Standard Register (NYSE: SR) today reported its fourth quarter
and total year 2008 results.
Results of Operations
For the fourth quarter, net income was $0.8 million or $0.03 per
share, compared to a prior year net loss of $4.0 million or $0.14
per share. Revenue for the quarter was $196.1 million, down 10.3
percent versus the same period of 2007 with approximately 70
percent of the decrease attributed to unit decreases or pricing
concessions related to the poor economic conditions. The revenue
decrease translated into reduced gross margins, but SG&A
expenses were significantly lower � primarily due to lower non-cash
amortization and settlement charges related to past years�
actuarial pension losses.
For the year, net income was $6.8 million or $0.24 per share,
versus a net loss last year of $7.3 million and $0.25 per share.
Revenue was $791.1 million, down 8.6 percent from the $865.4
million reported in 2007. Management attributes approximately
three-fourths of the decrease to weakness in the economy. The
manufacturing cost reduction program undertaken in mid-2007 enabled
the Company to report a modest improvement in the percentage gross
margin for the year, despite the lower revenue.
SG&A expenses were lower in the current year as a result of
both the mid-2007 cost reduction initiative and the late 2008
restructuring, which established a lower expense base for 2009.
SG&A expenses for the year were also substantially lower due to
the aforementioned decrease in pension amortization and settlement
charges.
Cash flow from operations for the year was strong at $61.7
million and well above the prior year�s $33.1 million, primarily as
a result of improved working capital management. Net debt [total
debt less cash] ended the year at $33.7 million, compared to $51.3
million at the outset of the year, reflecting the year�s net
positive cash flow of $17.6 million after capital expenditures,
dividends, and pension funding.
Strategy
Several actions are being taken early in 2009 as a result of
planning undertaken last year under then COO Joe Morgan. �We
reviewed our portfolio, customer relationships, and market
conditions and concluded that we have a number of significant
opportunities and, like everyone else, a few challenges,� said Joe
Morgan, now president and CEO.
�We have maintained our underlying operating margins, despite
lower sales, by managing our costs during what has been a
challenging period for our industry. Cash flow has also been strong
over the years, enabling us to reduce net debt to a modest $34
million at year-end 2008,� added Morgan.
�Our clear challenge is to grow the top-line. Our analysis of
our revenue decrease for 2008 indicates that the weakening economy
reduced revenue 6.5 percent and that technology and other outside
influences reduced it by an additional 2.3 percent. The pace of
technology advancement, in particular the move toward digital, will
undoubtedly persist into the future and continue to impact many of
our traditional products,� said Morgan.
�Our strategic planning work produced a central thesis: That an
intense focus on a few vertical markets with growth potential,
where we have existing industry expertise and integrated solutions
valued by customers, will ultimately lead to growth in revenue and
earnings,� said Morgan.
Those markets are healthcare, industrial products manufacturing,
and selected segments of the larger commercial marketplace. The
largest three markets accounted for 70% of 2008 revenue. For the
year, the Company signed 53 new contracts [each in excess of
$250,000 annually] � an increase of 23 percent over the prior year,
with the majority in the healthcare and industrial segments.
In a break with the past, the Company is organizing its
marketing, sales, R&D, and in some cases manufacturing and
support resources by major target market. �We believe that our
approach will achieve focus, accountability, and the right
environment for prudent risk-taking and growth � without losing the
productivity and cost savings we have fought hard for,� added
Morgan.
Dividend
At its February meeting, the Board of Directors stated its
intention to reduce the quarterly dividend from $0.23 per share to
$0.05 per share in the second quarter. The Board expects to
formally declare the second quarter dividend in its April board
meeting and will consider subsequent dividend payments on a quarter
by quarter basis in accordance with its normal practice. This will
have no impact on the payment of the $0.23 quarterly dividend
declared in December 2008, which will be paid on March 6, 2009 to
shareholders of record as of February 20, 2009.
This decision was made after giving extensive and careful
consideration to the current economic environment and the Company�s
strategy, equity position, and near term capital needs.
The Company�s core strategy is to provide document management
services to vertical markets where it can maintain a leadership
position by virtue of its industry expertise, tailored solutions,
and high levels of service. The Company�s primary markets are
healthcare, industrial products manufacturing, and selected sectors
within the broader commercial marketplace.
�The Company believes these markets have long-term growth
potential and will prove to be relatively resilient, even in
difficult times,� said Morgan. �In many cases, our products and
services are essential to our customers� everyday operations,
providing us with a stable source of cash flow. Our markets are
undergoing technological change, however, and we must not shrink
from investing in the people, products, and technologies necessary
for us to continue to be the partner of choice to our
customers.�
Despite the profitable fourth quarter, the Company�s equity
position decreased by $75 million in the fourth quarter, ending the
year at $35 million. This decrease was primarily the result of
actuarial pension losses brought about by the quarter�s �perfect
storm� � a dramatic drop in stock market values which decreased
trust assets, and a drop in long-term interest rates which
increased the pension liability. Pension gains and losses [after
tax] are recorded directly to equity at year-end on a
mark-to-market basis.
Further reductions in the level of shareholders� equity could
limit the ability of the Company to declare dividends in the
future. Under Ohio law, a company cannot declare a dividend in
excess of its �Surplus� � the difference between total
shareholders� equity and the par value of outstanding shares. The
Company�s Surplus was $6.2 million at year-end.
As for the Company�s pension, contributions to the plan have
averaged $20 million over the last four years and $25 million is
planned for 2009. Current estimates call for a modest step-up in
funding in subsequent years, assuming no significant actuarial
gains or losses going forward.
