SR Spire Inc

Quarterly operating earnings before restructuring and impairment rise over the prior year for the seventh consecutive quarter; net debt drops below 10 percent of capital DAYTON, Ohio, July 27 /PRNewswire-FirstCall/ -- Standard Register (NYSE:SR) today reported its financial results for the second quarter ended July 2, 2006. Results of Operations The results for the quarter reflected the impact of several major strategic elements that are reshaping the Company. - The Print-on-Demand (POD) Services segment reported a jump in operating margin, fueled by a 9.4 percent revenue increase and improved production costs. - Gross margins in the Document and Label Solutions (DLS) segment remained steady despite the competitive pricing climate and reduced unit sales that pushed the quarter's revenue 4.0 percent lower, as the Company continued its program of cost reductions and productivity improvements. - All other segments, including Commercial Print Services and Document Systems, that emphasize software and service offerings showed 6.3 percent revenue growth overall. - The Digital Solutions segment, which offers cost effective data capture solutions based on innovative digital writing technology, continued to report positive new developments and a growing pipeline of opportunities. Revenue in this emerging market has been modest thus far, however, and this segment reported an operating loss of $1.4 million in the quarter. - As previously reported, the Company sold its unprofitable InSystems business unit during the second quarter. This business did not fit with the Company's strategy. Proceeds were $8.5 million plus the return of certain cash balances. The Company reported a loss on the sale of $9.2 million after tax. InSystems results and its sale are reported as discontinued operations. - The Company continued to maintain a strong balance sheet with net debt just 9.3 percent of total capital. Total revenue for the quarter was $222.8 million, up slightly from last year's $222.5 million, reflecting the lower DLS revenue offset by the growth in POD Services and other segments. Revenue for the first half was $451.5 million versus $451.9 million in the prior year. The gross margin improved by 1.7 and 1.3 percentage points in relation to revenue for the quarter and year-to-date periods, respectively. The Company has made good progress in recovering recent paper cost increases and benefited from lower production costs and higher POD Services volume. Operating expenses were higher in both the quarter and year-to-date periods, impacted by higher restructuring, asset impairment, and the amortization of past pension losses. The table below isolates these effects on the Company's earnings. [$ Millions, rounded] Effect on 2Q Income Effect on YTD Income 2006 2005 Chg 2006 2005 Chg CONTINUING OPERATIONS Operations before Restructuring, Impairment & Amortization of Past Pension Losses 10.9 8.4 2.5 23.8 19.9 3.9 Reconciliation to Net Income / (Loss): Restructuring Expense -0.8 -0.3 -0.4 -1.9 -0.9 -1.0 Impairment Expense 0.2 0.0 0.2 -1.5 0.0 -1.5 Amortization of Past Pension Losses -6.7 -4.4 -2.3 -12.7 -9.5 -3.2 Income / (Loss) on Operations 3.6 3.7 -0.1 7.7 9.6 -1.9 Interest & Other Income / (Expense) -0.4 -0.7 0.2 -0.9 -1.2 0.3 Pretax Income / (Loss) 3.2 3.0 0.1 6.8 8.3 -1.5 Ohio Statutory Tax Rate Adjustment -2.9 2.9 -2.9 2.9 Income Taxes -1.2 -1.3 0.1 -2.8 -3.5 0.8 Net Income / (Loss) on Continuing Operations 1.9 -1.1 3.0 4.0 1.9 2.1 DISCONTINUED OPERATIONS -10.4 -1.2 -9.2 -11.1 -1.9 -9.2 CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 0.1 0.1 TOTAL NET INCOME / (LOSS) -8.5 -2.3 -6.2 -7.0 0.1 -7.1 Continuing operations before restructuring, impairment, and amortization of past pension losses was $10.9 million and $23.8 million for the quarter and year-to-date periods, up 30 percent and 20 percent, respectively. Current year earnings were helped by an accrual adjustment for unclaimed funds, but were penalized by unusually high health care claims; the net positive effect on earnings from these two items was approximately $0.7 million. Including the loss on the sale of InSystems, the Company reported a second quarter net loss of $8.5 million or $0.29 per share, compared to a loss of $2.3 million and $0.08 per share last year. For the first six months, the net loss was $7.0 million or $0.24 per share versus a breakeven result for the comparable period of 2005. Net debt was $16.3 million at the end of June, down $15.6 million during the quarter. Setting aside $8.5 million from the sale of InSystems, cash flow for the quarter was a positive $7.1 million -- after satisfying the operating needs plus capital spending of $4.5 million, pension funding of $6.0 million and dividends of $6.7 million. Outlook "We continue to expect modest revenue growth for the whole of 2006 with the fourth quarter seasonally stronger," said Dennis Rediker, Standard Register's president and chief executive officer. "Despite a very price competitive market for certain of our traditional print products, we believe that our strategic initiatives are beginning to show results that will lead to meaningful growth in our earnings over the next several years," added Rediker. Dividend Standard Register's board of directors today declared a quarterly dividend of $ 0.23 per share to be paid on Sept. 8, 2006, to shareholders of record as of Aug. 25, 2006. Presentation of Information in This Press Release This press release presents information that excludes restructuring, impairment charges, and amortization of past pension losses. These financial measures are considered non-GAAP. 