Standard Register (NYSE:SR) today reported its financial results
for the second quarter and first half ended July 1, 2007. Results
of Operations Revenue on Continuing Operations for the second
quarter 2007 was $211.2 million, compared to $222.7 million
reported for the comparable quarter of 2006. Through the first
half, Revenue on Continuing Operations was $438.6 million, down 2.8
percent in comparison to last year�s $451.2 million. The Net Loss
for the quarter was $4.6 million or $0.16 per share, versus a Net
Loss of $8.5 million or $0.29 per share reported for prior year.
Through six months, the Net Loss was $5.5 million or $0.19 per
share, compared to a Net Loss of $7.0 million or $0.24 per share in
2006. Changing sales levels at three customer accounts figured
prominently in the quarter and year-to-date results, reducing
revenue by $12 million and $20 million in the respective periods.
Excluding the changes in these accounts, revenue was even with last
year for the quarter and rose 1.7 percent for the first half. The
table below isolates the effects of restructuring, impairment,
amortization of past pension losses, pension settlement, and
discontinued operations on the quarter and year-to-date periods. [$
Millions, rounded] Effect on 2Q Income Effect on YTD Income
CONTINUING OPERATIONS 2007 2006 Chg 2007 2006 Chg Operations before
Restructuring, Impairment Amortization of Past Pension Losses &
the Pension Settlement Charge 3.3 12.2 -8.9 12.7 26.4 -13.8 �
Reconciliation to Net Income / (Loss): Restructuring Expense -1.8
-0.8 -1.0 -4.2 -1.9 -2.3 Impairment Expense 0.3 0.2 0.2 0.8 -1.5
2.3 Amortization of Past Pension Losses -7.1 -6.7 -0.3 -14.1 -12.7
-1.3 Pension Settlement Charge -3.2 � -3.2 -3.2 � -3.2 Income /
(Loss) on Continuing Operations -8.4 4.9 -13.3 -8.0 10.3 -18.3 �
Interest & Other Income / (Expense) -0.8 -0.4 -0.4 -1.5 -0.9
-0.6 Pretax Income / (Loss) -9.2 4.4 -13.6 -9.5 9.4 -18.9 � Income
Taxes -3.8 1.7 -5.6 -4.0 3.8 -7.8 Net Income / (Loss) on Continuing
Operations -5.4 2.7 -8.1 -5.5 5.6 -11.1 � DISCONTINUED OPERATIONS
0.7 -11.2 11.9 0.1 -12.7 12.8 � � � � � � TOTAL NET INCOME / (LOSS)
-4.6 -8.5 3.9 -5.5 -7.0 1.6 � Earnings Per Share Attribution
Restructuring & Impairment Expenses -0.03 -0.01 -0.02 -0.07
-0.07 0.00 Pension Loss Amortization & Pension Settlement -0.22
-0.14 -0.08 -0.36 -0.26 -0.10 All Other Operations 0.06 0.25 -0.19
0.24 0.53 -0.29 Total on Continuing Operations -0.19 0.09 -0.28
-0.19 0.19 -0.39 � Discontinued Operations 0.03 -0.39 0.42 0.00
-0.44 0.44 Total Earnings Per Share -0.16 -0.29 -0.13 -0.19 -0.24
-0.05 Restructuring charges primarily relate to the consolidation
of the Middlebury, VT plant�s capacity into other manufacturing
locations, announced in the first quarter of the year and completed
in June. Impairment expense was adjusted in the quarter for
equipment originally slated for disposal that was put back in
service. Pension loss amortization was higher for both the quarter
and first half periods. This amortization is primarily the result
of asset losses from the weak stock market in 2001 and 2002 and
lower interest rates. A pension settlement charge was also recorded
in the quarter as a result of large lump-sum payments under the
Company�s non-qualified retirement plan. The pension settlement
expense accelerates the amortization of prior year�s pension losses
in proportion to the lump-sum payments. The results of InSystems
and Digital Solutions operations and their sale are reported above
as discontinued operations. InSystems was sold June 5, 2006 and
Digital Solutions was sold April 21, 2007. Second quarter pretax
Income on Continuing Operations, excluding restructuring,
impairment, pension loss amortization, and the pension settlement
charge was $3.3 million, versus $12.2 million in the prior year.
