-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OLL8CV0Pgy4Yb+jKhDzw0evXx7EYDi3bQ6Wjyvq2oVk/xiweQMAKWfGbtD0jyzOi ZRjcX7ue2RoEqkDHeVFS3A== 0000093456-98-000001.txt : 19980514 0000093456-98-000001.hdr.sgml : 19980514 ACCESSION NUMBER: 0000093456-98-000001 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980329 FILED AS OF DATE: 19980513 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: STANDARD REGISTER CO CENTRAL INDEX KEY: 0000093456 STANDARD INDUSTRIAL CLASSIFICATION: MANIFOLD BUSINESS FORMS [2761] IRS NUMBER: 310455440 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-11699 FILM NUMBER: 98617531 BUSINESS ADDRESS: STREET 1: 600 ALBANY ST CITY: DAYTON STATE: OH ZIP: 45401 BUSINESS PHONE: 5134341000 MAIL ADDRESS: STREET 1: 600 ALBANY STREET STREET 2: P O BOX 1167 CITY: DAYTON STATE: OH ZIP: 45401-1167 10-Q 1 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended March 29, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For The Transition Period From to Commission File Number 01-1097 THE STANDARD REGISTER COMPANY OHIO CORPORATION 31-0455440 600 ALBANY STREET, DAYTON, OHIO 45401 TELEPHONE NUMBER 937-443-1000 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No. . CLASS OUTSTANDING AS OF March 29, 1998 Common Stock - $1.00 Par Value 23,701,305 Class A Stock - $1.00 Par Value 4,725,000 - 1 of 12 - 2 THE STANDARD REGISTER COMPANY AND SUBSIDIARY INDEX Page No. PART I - FINANCIAL STATEMENTS Balance Sheet March 29, 1998, December 28, 1997 3 Statement of Income 13 Weeks Ended March 29, 1998 and March 30, 1997 4 Statement of Cash Flows 13 Weeks Ended March 29, 1998 and March 30, 1997 5 Notes to Consolidated Financial Statements 6 The financial statements of the Registrant included herein have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Although certain information normally included in financial statements prepared in accordance with generally accepted accounting principles has been condensed or omitted, the Registrant believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these financial statements be read in conjunction with the financial statements and notes thereto included in the Annual Report on Form 10-K of the Registrant for the year ended December 28, 1997. The financial statements included herein reflect all adjustments (consisting only of normal recurring accruals) which, in the opinion of management, are necessary to present a fair statement of the results for the interim periods. The results for interim periods are not necessarily indicative of trends or of results to be expected for a full year. Management's Discussion and Analysis of the Interim Financial Statements 7-9 PART II - OTHER INFORMATION AND SIGNATURE 10-12 - 2 of 12 - 3 THE STANDARD REGISTER COMPANY AND SUBSIDIARY CONSOLIDATED BALANCE SHEET (Dollars in Thousands) (Unaudited)
ASSETS March 29, December 28, 1998 1997 CURRENT ASSETS Cash and Cash Equivalents $ 45,442 $ 67,556 Short Term Investments 15,902 16,055 Accounts Receivable, less Allowance for Losses 261,010 191,031 Deferred Accounts Receivable, less Allowance for Losses 24,733 Inventories Finished Products 91,075 58,675 Jobs in Process 30,797 16,500 Materials and Supplies 14,683 10,371 Deferred Income Tax 6,168 6,168 Prepaid Expense 10,368 12,462 Total Current Assets 500,178 378,818 PLANT AND EQUIPMENT Buildings and Improvements 93,355 67,874 Machinery