Standard Register (NYSE: SR) today announced its financial
results for the second quarter of 2014.
The Company reported revenue of $225.3 million and a net loss of
$5.8 million or $0.67 per diluted share. For the 2013 second
quarter, revenue was $136.8 million and net income was $2.0 million
or $0.34 per diluted share.
Adjusted EBITDA, which excludes certain items as detailed in the
attached reconciliation, was $15.5 million compared to $8.9 million
for the second quarter of 2013.
Results for the second quarter of 2013 do not include results
from WorkflowOne, which Standard Register acquired on August 1,
2013.
“The benefits from integration are evident, with increased
revenue in all solutions and improvement in margin and adjusted
EBITDA over the first quarter,” said Joseph P. Morgan, Jr.,
president and chief executive officer. “The business is stabilizing
as we continue to invest in our growth solutions, sell our
portfolio of solutions across our growing base of more than 12,000
customers and move new business through implementation.”
Second Quarter Results
Total revenue increased 64.7 percent to $225.3 million from
$136.8 million in the 2013 second quarter. On a pro forma basis,
including WorkflowOne, revenue for the second quarter of 2013 was
$247.8 million.
Gross margin as a percentage of revenue improved to 28.2 percent
from 27.3 percent in the first quarter of 2014 and compared to 28.5
percent in the second quarter of 2013. Selling, General and
Administrative (SG&A) expenses were $57.1 million for the
second quarter of 2014 compared to $35.4 million for the second
quarter last year. The increase is primarily attributable to the
inclusion of WorkflowOne.
Standard Register operates two business units: Business
Solutions and Healthcare.
Business Solutions revenue was $160.9 million for the second
quarter of 2014, an increase of 81.5 percent over revenue of $88.6
million in the 2013 second quarter. Business added from the
acquisition, and growth in Mexico-based label manufacturing
operations and promotional products sales contributed to the
increase. Operating profit was $2.6 million compared to $0.9
million last year.
Healthcare revenue was $64.4 million, an increase of 33.7
percent over revenue of $48.2 million in the second quarter of
2013. Technology-enabled solutions in patient information
management continued to grow in the second quarter, and business
added from the acquisition contributed to the increase. Health
insurance reform, electronic health record (EHR) adoption and state
electronic records adoption are decreasing orders for printed
forms. Operating profit was $2.9 million for the quarter compared
to $1.8 million last year.
Second Quarter Highlights
- Integration of the WorkflowOne
acquisition is progressing on schedule with consolidation of
production facilities and technology platforms, sales forces and
customer service teams. The Company has exited 19 facilities since
the acquisition of WorkflowOne (including third party logistics
sites), and continues to anticipate at least $40 million in annual
savings when the integration is complete at the end of 2015.
- High-speed ink jet web presses are now
operational in Sacramento, California and Columbus, Ohio,
contributing to customer communications solutions sales and
strengthened pipelines.
- A Customer Service Center of Excellence
was established in Denver, Colorado, serving the western United
States and Hawaii with the studio concept of specialists to support
specific customers and solutions.
- Standard Register was awarded a patent
for chemically reactive ink that helps deter certain types of
document fraud. The Company has earned approximately 900 patents
since its founding in 1912, and has 102 active U.S. patents in the
areas of labels and form/label combinations, in-mold labeling,
software and/or equipment, security print and specialty inks and
business forms.
- The Company invested in its SMARTworks®
platform to expand the capabilities for configurable promotional
products and support for on-demand publishing and marketing
solutions, and added more automation to the Center for Excellence
distribution center in Jeffersonville, Indiana.
First Half of Year Results
Total revenue increased 63.0 percent to $453.8 million and the
Company incurred a net loss of $12.9 million or $1.50 per diluted
share, compared to revenue of $278.4 million and net income of $6.7
million or $1.13 per diluted share for the first half of 2013. On a
pro forma basis, including WorkflowOne, revenue for the first half
of 2013 was $501.5 million.
Adjusted EBITDA was $28.6 million for the first half of 2014
compared to $21.1 million for the first half of 2013.
Business Solutions revenue increased 79.6 percent to $324.6
million for the first half of 2014 compared to $180.7 million for
the prior year first half. Operating profit increased 4.6 percent,
to $4.0 million from $3.8 million last year.