The $8.9 million decrease is primarily attributed to approximately
$6.0 million in lower gross margin on the three significant
customer accounts mentioned earlier, and about $3.0 million in
reduced Document and Label Solutions (DLS) gross margins due to
lower sales of traditional document products and temporarily higher
quality, overtime, and training costs stemming from the Middlebury
restructuring. On a year-to-date basis, Income on Continuing
Operations before restructuring, impairment, pension loss
amortization, and pension settlement expenses was $12.7 million,
compared to $26.4 million in 2006. The $13.8 million decline in
this measure is primarily a function of four items � an approximate
$11.0 million reduction in gross margin from the three referenced
accounts, a $10.0 million margin drop due to reduced sales of
traditional printed products and the temporarily higher
manufacturing costs, offset by approximately $4.0 million in higher
margins from revenue gains in digital print, services, and Document
Systems, plus $2.7 million in lower SG&A and depreciation
expenses. �Setting aside the three significant accounts, several
trends are apparent in our first half results that serve to
reinforce our strategy,� said Dennis Rediker, Standard Register�s
president and chief executive officer. �Our traditional DLS print
business is under pressure brought about by advancing digital
technology and an oversupplied industry. Our annual rate of decline
is approximately 5 percent which mirrors industry trends. We
believe we can gain market share in select vertical markets where
we have expertise and focus, but we must continue to improve cost
and productivity to remain competitive and produce sustaining cash
flows. �Our label business is growing, but not at the general pace
of the market. Labels are an opportunity for us and we are
investing for growth, as illustrated by our recent venture into
Mexico. �Our newer digital print and service initiatives are
gaining traction. Through the first half, revenue from digital
print was up 18 percent, services rose 11 percent, Document Systems
increased 19 percent, and commercial print was 11 percent ahead of
last year.� On the balance sheet, net debt increased $3.2 million
in the quarter, ending at $54.1 million. Net debt, debt less cash
and short-term investments, has increased $13.2 million since the
outset of the year, primarily reflecting the timing of capital
expenditures and other disbursements that were about $12.5 million
heavier in the first six months of the year than the expected
annual rate would suggest. Restructuring On July 20th, the Company
announced that it had completed a restructuring action as part of
an overall plan to reduce its annual operating costs by $40
million. That action eliminated approximately 250 positions,
primarily in management and overhead, representing $22 million in
annual compensation and related costs. This was in addition to the
plant (Middlebury, VT) and warehousing restructuring action
announced in the first quarter of the year and completed in June,
which targets annual savings of approximately $5 million, and other
cost saving initiatives targeted to reduce purchasing and other
non-compensation costs by approximately $13 million annually.
Outlook The first half of the year produced revenue of about $439
million and operating income before restructuring, impairment,
pension loss amortization, and pension settlement of $12.7 million.