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 (GAAP). This information is intended to enhance an overall understanding of the financial performance due to the non-operational nature of these items and the significant change from period to period. This presentation is consistent with the manner in which the Board of Directors internally evaluates performance. The presentation of non-GAAP information is not meant to be considered in isolation or as a substitute for results prepared in accordance with principles generally accepted in the United States. Conference Call Standard Register president and chief executive officer Dennis L. Rediker and chief financial officer Craig Brown will host a conference call at 10 a.m. EDT on July 28, 2006, to review the second quarter results. The call can be accessed via an audio webcast which is accessible at: http://www.standardregister.com/investorcenter. About Standard Register Standard Register is a premier document services provider, trusted by companies to manage the critical documents they need to thrive in today's competitive climate. Relying on nearly 100 years of industry expertise, Lean Six Sigma methodologies and leading technologies, we help organizations increase efficiency, reduce costs, mitigate risks, grow revenue and meet the challenges of a changing business landscape. It offers document and label solutions, e-business solutions, consulting, and print supply chain services to help clients manage documents across their enterprise. 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 2006 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, cost-containment strategies, and the Company's success in attracting and retaining key personnel. Additional information concerning factors that could cause actual results to differ materially from those projected is contained in the Company's filing with The Securities and Exchange Commission, including its report on Form 10-K for the year ended January 1, 2006. 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. THE STANDARD REGISTER COMPANY STATEMENT OF OPERATIONS Second Quarter (In Thousands, except Y-T-D 13 Weeks 13 Weeks Per Share Amounts) 26 Weeks 26 Weeks Ended Ended Ended Ended 02-Jul-06 03-Jul-05 02-Jul-06 03-Jul-05 $222,832 $222,495 TOTAL REVENUE $451,455 $451,871 144,883 148,365 COST OF SALES 291,637 297,620 77,949 74,130 GROSS MARGIN 159,818 154,251 COSTS AND EXPENSES 2,780 1,730 Research and Development 5,115 3,672 Selling, General and 63,484 59,078 Administrative 128,637 121,967 Depreciation and 7,483 9,268 Amortization 14,975 18,194 (155) - Asset Impairment 1,539 - 774 338 Restructuring 1,864 866 74,366 70,414 TOTAL COSTS AND EXPENSES 152,130 144,699 INCOME FROM CONTINUING 3,583 3,716 OPERATIONS 7,688 9,552 OTHER INCOME (EXPENSE) (523) (636) Interest Expense (1,037) (1,292) Investment and Other 97 (38) Income (Expense) 134 49 (426) (674) Total Other Expense (903) (1,243) INCOME (LOSS) FROM CONTINUING OPERATIONS 3,157 3,042 BEFORE INCOME TAXES 6,785 8,309 1,228 4,148 Income Tax Expense 2,786 6,393 NET INCOME (LOSS) FROM 1,929 (1,106) CONTINUING OPERATIONS 3,999 1,916 DISCONTINUED OPERATIONS Loss from discontinued (1,273) (1,608) operations, net of taxes (1,923) (2,422) Gain (loss) on sale of discontinued operations, (9,168) 406 net of taxes (9,168) 552 NET INCOME BEFORE CUMULATIVE EFFECT OF A CHANGE IN (8,512) (2,308) ACCOUNTING PRINCIPLE (7,092) 46 Cumulative effect of a change in accounting - - principle 78 - ($8,512) ($2,308) NET INCOME (LOSS) (7,014) $46 Average Number of Shares 28,934 28,771 Outstanding - Basic 28,907 28,657 Average Number of Shares 28,952 28,771 Outstanding - Diluted 28,970 28,668 BASIC AND DILUTED EARNINGS (LOSS) PER SHARE Income (loss) from $0.07 ($0.04) continuing operations $0.14 $0.06 Loss from discontinued (0.04) (0.05) operations (0.06) (0.08) (Loss) Gain on sale of (0.32) 0.01 discontinued operations (0.32) 0.02 ($0.29) ($0.08) Net income (loss) per share ($0.24) $0.00 $0.23 $0.23 Dividends Paid Per Share $0.46 $0.46 BALANCE SHEET (In Thousands) 2-Jul-06 01-Jan-06 ASSETS Cash & Short Term Investments $2,426 $13,609 Accounts Receivable 121,573 123,006 Inventories 46,407 47,033 Other Current Assets 30,467 30,255 Total Current Assets 200,873 213,903 Plant and Equipment 121,375 129,989 Goodwill and Intangible Assets 7,924 16,866 Deferred Taxes 80,079 83,937 Other Assets 22,319 31,217 Total Assets $432,570 $475,912 LIABILITIES AND SHAREHOLDERS' EQUITY Current Portion Long-Term Debt $619 $611 Current Liabilities 84,341 99,437 Deferred Compensation 16,292 16,357 Long-Term Debt 18,068 34,379 Retiree Healthcare 41,994 43,885 Pension Liability 112,267 107,236 Other Long-Term Liabilities 75 555 Shareholders' Equity 158,914 173,452 Total Liabilities and Shareholders' Equity $432,570 $475,912 DATASOURCE: Standard Register CONTACT: News media, Julie McEwan, +1-937-221-1825, or , or Investors, Robert J. Cestelli, +1-937-221-1304, or , both of Standard Register

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