�The Board of Directors is mindful of the value its shareholders
place on the Company�s dividends and is cognizant of its
long-standing record in this regard,� said David Clarke III,
chairman of the board. �Cash flow has been more than adequate to
fund the dividend over the last five years, as evidenced by the $14
million decrease in our net debt over that period. Moreover, our
net debt stood at just $34 million at year-end.�
�During this extraordinary time, however, it is the board�s
opinion that capital preservation and prudent investments in
pursuit of the strategy best serves the Company�s long-term
interests. We will continue to evaluate the situation and look
forward to improved economic conditions and financial performance
that will warrant an adjustment to the dividend,� added Clarke.
Conference Call
Standard Register�s president and chief executive officer Joseph
P. Morgan and chief financial officer Craig Brown will host a
conference call at 11 a.m. EST on February 20, 2009, to review the
fourth quarter and year-end results. The call can be accessed via
an audio web cast which is accessible at:
http://www.standardregister.com/investorcenter.
Presentation of Information in This Press Release
This press release presents information that is 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. The presentation of
non-GAAP information is not meant to be considered in isolation or
as a substitute for results prepared in accordance with accounting
principles generally accepted in the United States. In particular,
we will segregate and highlight cash flows related to restructuring
and contributions to our qualified pension plan, both of which are
carefully monitored by management and have a significant and
variable impact on cash flow. In addition, because our outstanding
debt 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 receivable balances and
letters of credit), we measure cash flow performance prior to debt
borrowing or repayment. In effect, we evaluate cash flow as the
change in net debt (total debt less cash and cash equivalents).
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. Employing nearly a century
of industry expertise, Lean Six Sigma methodologies and other
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, technology solutions,
consulting and print supply chain services to help clients manage
documents throughout their enterprises. 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 2009 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 28, 2008. 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 � � � �
Fourth
Quarter STATEMENT OF OPERATIONS Y-T-D 13 Weeks
Ended 13 Weeks Ended (Dollars in thousands, except per
share amounts)
52 Weeks Ended 52 Weeks Ended
28-Dec-08 �
30-Dec-07 28-Dec-08 �
30-Dec-07 �
$ 196,056 $ 218,551
TOTAL
REVENUE $ 791,076 $ 865,432 � � 135,765 � � �
148,395 �
COST OF SALES �
540,274 � � � 593,118 � �
60,291 70,156
GROSS MARGIN 250,802 272,314 �
COSTS AND EXPENSES 53,321 75,310 Selling, general and
administrative
228,346 273,957
- 214 Asset Impairment
164 (439 ) �
2,878 � � � 276 � Restructuring �
5,621 � � � 7,996 � � �
56,199 � � � 75,800 �
TOTAL COSTS AND EXPENSES �
234,131 � � � 281,514 � �
4,092 (5,644 )
INCOME (LOSS) FROM CONTINUING
OPERATIONS 16,671 (9,200 ) �
OTHER INCOME
(EXPENSE) (449 ) (1,031 ) Interest expense
(2,220 ) (3,763 ) �
114 � � � 36 � Other
income �
285 � � � 208 �
(335 ) (995 )
Total Other Expense (1,935 ) (3,555 ) � �
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES
3,757 (6,639 )
14,736 (12,755 ) � � �
2,961 �
� � (2,615 ) Income Tax (Benefit) Expense �
7,905 � � �
(5,176 ) �
796 (4,024 )
NET INCOME (LOSS) FROM CONTINUING
OPERATIONS 6,831 (7,579 ) �
DISCONTINUED
OPERATIONS (2 ) Loss from discontinued operations, net of taxes
- (752 ) �
1 � � � 11 � Gain on sale of discontinued
operations, net of taxes �
5 � � � 1,026 � �
$
797 � � � ($4,015 )
NET INCOME (LOSS) $
6,836 � � � ($7,305 ) � � �
28,778 28,721 Average
Number of Shares Outstanding - Basic
28,759 28,684
28,784 28,721 Average Number of Shares Outstanding - Diluted
28,774 28,684 �
BASIC AND DILUTED INCOME (LOSS) PER
SHARE 0.03 ($0.14 ) Income (loss) from continuing
operations
$ 0.24 ($0.26 )
- - Loss from
discontinued operations
- (0.03 ) �
- � � � - � Gain
on sale of discontinued operations �
- � � � 0.04 �
$
0.03 � � � ($0.14 ) Net income (loss) per share
$
0.24 � � � ($0.25 ) �
$ 0.23 $ 0.23 Dividends
Paid Per Share
$ 0.92 $ 0.92 � � �
BALANCE
SHEET (In Thousands) 28-Dec-08 � 30-Dec-07 �
ASSETS Cash
& Short Term Investments
$ 282 $ 697 Accounts
Receivable
112,810 130,212 Inventories
38,718 45,351
Other Current Assets �
22,060 � � � 22,523 � Total Current
Assets
173,870 198,783 � Plant and Equipment
102,071
110,975 Goodwill and Intangible Assets
7,752 7,861 Deferred
Taxes
114,121 82,272 Other Assets
15,563 21,075 � � �
Total Assets
$ 413,377 � � $ 420,966 � �
LIABILITIES AND SHAREHOLDERS' EQUITY Current Portion
Long-Term Debt
$ 159 $ 21 Current Liabilities
87,296 87,342 Deferred Compensation
8,362 12,010
Long-Term Debt
33,840 51,988 Retiree Healthcare
8,063
19,496 Pension Liability
235,457 133,553 Other Long-Term
Liabilities
5,231 5,177 Shareholders' Equity
34,969
111,379 � � � Total Liabilities and Shareholders' Equity
$
413,377 � � $ 420,966 �
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