Healthcare revenue increased 32.3 percent to $129.2 million
compared to $97.7 million for the first half of 2013. Operating
profit increased 23.4 percent to $4.8 million from $3.9 million
last year.
Gross margin as a percentage of revenue was 27.7 percent for the
first half of 2014 compared to 29.1 percent last year. SG&A
expenses were $115.8 million for the first half of 2014 compared to
$70.1 million last year. The increase is primarily attributable to
the inclusion of WorkflowOne.
Capital expenditures, including capital leases, for the first
half of 2014 were $14.9 million compared to $6.4 million last year.
The Company continues to invest in the areas with growth potential,
including digital printing, label operations in Mexico, marking and
decorative technology, software development and its SMARTworks®
workflow platform.
Standard Register contributed $14.1 million to its qualified
pension plan in the first half of 2014 compared to $10.5 million in
the first half of 2013. Total pension contributions for 2014 are
expected to be $42.2 million in 2014 and $34.4 million in 2015. The
Company is monitoring the progress of the Highway Bill, which may
reduce pension funding obligation for 2014 and 2015.
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, July 25, 2014, to
review the second quarter results. The call can be accessed via an
audio webcast at http://www.standardregister.com.
About Standard Register
Standard Register (NYSE:SR), is trusted by the world’s leading
companies to advance their reputations and add value to their
operations by aligning communications with corporate brand
standards. Providing market-specific insights and a compelling
portfolio of workflow, content and analytics solutions to address
the changing business landscape in healthcare, financial services,
manufacturing, transportation and retail 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 ability to successfully integrate
the acquired assets or achieve the expected synergies of the
WorkflowOne acquisition, future pension funding requirements and
recognition of actuarial gains and losses, 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 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 several measures of operating performance,
including Adjusted EBITDA 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 uses Adjusted EBITDA, defined as earnings before
interest, taxes, depreciation and amortization and excludes pension
benefit cost, restructuring and impairment charges, acquisition and
integration expense and certain acquisition fair value and other
miscellaneous adjustments, to evaluate the Company’s results. 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 Company’s debt covenants are also based on the
Adjusted EBITDA calculation.
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 $125 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 equivalents).
A reconciliation of non-GAAP measures to their most comparable
measure calculated in accordance with GAAP is included in the
tables below.
THE STANDARD
REGISTER COMPANY CONSOLIDATED STATEMENTS OF INCOME (In
thousands, except per share amounts) (Unaudited)
Second
Quarter Y-T-D 13 Weeks Ended 13 Weeks
Ended 26 Weeks Ended 26 Weeks Ended Jun 29,
2014 Jun 30, 2013 Jun 29, 2014
Jun 30, 2013 $ 225,299 $ 136,817
TOTAL REVENUE $ 453,788 $ 278,437
161,876 97,762
COST OF SALES
327,899 197,462
63,423
39,055
GROSS MARGIN 125,889
80,975
OPERATING EXPENSES
57,104 35,366 Selling, general and administrative
115,783 70,102
3,515 679 Acquisition and integration
costs
6,212 1,786
244 — Asset impairments
680
—
2,960 193 Restructuring and other
exit costs
5,766 819
63,823 36,238
TOTAL OPERATING
EXPENSES 128,441 72,707
(400 ) 2,817
(LOSS) INCOME FROM
