Standard Register (NYSE: SR), a leader in critical
communications management solutions, today announced its financial
results for the fourth quarter and full year 2012. The Company
reported fourth quarter 2012 revenue of $143.6 million and a net
loss of $0.2 million or $0.01 per share. The results compare to
2011 fourth quarter revenue of $161.4 million and a net loss of
$95.5 million or $3.28 per share. The 2011 fourth quarter loss
included a non-cash charge of $89.5 million to establish a
valuation allowance against certain deferred tax assets.
Non-GAAP net income from operations after adjustments for
pension loss amortization, pension settlement, restructuring
charges, postretirement plan termination, tax effect of adjustments
and deferred tax valuation allowances was $4.0 million or $0.14 per
share for the fourth quarter of 2012, compared to $0.9 million or
$0.03 per share for the same period in 2011.
For the full 12 months of 2012, the Company reported revenue of
$602.0 million and a net loss of $9.1 million or $0.31 per share.
The results compare to full year 2011 revenue of $648.1 million and
a net loss of $87.7 million or $3.02 per share. Full year 2011
included the $89.5 million valuation allowance and a $20.2 million
one-time gain from the termination of the postretirement health
care plan.
Non-GAAP adjusted net income from operations for the full year
2012 was $12.2 million or $0.42 per share compared to non-GAAP
adjusted net income of $7.7 million or $0.26 per share for the
prior year.
“Operational performance continues to improve, which is an
indicator that customers are seeing the value of our transition
from a traditional printing company to a provider of communications
and marketing solutions across multiple delivery channels,” said
Joseph P. Morgan, Jr., president and chief executive officer. “The
restructuring plan that we introduced in January 2012 has resulted
in improvements in efficiency as well as helping us align our cost
structure with our resources. We are building a sustainable
enterprise based on our recognized expertise in managing workflow
and our platform of marketing, communications and program
management for business and healthcare.”
Morgan continued, “Macro-trends are affecting our traditional
printing business, but Standard Register has maintained strong
customer relationships. Our qualified pension plan is still a
challenge in this low interest rate environment; however we
exceeded our 2012 obligation by funding $22.7 million in
contributions to the plan during 2012. We are on track with our
restructuring plan and ended the year with $8.2 million in positive
cash flow on a net debt basis.”
The Company previously announced reductions in volume and
freight business with a large financial services customer that
reorganized its distribution channels and restructured its
operations. Revenue from this customer declined $24.2 million
($17.6 million in Legacy products and $6.6 million in Core
solutions) in 2012 and is estimated to decline an additional $18
million to $20 million in 2013.
Fourth Quarter Results
Total revenue declined 11 percent to $143.6 million in the
fourth quarter compared to $161.4 million in the fourth quarter of
2011. Approximately half of the decline was attributable to reduced
volumes with the large financial services customer. Core solutions,
the Company’s priority growth products and services, declined 4
percent. Legacy products, generally transactional documents and
printed materials, decreased 14 percent.
Healthcare revenue declined 11 percent for the quarter, to $52.5
million compared to $59.3 million in the prior year quarter.
Declines in volumes, particularly in printed forms related to the
mandated migration to Electronic Healthcare Records, offset
increases in Core solutions sales. Operating income for the fourth
quarter was $4.1 million compared to $2.1 million for the same
period in 2011.
Business Solutions revenue for the fourth quarter was $91.0
million, a decrease of 11 percent compared to the fourth quarter of
2011 revenue of $102.1 million. Core solutions and Legacy products
declined, primarily related to the reduction in volume from the
large financial services customer. Operating income for the fourth
quarter was $2.4 million compared to an operating loss of $1.3
million in the fourth quarter last year.
Consolidated gross margin as a percent of revenue was 30
percent, the same as for the fourth quarter of 2011. Selling,
general and administrative (SG&A) expenses declined 18 percent
in the quarter.
Full Year Results
Total revenue declined 7 percent to $602.0 million compared to
$648.1 million for the full year 2011. Over half of this decline
was attributable to reduced volume with the large financial
services customer and the remainder was primarily the result of
Legacy product unit volumes declining more rapidly than growth in
Core solutions sales. For 2012, Core solutions declined 0.3
percent. Legacy products declined 12 percent. At the end of 2012,
Core solutions comprised 43 percent of revenue, compared to 40
percent at the end of 2011. Legacy products correspondingly
declined to 57 percent from 60 percent for the same periods.
Healthcare revenue declined 9 percent to $215.9 million from
$236.8 million in 2011. Operating income for 2012 decreased 12
percent, to $12.7 million from $14.5 million for the prior
year.
