Unaudited)
13 Weeks Ended 13
Weeks Ended Mar 30, 2014
Mar 31, 2013
REVENUE Healthcare
$ 64,777 $ 49,495 Business
Solutions
163,712 92,125 Total
Revenue
$ 228,489 $ 141,620
NET (LOSS) INCOME BEFORE TAXES
Healthcare
$ 1,870 $ 2,136 Business Solutions
1,422 2,934 Unallocated
(10,269 )
(244 ) Total Net (Loss) Income Before Taxes
$
(6,977 ) $ 4,826
CONSOLIDATED BALANCE SHEETS (In
thousands)
(Unaudited)
Mar 30, 2014 Dec 29, 2013 ASSETS
Cash and cash equivalents
$ 3,081 $ 2,342 Accounts
receivable
154,230 157,567 Inventories
61,306 61,939
Other current assets
15,561 14,508
Total current assets
234,178 236,356 Plant and
equipment
90,593 93,003 Goodwill and intangible assets
130,904 133,444 Deferred taxes
9,311 9,306 Other
assets
8,504 8,768 Total assets
$ 473,490 $ 480,877
LIABILITIES AND SHAREHOLDERS'
DEFICIT
Current liabilities
$ 127,960 $ 125,357 Deferred
compensation
3,021 3,169 Long-term debt
268,055
263,880 Pension benefit liability
185,531 192,779 Other
long-term liabilities
6,887 6,989 Shareholders' deficit
(117,964 ) (111,297 )
Total liabilities and shareholders' deficit
$
473,490 $ 480,877
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands) (Unaudited)
13 Weeks Ended 13 Weeks
Ended Mar 30, 2014 Mar 31, 2013
Net (loss) income plus non-cash items
$ 5,772
$ 10,169 Working capital
4,619 3,471 Restructuring payments
(3,828 ) (565 ) Contributions to qualified pension
plan
(5,932 ) (5,839 ) Other
(1,742 )
(2,363 ) Net cash (used in) provided by operating
activities
(1,111 ) 4,873 Additions to plant
and equipment
(3,637 ) (3,889 ) Proceeds from sale of
equipment
49 77 Net cash used in
investing activities
(3,588 ) (3,812 ) Net
change in borrowings under credit facility
6,761 (629 )
Principal payments on long-term debt
(1,107 ) (592 )
Other
(146 ) — Net cash provided
by (used in) financing activities
5,508
(1,221 ) Effect of exchange rate
(70 )
211 Net change in cash
$ 739
$ 51
RECONCILIATION OF GAAP TO NON-GAAP MEASURES (In thousands)
(Unaudited)
13 Weeks Ended 13 Weeks Ended
Mar 30, 2014
Mar 31, 2013 GAAP Net (Loss) Income
$
(7,128 ) $ 4,699 Adjustments: Income taxes
151
127 Interest
4,988 624 Depreciation and amortization
9,196 5,066 EBITDA
$
7,207 $ 10,516
Adjustments: Restructuring and impairment
3,242 626
Acquisition and integration costs
2,697 1,107 Pension
expense
(548 ) (507 ) Non-cash stock compensation
681 469 Other
(111 ) —
Adjusted EBITDA
$ 13,168 $
12,211 GAAP Net Cash Flow
$ 739 $ 51
Adjustments: Credit facility (borrowed) paid
(6,761 )
629 Non-GAAP Net Cash Flow
$
(6,022 ) $ 680
For Standard RegisterInvestor and media contact:Carol Merry,
614-383-1624carol.merry@fahlgren.comwww.standardregister.com
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