OPERATIONS (2,552 ) 8,268
OTHER INCOME (EXPENSE) (5,127 ) (530 )
Interest expense
(10,115 ) (1,154 )
3
59 Other income
166 58
(5,124 ) (471 )
Total other expense
(9,949 ) (1,096 )
(5,524 ) 2,346
(LOSS) INCOME BEFORE INCOME TAXES (12,501 )
7,172
273 307 Income tax expense
424 434
$ (5,797
) $ 2,039
NET (LOSS) INCOME $
(12,925 ) $ 6,738
8,615
5,925 Average Number of Shares Outstanding - Basic
8,603
5,898
8,615 6,038 Average Number of Shares Outstanding -
Diluted
8,603 5,972
$ (0.67 ) $
0.34
BASIC (LOSS) INCOME PER SHARE $ (1.50
) $ 1.14
$ (0.67 ) $ 0.34
DILUTED
(LOSS) INCOME PER SHARE $ (1.50 ) $ 1.13
MEMO:
$ 9,231 $ 4,938 Depreciation and
amortization
$ 18,427 $ 10,004
SEGMENT OPERATING RESULTS (In
thousands) (Unaudited)
13 Weeks Ended 13 Weeks Ended
26 Weeks Ended 26 Weeks Ended Jun 29, 2014
Jun 30, 2013 Jun 29, 2014 Jun
30, 2013 REVENUE $ 64,456 $ 48,176
Healthcare
$
129,233
$
97,671
160,843 88,641 Business
Solutions
324,555 180,766
$ 225,299 $ 136,817 Total
Revenue
$
453,788
$
278,437
NET (LOSS) INCOME BEFORE TAXES
$ 2,949 $ 1,769 Healthcare
$
4,819
$
3,905
2,583 894 Business Solutions
4,005 3,828
(11,056 ) (317 ) Unallocated
(21,325
)
(561 )
$ (5,524 ) $ 2,346 Total
Net (Loss) Income Before Taxes
$
(12,501
)
$
7,172
CONSOLIDATED BALANCE SHEETS (In
thousands)
Jun 29, 2014 Dec 29, 2013
ASSETS (Unaudited) Cash and cash equivalents
$
3,027 $ 2,342 Accounts receivable
150,094 157,567
Inventories
60,597 61,939 Other current assets
17,425
14,508 Total current assets
231,143
236,356 Plant and equipment
93,743 93,003 Goodwill
and intangible assets
128,381 133,444 Deferred taxes
9,311 9,306 Other assets
8,400 8,768
Total assets
$ 470,978 $ 480,877
LIABILITIES AND SHAREHOLDERS' DEFICIT Current
liabilities
$ 128,253 $ 125,357 Long-term debt
279,577 263,880 Pension benefit liability
176,481
192,779 Other long-term liabilities
9,718 10,158
Shareholders' deficit
(123,051 ) (111,297 )
Total liabilities and shareholders'
deficit
$ 470,978 $ 480,877
CONSOLIDATED STATEMENTS OF CASH
FLOWS
(In thousands) (Unaudited)
26 Weeks Ended 26 Weeks
Ended Jun 29, 2014 Jun 30, 2013 Net
loss plus non-cash items
$ 14,940 $ 17,761 Working
capital
6,113 5,516 Restructuring payments
(6,817
) (1,329 ) Contributions to qualified pension plan
(14,052 ) (10,521 ) Other
(4,416 )
(2,608 ) Net cash (used in) provided by operating activities
(4,232 ) 8,819 Capital
expenditures
(7,472 ) (6,301 ) Proceeds from sale of
equipment
411 88 Net cash used in
investing activities
(7,061 ) (6,213 )
Net change in borrowings under credit facility
14,641 (1,729
) Principal payments on long-term debt
(2,494 )
(1,193 ) Other
(146 ) (200 ) Net cash provided
by (used in) financing activities
12,001
(3,122 ) Effect of exchange rate
(23 )
(15 ) Net change in cash
$ 685 $
(531 )
RECONCILIATION OF GAAP TO NON-GAAP MEASURES (In thousands)
(Unaudited)
13 Weeks Ended 13 Weeks Ended 26 Weeks
Ended 26 Weeks Ended Jun 29, 2014 Jun
30, 2013 Jun 29, 2014 Jun 30, 2013
$ (5,797 ) $ 2,039 GAAP Net (Loss) Income
$ (12,925 ) $ 6,738 Adjustments:
273
307 Income taxes
424 434
5,127 530 Interest
10,115 1,154
9,231 4,938
Depreciation and amortization
18,427 10,004
$ 8,834 $ 7,814 EBITDA
$ 16,041 $ 18,330
Adjustments:
3,204 193 Restructuring and impairment
6,446 819
3,515 679 Acquisition and integration costs
6,212 1,786
(548 ) (507 ) Pension expense
(1,096 ) (1,014 )
663 507 Non-cash stock
compensation
1,344 976
(212 ) 194
Other
(323 ) 194
$
15,456 $ 8,880 Adjusted EBITDA
$
28,624 $ 21,091 GAAP Net Cash
Flow
$ 685 $ (531 ) Adjustments: Credit facility
(borrowed) paid
(14,641 ) 1,729
Non-GAAP Net Cash Flow
$ (13,956 ) $
1,198
For Standard RegisterInvestor and media contact:Carol Merry,
614-383-1624carol.merry@fahlgren.com
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