Business Solutions revenue declined to $386.1 million from
$411.3 million for 2011. Nearly all of the decline was from reduced
volume with the large financial services customer. Operating income
for 2012 more than doubled to $8.1 million from $3.5 million for
2011.
Consolidated gross margin as a percent of revenue was 30 percent
for 2012, compared to 31 percent for 2011. SG&A expense
declined 13 percent to $180.7 million from $206.9 million in the
prior year.
Cash flow on a net debt basis was positive by $8.2 million for
2012 compared to negative cash flow of $11.6 million for 2011.
Capital Expenditures, Restructuring and Pension Contribution
Updates
For 2012 capital expenditures were $6.0 million. The Company
continues to invest at a prudent level to support Core technology
solutions growth and to increase efficiencies with management
reporting capabilities. Restructuring efforts have more clearly
defined investments that will produce the best return. The Company
expects capital expenditures for 2013 to be within the range of $15
million to $18 million.
In January 2012, the Company announced a two-year strategic
restructuring plan to better align its resources in support of the
growing Core solutions business and reduce costs to offset the
impact of declining revenues in Legacy products. When fully
implemented at the end of 2013, annual savings of $60 million are
expected to be realized. Through 2012, the Company achieved
approximately $40 million of savings and incurred nearly all of the
expected $10.0 million in cumulative costs associated with the
program.
Standard Register contributed $22.7 million to the Company’s
qualified pension plan in 2012, including $2.0 million more than
required for the year. With relief provided by the Moving Ahead for
Progress in the 21st Century Act (MAPS-21), commonly called the
highway bill, and the additional $2.0 million of funding in 2012,
contributions for 2013 and 2014 are expected to be $24.8 million
and $36.4 million, respectively.
Conference Call
Standard 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, February 22, 2013,
to review the fourth quarter results. The call can be accessed via
an audio webcast accessible at
http://www.standardregister.com/investorcenter.
About Standard Register
Standard Register (NYSE:SR), celebrating 100 years of
innovation, 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 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 access to capital for expanding in
Core solutions, the pace at which digital technologies erode the
demand for certain Legacy products, 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 Measure 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 several measures operating performance
including non-GAAP net income and earnings per share 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 evaluates the Company’s results, excluding pension
loss amortization, pension settlements, restructuring charges,
postretirement plan terminations and deferred tax valuation
allowances. 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.
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 $100 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 and 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 OPERATIONS (In thousands, except per share
amounts) (Unaudited)
Fourth Quarter
Y-T-D 13 Weeks Ended 13 Weeks Ended
52 Weeks Ended 52 Weeks Ended Dec 30,
2012 Jan 1, 2012 Dec 30, 2012
Jan 1, 2012 $ 143,550 $ 161,392
TOTAL REVENUE $ 601,988 $ 648,109
99,975 113,589
COST OF SALES
421,586 449,940
43,575
47,803
GROSS MARGIN 180,402 198,169
OPERATING EXPENSES 42,026 51,386 Selling, general and
administrative
180,674 206,859
355 67 Pension
settlement and postretirement plan amendment
1,338 (19,719 )
933 5,263 Restructuring and other exit
costs
4,278 5,198
43,314
56,716
TOTAL OPERATING EXPENSES
186,290 192,338
261
(8,913 )
INCOME (LOSS) FROM OPERATIONS (5,888
) 5,831
OTHER INCOME (EXPENSE) (630
) (692 ) Interest expense
(2,689 ) (2,466 )
(10 ) 74 Other income (expense)