and Equipment 315,745 237,320 Office Equipment 57,199 67,324 Total 466,299 372,518 Less Accumulated Depreciation 168,140 155,634 Depreciated Cost 298,159 216,884 Construction in Process 49,924 39,070 Land 9,457 4,081 Total Plant and Equipment 357,540 260,035 OTHER ASSETS Goodwill, Patents, and Other 37,477 3,099 Prepaid Pension Expense 73,889 Investment in F3 4,785 5,066 Total Other Assets 116,151 8,165 TOTAL ASSETS 973,869 647,018 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts Payable 50,804 25,296 Dividends Payable - 5,968 Accrued Compensation 35,634 34,817 Accrued Other Expense 5,397 4,581 Accrued Taxes, except Income 12,803 6,977 Income Taxes Payable 6,089 1,155 Customer Deposits 26,225 21,003 Deferred Service Contract Income 9,062 7,222 Total Current Liabilities 146,014 107,019 LONG-TERM LIABILITIES Long-Term Debt 234,670 4,600 Deferred Compensation 2,525 Retiree Healthcare 55,253 28,779 Accrued Restructuring 37,030 Deferred Income Taxes 652 18,685 Total Long-Term Liabilities 330,130 52,064 SHAREHOLDERS' EQUITY Common Stock, $1.00 Par Value 24,333,378 Shares Issued in 1998 24,333 24,308,437 Shares Issued in 1997 24,308 Class A Stock, $1.00 Par Value 4,725,000 Shares Outstanding 4,725 4,725 Capital in Excess of Par Value 32,231 31,599 Retained Earnings 453,948 444,259 Treasury Stock, 632,073 Shares at Cost (17,512) 615,073 Shares at Cost (16,956) Total Shareholders' Equity 497,725 487,935 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $973,869 $647,018 See notes to consolidated financial statements.
- 3 of 12 - 4 THE STANDARD REGISTER COMPANY AND SUBSIDIARY CONSOLIDATED STATEMENT OF INCOME (In Thousands except Data Per Share) (Unaudited)
First Quarter 13 Weeks Ended March 29, March 30, 1998 1997 TOTAL REVENUE $344,057 $230,114 COSTS AND EXPENSES Cost of Products Sold 222,473 136,525 Engineering & Research 2,782 2,481 Selling and Administrative 85,813 56,634 Depreciation and Amortization 13,521 9,156 Interest 3,430 77 Total Costs and Expenses 328,019 204,603 INCOME BEFORE INCOME TAXES 16,038 25,511 Income Taxes 6,347 10,563 NET INCOME $ 9,691 $ 14,948 Average Number of Shares Outstanding (000): Basic 28,424 28,616 Diluted 28,613 28,824 DATA PER SHARE: Earning Per Share: Basic $ 0.34 $ 0.52 Diluted 0.34 0.52 Dividends Paid 0.21 0.20
See notes to consolidated financial statements. - 4 of 12 - 5 THE STANDARD REGISTER COMPANY AND SUBSIDIARY CONSOLIDATED STATEMENT OF CASH FLOWS (Dollars in Thousands) (Unaudited)
First Quarter 13 Wks Ended March 29, March 30, 1998 1997 CASH FLOWS FROM OPERATING ACTIVITIES Net Income $ 9,691 $ 14,948 Add Items not Affecting Cash: Depreciation and Amortization 13,521 9,156 Loss on Sale of Facilities 63 56 Net Change to Investments 138 750 Change to Retiree Healthcare 523 455 Net change to Deferred Compensation 2,525 Increase (Decrease) in Cash Arising from Changes in Asset and Liabilities: Accounts Receivable 12,181 14,275 Deferred Accounts Receivable 26,036 Inventories (35,010) (430) Other Assets (1,113) 983 Accounts Payable and Accrued Expenses (20,721) (11,907) Income Taxes Payable 2,834 8,177 Customer Deposits 5,222 2,974 Deferred Service Income 1,840 2,120 Net Adjustments 8,039 26,609 Net Cash Provided by Operating Activities 17,730 41,556 CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from Sale of Facilities 50 120 Additions to Plant and Equipment (14,665) (13,326) Acquisition (245,000) - Maturity of Short Term Investments 15,295 - Purchase of Short Term Investments (15,000) - Investment in F3 Corporation (1,000) (3,028) Purchase of Key Man Life Insurance Policies (2,400) - Net Cash (Used in) Investing Activities (262,720) (16,233) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from Long Term Debt 230,000 - Payments of Long Term Debt (1,254) - Proceeds from Issuance of Common Stock 657 2,204 Redemption of Common Stock (557) (5,275) Dividends Paid (5,970) (5,750) Net Cash Provided by (Used in) Financing Activities 222,876 (8,821) NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (22,114) 16,502 Cash and Cash Equivalents, Beginning 67,556 64,550 CASH AND CASH EQUIVALENTS, ENDING $ 45,442 $ 81,052
See notes to consolidated financial statements. - 5 of 12 - 6 THE STANDARD REGISTER COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE A - BASIS OF PRESENTATION The accompanying consolidated financial statements include the accounts of The Standard Register Company and its wholly-owned subsidiary, Uarco Incorporated, which was acquired on December 31, 1997. Significant intercompany balances and transactions have been eliminated in the consolidation process. Uarco Incorporated was merged into The Standard Register Company on March 31, 1998. NOTE B - ACQUISITION OF UARCO INCORPORATED On December 31, 1997, the Company acquired all outstanding shares of Uarco Incorporated. The purchase price was $245 million in cash, of which $230 million was financed under a new five-year bank revolving credit agreement. The acquisition has been accounted for under the purchase method. The purchase price will be allocated to the assets acquired and liabilities assumed based upon their estimated fair market values. This allocation has been completed on a preliminary basis, and as a result, adjustments to the carrying values of assets and liabilities may occur during 1998 as additional information becomes available. The unaudited pro forma information for the periods set forth below give effect to the acquisition and related financing as if they had occurred on December 29, 1997 and December 30, 1996. The pro forma information is presented for informational purposes only and is not necessarily indicative of the results of operations that actually would have been achieved had these transactions been consummated at the beginning of the periods presented.
(in thousands of dollars) First Quarter 13 Weeks Ended March 29, March 30, 1998 1997 (Unaudited) Total Revenue $344,057 $339,948 Net Income (Loss) 9,691 (872) Earnings Per Share Basic $ 0.34 $ (0.03) Diluted 0.34 (0.03)
- 6 of 12 - 7 THE STANDARD REGISTER COMPANY AND SUBSIDIARY MANAGEMENT DISCUSSION AND ANALYSIS OF THE INTERIM FINANCIAL STATEMENTS Revenue for the first quarter ended March 29, 1998 was $344.1 million, 49.5% above the $230.1 million reported for the first quarter 1997. Net Income was $9.7 million or $0.34 per share versus $14.9 million and $0.52 per share for the comparable period of 1997. The acquisition of Uarco, Incorporated on December 31, 1997 figured prominently in the results of operations for the quarter. The table below isolates the effects that the acquisition and the Year 2000 initiative had on Standard Register's first quarter operating results. Dollars are in millions except for per share results.
