Standard Register (NYSE:SR), a leader in the management and
execution of mission-critical communications, today announced a
strategic restructuring program to better align the Company’s
resources in support of its growing core solutions business and to
reduce costs to offset the impact of declining revenue in its
legacy operations. The restructuring is expected to result in an
estimated $45 million in annual savings and the elimination of 12%
to 15% of its workforce over the next 6 to 9 months. Costs
associated with the restructuring program are expected to reduce
fourth quarter 2011 earnings by approximately $5.5 million, or
$0.11 per share, net of tax. The balance of the costs will reduce
2012 earnings by approximately $1.5 million, or $0.03 per share,
net of tax.
The Company will also record a non-cash charge to tax expense of
$70 to $90 million to establish a valuation allowance against
certain deferred tax assets, which will reduce earnings per share
by $2.40 to $3.10 in the fourth quarter. The action is necessary
under accounting standards that require recording a valuation
allowance when it is more likely than not that a portion of the
asset will not be realized. The valuation allowance will be
maintained until sufficient evidence exists to support its
reversal.
Additionally, the Company will record a non-cash actuarial loss
of approximately $80 million to other comprehensive income within
equity as a result of actual pension asset performance as compared
to actuarial assumptions and liability increases caused by
continued declines in the discount rate. The recording of this loss
has no impact on 2011 earnings.
On a preliminary basis, the Company expects fourth quarter 2011
revenue to be $160 to $162 million and pretax losses to be ($9.6)
to ($10.1) million. On a non-GAAP basis, pretax income (excluding
the impact of pension amortization and settlement and restructuring
costs) is expected to be $1.3 to $1.8 million representing growth
as compared to the third quarter 2011 (which also excludes the
impact of the postretirement plan amendment).
Standard Register also announced the suspension of its quarterly
dividend in keeping with Ohio law, which requires that cash
dividends be paid only out of a corporation’s statutory surplus.
Because of the decline in book equity related to additional fourth
quarter actuarial losses in the Company’s pension plan and the
valuation allowance established against deferred tax assets, there
is not currently a statutory surplus. The suspension of the
dividend results in the annual retention of approximately $6
million of capital by the Company. The 2012 first quarter dividend
which was declared in December 2011 will be paid on March 9,
2012.
“The actions we’ve announced today will more appropriately align
our resources with our revenue expectations and in support of our
core solutions business. Importantly, they will also assist us in
achieving positive cash flow and in making investments in talent,
technology and operational infrastructure, as well as sales and
marketing optimization, to drive growth,” said Joseph P. Morgan,
Jr., president and chief executive officer. “We are accelerating
our strategy of providing solutions to enable our customers to
align their brand communications with their corporate priorities
and standards. We have a solid base of customers as well as
significant opportunities to grow market share in each of our
market-facing business units.”
Morgan continued, “Despite today’s news, we generated modest
revenue gains in the fourth quarter supported in particular by
strong results in our financial services segment and healthcare
technology. We will continue to aggressively execute our strategic
plan. Today’s announcement is another important step forward in
stabilizing our position and will result in sufficient liquidity
and capital resources to fund our near-term operations and growth
objectives.”
Standard Register has realigned its business to focus on four
markets where it has deep industry knowledge and strong
relationships: Healthcare, Financial Services, Commercial Markets
and Industrial. Its customer base includes approximately half of
the Fortune 100 as well as a variety of mid-sized organizations and
small businesses. The Company’s core solutions help customers
operate more efficiently, build brand consistency, and reduce risk
through the use of the Company’s secure distributed digital network
with digital color production and distribution. In addition to its
core solutions, the Company delivers market-specific solutions in
the areas of software and consulting as well as more traditional
products and services such as forms printing, transactional labels,
commercial print and digital black and white printing.
Conference Call
Standard Register's President and Chief Executive Officer Joe
Morgan and Chief Financial Officer Bob Ginnan will host a
conference call at 10:00 a.m. EST on January 23, 2012, to discuss
this announcement. The call can be accessed via an audio web cast
accessible at: http://www.standardregister.com/investorcenter.
About Standard Register
Standard Register (NYSE:SR) 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 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 years 2011
and 2012 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, such
as interest rates, timing of the completion and integration of
acquisitions, the consequences of competitive factors in the
marketplace including the ability to attract and retain customers,
results of continuous improvement and other cost-containment
strategies, asset impairments or other accounting adjustments that
could result from any of the forgoing factors or other factors
affecting the Company’s business and the Company's success in
attracting and retaining key personnel. 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.
Non-GAAP Measures 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 non-GAAP pretax income, which is not
calculated in accordance with GAAP. This non-GAAP measure should
not be considered as a substitute for, or superior to, results
determined in accordance with GAAP.
Management evaluates the Company’s results, excluding pension
loss amortization, pension settlements, restructuring charges,
asset impairments and postretirement termination benefits. 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 table below provides a reconciliation of the non-GAAP
measure to its most comparable measure calculated in accordance
with GAAP.
($ in millions)
13 Weeks Ended 1-Jan-12 13 Weeks Ended
High Low 2-Oct-11 (Unaudited)
(Unaudited) (Unaudited)
GAAP (Loss)/ Income before Income
taxes
$ (9.6 ) $ (10.1 )
$ 14.7 Adjustments, before tax: Pension loss
amortization
6.1 6.1 6.1 Pension settlement
and postretirement plan amendment
- - (20.2
) Restructuring cost
5.3 5.3 0.1
Non-GAAP Income before Income taxes
$ 1.8 $ 1.3
$ 0.7
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