39 632
(640 ) (618 )
Total other expense (2,650 ) (1,834 )
(379 ) (9,531 )
(LOSS) INCOME BEFORE INCOME
TAXES (8,538 ) 3,997
(170 )
85,953 Income tax (benefit) expense
534
91,695
$
(209
) $
(95,484
)
NET LOSS $ (9,072 ) $ (87,698 )
29,232 29,094 Average Number of Shares Outstanding -
Basic
29,194 29,049
29,232 29,094 Average Number of
Shares Outstanding - Diluted
29,194 29,049
$
(0.01 ) $ (3.28 )
BASIC AND DILUTED LOSS PER
SHARE $ (0.31 ) $ (3.02 )
$
— $ 0.05 Dividends per share declared for the period
$ 0.05 $ 0.20 MEMO:
$ 5,141 $
5,925 Depreciation and amortization
$ 22,007 $ 21,809
$ 5,773 $ 6,070 Pension loss amortization
$
23,104 $ 24,281
SEGMENT OPERATING
RESULTS (In thousands) (Unaudited)
13 Weeks Ended
13 Weeks Ended 52 Weeks Ended
52 Weeks Ended Dec 30, 2012 Jan 1, 2012
Dec 30, 2012 Jan 1, 2012 REVENUE
$ 52,535 $ 59,332 Healthcare
$ 215,883
$ 236,772
91,015 102,060 Business
Solutions
386,105 411,337
$
143,550 $ 161,392 Total Revenue
$ 601,988 $ 648,109
NET (LOSS) INCOME BEFORE TAXES $ 4,140 $ 2,110
Healthcare
$ 12,704 $ 14,475
2,427 (1,326 )
Business Solutions
8,077 3,483
(6,946 )
(10,315 ) Unallocated
(29,319 ) (13,961 )
$ (379 ) $ (9,531 ) Total Net (Loss)
Income Before Taxes
$ (8,538 ) $ 3,997
CONSOLIDATED BALANCE SHEETS (In thousands)
(Unaudited)
Dec 30, 2012 Jan 1,
2012 ASSETS Cash and cash equivalents
$
1,012 $ 1,569 Accounts receivable
104,513 113,403
Inventories
44,281 48,822 Other current assets
9,248
9,058 Total current assets
159,054
172,852 Plant and equipment
58,923 73,950 Goodwill
and intangible assets
13,389 14,479 Deferred taxes
22,765 23,996 Other assets
5,773 8,584
Total assets
$ 259,904 $ 293,861
LIABILITIES AND SHAREHOLDERS' DEFICIT Current
liabilities
$ 74,832 $ 83,443 Deferred compensation
3,498 5,777 Long-term debt
49,159 60,149 Pension
benefit obligation
252,665 236,206 Other long-term
liabilities
6,610 7,339 Shareholders' deficit
(126,860 ) (99,053 ) Total
liabilities and shareholders' deficit
$ 259,904
$ 293,861
CONSOLIDATED STATEMENT OF
CASHFLOWS (In thousands) (Unaudited)
Dec 30,
2012 Jan 1, 2012 Net loss plus non-cash
items
$ 42,694 $ 32,477 Working Capital
12,452
7,176 Restructuring Payments
(8,567 ) (1,227 )
Contributions to qualified pension plan
(22,729 )
(25,000 ) Other
(5,334 ) (171 ) Net cash
provided by operating activities
18,516 13,255
Capital expenditures, net
(5,972 ) (14,186 ) Proceeds
from sale of equipment
134 1,845 Acquisition, net of cash
received
— (4,905 ) Net cash used in investing
activities
(5,838 ) (17,246 ) Net change in
borrowings under credit facility
(8,760 ) 12,661
Principal payments on long-term debt
(2,483 ) (1,721
) Dividends paid
(1,502 ) (5,836 ) Other
(613
) 105 Net cash (used in) provided by financing
activities
(13,358 ) 5,209
Effect of exchange rate
123 (180 ) Net
change in cash
$ (557 ) $ 1,038
RECONCILIATION OF GAAP TO NON-GAAP MEASURES (In
thousands, except per share amounts) (Unaudited)
13 Weeks
Ended 13 Weeks Ended 52 Weeks
Ended 52 Weeks Ended Dec 30, 2012
Jan 1, 2012 Dec 30, 2012 Jan 1, 2012
$ (209 ) $ (95,484 ) GAAP Net Loss
$
(9,072 ) (87,698 ) Adjustments:
5,773 6,070
Pension loss amortization
23,104 24,281
355 67
Pension settlement and postretirement plan amendment
1,338
(19,719 )
933 5,263 Restructuring charges
4,278 5,198
(2,783 ) (4,501 ) Tax effect of adjustments (at
statutory tax rates)
(11,319 ) (3,850 )
(75
) 89,478 Deferred tax valuation allowance
3,910 89,478
$ 3,994
$ 893 Non-GAAP Net Income
$
12,239 $ 7,690
$
(0.01 ) $ (3.28 ) GAAP Loss Per Share
$
(0.31 ) $ (3.02 ) Adjustments, net of tax:
0.12 0.12 Pension loss amortization
0.48 0.50
0.01 — Pension settlement and postretirement plan amendment
0.03 (0.41 )
0.02 0.11 Restructuring charges
0.09 0.11
— 3.08 Deferred tax
valuation allowance
0.13 3.08
$
0.14 $ 0.03 Non-GAAP Income Per Share
$ 0.42 $ 0.26 GAAP Net
Cash Flow
$ (557 ) $ 1,038 Adjustments: Credit
facility paid (borrowed)
8,760 (12,661 )
Non-GAAP Net Cash Flow
$ 8,203 $
(11,623 )
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