Standard Register (NYSE: SR) today announced its financial
results for the first quarter of 2013. The Company reported revenue
of $141.6 million and a net loss of $2.0 million or $0.7 per share.
The results compare to first quarter 2012 revenue of $157.6 million
and a net loss of $5.1 million or $0.18 per share.
Non-GAAP net income from operations, after adjustments for
pension loss amortization, pension settlement, restructuring
charges and related tax effects, was $3.3 million or $0.11 per
share compared to $1.9 million or $0.06 per share for the first
quarter of 2012.
“Our progress continued in the quarter with improvement in
operating profit and positive cash flow, and increasing demand for
our solutions enabled by technology,” said Joseph P. Morgan, Jr.,
president and chief executive officer. “Our investments have been
very targeted to support efficiency and our technology-enabled
growth solutions. As a result, we expect to achieve positive cash
flow for 2013. We also expect the decline in revenue to slow during
the rest of the year.”
First Quarter Results
Total revenue declined 10.2% to $141.6 million compared to
$157.6 million in the prior year quarter. The decline was primarily
the result of reduced volumes in printed clinical forms and
transactional documents. As the Company focuses on the technology
portfolio of solutions and services that are providing growth, it
will report on solutions sets (Marketing Communications, Customer
Communications, Product Marking and Labeling, Patient
Identification and Safety, Patient Information Solutions and
Document Management), and no longer define its business with the
terms “Core” and “Legacy.”
Healthcare revenue declined 13.2%, to $49.5 million compared to
$57.0 million in the first quarter of 2012. Operating profit
declined 19.2% to $2.1 million from $2.6 million in the prior year
quarter. Large one-time projects in the first quarter of 2012 and
continued declines in clinical documents had an impact on the
results comparison. Healthcare technology solutions sales to both
new and existing customers increased in the quarter, and the
technology pipeline remains strong.
Business Solutions revenue declined 8.4%, to $92.1 million from
$100.6 million in the first quarter last year. More than half of
this decline is due to reductions in revenue with a large financial
services customer that reorganized its distribution channels and
restructured operations. Revenue from this customer declined $5.4
million in the quarter and the revenue loss is expected to be $18
to $20 million for the year. Lower volumes in printed documents
also contributed to the revenue decline. Operating profit
quadrupled, to $2.9 million compared to $0.7 million last year. The
increase was primarily attributable to expense management and
growth in labeling orders driven by improvements in the overall
economy affecting many industries that Standard Register
serves.
Gross margin as a percentage of revenue decreased to 29.6% from
30.6% for the same quarter last year. Pricing pressure and declines
in volume contributed to the change. Selling, general and
administrative (SG&A) expenses declined 15.2% in the quarter
reflecting the realization of the restructuring cost reduction
efforts, which are on track with the $60 million of savings
expected for the year. Capital expenditures were $4.4 million
compared to $0.7 million in last year’s quarter. The company
continues to invest in software technology for its customer
communications solutions, and systems to improve efficiency and
inform management decisions.
The Company contributed $5.8 million to its qualified pension
plan compared to $7.0 million in the first quarter of 2012. Total
pension contribution obligation for 2013 is expected to be $24.8
million compared to $20.7 million obligation for 2012.
On March 31, 2013, the Company entered into the fourth and final
year of its credit facility, which moves $43 million of debt to be
classified as current on the balance sheet. The Company is
renegotiating with banking partners and confident of renewing its
credit facility on comparable terms later in 2013 or early
2014.