After deducting interest and other expense, this non-GAAP earnings
figure is reduced to $11.1 million pretax, equivalent to $0.24 per
share after tax. �Looking ahead to the second half of the year, we
expect revenue to be higher than in our first half,� said Rediker,
adding, �our outlook now calls for total year 2007 revenue
approximately equal to last year�s $894 million figure. Further, we
expect our second half cost of sales and SG&A expenses to be
approximately $15 million below our first half costs as a result of
the cost reduction plans announced earlier. The remaining $25
million in cost savings should flow through in 2008. The
combination of higher revenue and lower costs should make our
second half earnings significantly better than our first half and
set us up for a solid 2008 result.� Dividend Standard Register�s
board of directors declared on July 26, 2007 a quarterly dividend
of $0.23 per share to be paid on September 7, 2007, to shareholders
of record as of August 24, 2007. Presentation of Information in
This Press Release This press release presents information that
excludes restructuring, impairment charges, amortization of past
pension losses, and pension settlement charges. 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 Rediker and chief financial officer
Craig Brown will host a conference call at 10 a.m. EDT on July 27,
2007, 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, the company helps 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 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 2007 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 December 31,
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 � Y-T-D STATEMENT OF OPERATIONS Y-T-D 13 Weeks
Ended 13 Weeks Ended (In Thousands, except Per Share Amounts) 26
Weeks Ended 26 Weeks Ended 1-Jul-07 2-Jul-06 1-Jul-07 2-Jul-06 �
$211,165 $222,665 TOTAL REVENUE $438,596 $451,186 � 144,000 �
144,859 � COST OF SALES 295,496 � 291,576 � � 67,165 77,806 GROSS
MARGIN 143,100 159,610 � COSTS AND EXPENSES 67,561 65,015 Selling,
General and Administrative 134,479 131,263 6,590 7,318 Depreciation
and Amortization 13,245 14,644 (342 ) (155 ) Asset Impairment (751
) 1,539 1,752 � 774 � Restructuring 4,158 � 1,864 � � 75,561 �
72,952 � TOTAL COSTS AND EXPENSES 151,131 � 149,310 � � (8,396 )
4,854 (LOSS) INCOME FROM CONTINUING OPERATIONS (8,031 ) 10,300 �
OTHER INCOME (EXPENSE) (886 ) (523 ) Interest Expense (1,683 )
(1,037 ) 99 � 97 � Other income 167 � 134 � (787 ) (426 ) Total
Other Expense (1,516 ) (903 ) � � (LOSS) INCOME FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES (9,183 ) 4,428 (9,547 ) 9,397 � �
(3,824 ) 1,733 � Income Tax (Benefit) Expense (3,999 ) 3,823 � �
(5,359 ) 2,695 NET (LOSS) INCOME FROM CONTINUING OPERATIONS (5,548
) 5,574 � DISCONTINUED OPERATIONS (81 ) (2,039 ) Loss from
discontinued operations, net of taxes (725 ) (3,498 ) 816 � (9,168
) Gain (loss) on sale of discontinued operations, net of taxes 821
� (9,168 ) � (4,624 ) (8,512 ) NET LOSS BEFORE CUMULATIVE EFFECT OF
A CHANGE IN ACCOUNTING PRINCIPLE (5,452 ) (7,092 ) � - � - �
Cumulative effect of a change in accounting principle, net of taxes
- � 78 � � ($4,624 ) ($8,512 ) NET LOSS ($5,452 ) ($7,014 ) � �
28,677 28,934 Average Number of Shares Outstanding - Basic 28,656
28,907 28,677 28,952 Average Number of Shares Outstanding - Diluted
28,656 28,970 � BASIC AND DILUTED EARNINGS (LOSS) INCOME PER SHARE
($0.19 ) $0.10 (Loss) income from continuing operations ($0.19 )
$0.19 - (0.07 ) Loss from discontinued operations (0.03 ) (0.11 )
0.03 � (0.32 ) Gain (loss) on sale of discontinued operations 0.03
� (0.32 ) ($0.16 ) ($0.29 ) Net loss per share ($0.19 ) ($0.24 ) �
$0.23 $0.23 Dividends Paid Per Share $0.46 $0.46 BALANCE SHEET (In
Thousands) 1-Jul-07 31-Dec-06 � ASSETS Cash & Short Term
Investments $0 $488 Accounts Receivable 120,715 135,839 Inventories
47,129 49,242 Other Current Assets 30,863 32,201 Total Current
Assets 198,707 217,770 � Plant and Equipment 119,574 119,339
Goodwill and Intangible Assets 8,033 8,168 Deferred Taxes 84,216
86,710 Other Assets 18,274 20,092 � Total Assets $428,804 $452,079
� LIABILITIES AND SHAREHOLDERS' EQUITY Current Portion Long-Term
Debt $68 $358 Current Liabilities 84,439 100,956 Deferred
Compensation 12,618 17,190 Long-Term Debt 54,000 41,021 Retiree
Healthcare 20,470 20,398 Pension Liability 139,843 153,953 Other
Long-Term Liabilities 1,246 36 Shareholders' Equity 116,120 118,167
� Total Liabilities and Shareholders' Equity $428,804 $452,079
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