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, April 26, 2013, to
review the first 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
our solutions, the pace at which digital technologies and
electronic health records (EHR) adoption erode the demand for
certain products and services, 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 of 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 and
certain adjustments to the deferred tax valuation allowance. 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)
13 Weeks Ended 13
Weeks Ended Mar 31, 2013 Apr 1, 2012
TOTAL REVENUE $ 141,620 $ 157,649
COST OF SALES 99,700 109,448
GROSS MARGIN 41,920 48,201
OPERATING EXPENSES Selling, general and administrative
42,592 50,215 Pension settlement
— 983 Restructuring
and other exit costs
626 1,122
TOTAL OPERATING EXPENSES 43,218 52,320
LOSS FROM OPERATIONS (1,298 )
(4,119 )
OTHER INCOME (EXPENSE) Interest expense
(624 ) (704 ) Other income (expense)
(1
) 16
Total other expense (625
) (688 )
LOSS BEFORE INCOME TAXES
(1,923 ) (4,807 ) Income tax expense
127 305
NET LOSS $
(2,050 ) $ (5,112 ) Average Number of
Shares Outstanding - Basic
29,358 29,117 Average Number of
Shares Outstanding - Diluted
29,358 29,117
BASIC
AND DILUTED LOSS PER SHARE $ (0.07 ) $
(0.18 ) Dividends per share declared for the period
$
— $ 0.05 MEMO: Depreciation and amortization
$
5,066 $ 5,822 Pension loss amortization
$
6,898 $ 5,785
SEGMENT OPERATING RESULTS
(In thousands) (Unaudited)
13 Weeks Ended
13 Weeks Ended Mar 31, 2013 Apr 1, 2012
REVENUE Healthcare
$ 49,495 $ 57,050 Business
Solutions
92,125 100,599 Total Revenue
$ 141,620 $ 157,649
NET (LOSS) INCOME BEFORE TAXES Healthcare
$
2,136 $ 2,568 Business Solutions
2,934 672
Unallocated
(6,993 ) (8,047 ) Total Net Loss
Before Taxes
$ (1,923 ) $ (4,807 )
CONSOLIDATED BALANCE SHEETS (In thousands)
(Unaudited)
Mar 31, 2013 Dec 30, 2012
ASSETS Cash and cash equivalents
$
1,063 $ 1,012 Accounts receivable
99,768 104,513
Inventories
44,718 44,281 Prepaid expense
10,244
9,248 Total current assets
155,793
159,054 Plant and equipment
58,673 58,923 Goodwill
and intangible assets
13,116 13,389 Deferred taxes
22,765 22,765 Other assets
5,424 5,773
Total assets
$ 255,771 $ 259,904
LIABILITIES AND SHAREHOLDERS' DEFICIT Current
liabilities
$ 117,090 $ 74,832 Deferred compensation
3,345 3,498 Long-term debt
4,980 49,159 Pension
benefit liability
245,349 252,665 Other long-term
liabilities
6,305 6,610 Shareholders' deficit
(121,298 ) (126,860 ) Total
liabilities and shareholders' deficit
$ 255,771
$ 259,904
CONSOLIDATED STATEMENT OF CASH
FLOWS
(In thousands) (Unaudited)
Mar 31, 2013 Apr
1, 2012 Net loss plus non-cash items
$
10,169 $ 9,059 Working capital
3,471 11,177
Restructuring payments
(565 ) (1,653 ) Contributions
to qualified pension plan
(5,839 ) (7,000 ) Other
(2,363 ) (5,131 ) Net cash provided by
operating activities
4,873 6,452 Capital expenditures
(4,389 ) (713 ) Proceeds from sale of equipment
77 8 Net cash used in investing
activities
(4,312 ) (705 ) Net change in
borrowings under credit facility
(629 ) (3,389 )
Additions to short-term notes payable
500 — Principal
payments on long-term debt
(592 ) (724 ) Dividends
paid
— (1,470 ) Other
— (5 ) Net cash
used in financing activities
(721 ) (5,588 )
Effect of exchange rate
211 (194 )
Net change in cash
$ 51 $ (35 )
RECONCILIATION OF GAAP TO NON-GAAP MEASURES
(In thousands, except per share amounts) (Unaudited)
13
Weeks Ended 13 Weeks Ended Mar 31, 2013
Apr 1, 2012 GAAP Net Loss
$ (2,050
) (5,112 ) Adjustments: Pension loss amortization
6,898 5,785 Pension settlement
— 983 Restructuring
charges
626 1,122 Tax effect of adjustments (at statutory
tax rates)
(2,965 ) (3,113 ) Deferred tax valuation
allowance
834 2,232 Non-GAAP Net Income
$ 3,343 $ 1,897 GAAP Loss
Per Share
$ (0.07 ) $ (0.18 ) Adjustments, net
of tax: Pension loss amortization
0.14 0.12 Pension
settlement
— 0.02 Restructuring charges
0.01 0.02
Deferred tax valuation allowance
0.03 0.08
Non-GAAP Income Per Share
$ 0.11
$ 0.06 GAAP Net Cash Flow
$ 51 $ (35 )
Adjustments: Credit facility paid
629 3,389
Non-GAAP Net Cash Flow
$ 680 $
3,354
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