REVENUE NET PROFIT E.P.S. Standard Register Operations $ 249.2 $16.2 $ 0.57 Former Uarco Operations 123.2 -1.0 -0.04 Revenue Recognition Policy -28.3 -2.1 -0.07 Interest Expense -2.0 -0.07 Integration Expenses -0.5 -0.02 Year 2000 Expenses -0.9 -0.03 Reported Results $ 344.1 $ 9.7 $ 0.34
Revenue growth for both Standard Register and the former Uarco operations, shown above, was relatively strong in the first quarter, up 8.3% and 12.0% over their respective first-quarter 1997 reported levels. The Company has moved rapidly to consolidate Standard Register and Uarco operations into two new divisions. The Document Management and Systems Division reported revenue of $277.7 million representing an 8.2% increase over the comparable (Standard Register plus Uarco) results for the prior year. Within this division, traditional business forms and related distribution services rose 6.9%, pressure-sensitive labels were up 6.7%, and document systems increased 20.2%. The Impressions Division recorded revenue of $94.4 million, a 10% increase over the comparable prior year operating results. Among Impressions' operating groups, Stanfast continued its pattern of strong growth with a 20.5% increase and Communicolor's promotional direct-mail business was up 5.3%; the Imaging Services Group revenue was off 4.1%, reflecting the absence of large repeat orders now expected later in the year. The Company incurred a $28.3 million adjustment to revenue to conform Uarco to Standard Register's revenue recognition policy for custom business forms stored in warehouses. Uarco recognized revenue when the finished product went into the warehouse; Standard's more conservative policy is to recognize revenue when it is delivered from the warehouse to the customer and is invoiced. These adjustments will continue, but at a declining value, over the balance of this year as Uarco product that was stored in warehouses on the date of the acquisition is replaced by new additions to storage. Standard Register operations, excluding the effect of the acquisition and the Year 2000 initiative, produced a contribution to Net Profit of $16.2 million, compared to the Company's $14.9 million result reported for the first quarter 1997; earnings per share on this basis would have been $0.57 versus $0.52 a year ago. Standard's (excluding Uarco) gross margin narrowed by 1.2 percentage points as a result of higher paper costs mitigated somewhat by modest forms pricing gains. This unfavorable effect was offset, however, by improved expense ratios and a lower effective tax rate that produced an 8.7% increase in Net Profit on the 8.3% increase on Revenue. - 7 of 12 - 8 The former Uarco operations produced a $1.0 million Net Loss for the quarter, which was substantially improved in comparison to Uarco's reported result in the prior year and was in line with management's expectations. Cost savings from consolidations with Standard Register operations, actions taken to increase account profitability, efforts to bring outsourced production in-house, the re- negotiation of Uarco operating leases, and other purchasing economies of scale are expected to result in a positive and improving contribution to earnings as the year progresses. The change in revenue recognition policy, discussed earlier, produced a reduction in Net Profit of $2.0 million or $0.07 per share. Interest expense, almost entirely related to the purchase of Uarco, also reduced Net Profit by $2.0 million. Expenses related to the acquisition not chargeable to the restructuring accrual, primarily travel and relocation of equipment and personnel, were $0.5 million or $0.02 per share. Expenditures to ensure that the Company's systems and products are Year 2000 compliant totaled $1.5 million for the quarter on a pretax basis ($0.9 million or $0.03 per share after tax). This was in line with the estimated $6.0 million total year expenditure planned for 1998; an additional $3.0 million in spending is expected in 1999 prior to the project's completion. The balance sheet as of March 29, 1998 differs substantially from the December 29, 1997 balance sheet as a result of the purchase of Uarco. The table below identifies, on a summary level, the effect of the December 31, 1997 acquisition and provides a comparison to the subsequent first quarter ending balance sheet.
YEAR-END 1997 ADJUSTED FOR ACQUISITION 12/28/97 12/31/97 ACQUISITION ADJUSTED 3/29/98 SRC UARCO FINANCING SRC SRC Cash & Short-term Investments $ 83.6 $ (9.4) $(15.0) $ 59.2 $ 61.3 Accounts Receivable 191.0 82.2 273.2 261.0 Deferred Accounts Receivable -- 50.8 50.8 24.7 Inventory 85.6 16.0 101.6 136.6 Prepaid Expense 12.5 -- 12.5 10.4 Other Current Assets 6.1 2.9 9.0 6.1 Total Current Assets 378.8 142.5 (15.0) 506.3 500.1 Property, Plant, & Equipment at NBV 260.0 96.1 356.1 357.5 Goodwill at NBV 1.9 24.7 26.6 26.2 Prepaid Pension Expense -- 67.0 67.0 73.9 Other Long-term Assets 6.3 7.3 13.6 16.2 Total Assets $647.0 $337.6 $(15.0) $969.6 $973.9 Current Liabilities $107.0 $ 43.6 $150.6 $146.0 Retiree Health Care Liability 28.8 26.0 54.8 55.3 Deferred Tax Liability 18.7 (18.0) 0.7 0.7 Deferred Compensation -- -- -- 2.5 Restructuring Liability -- 39.7 39.7 37.0 Long-term Debt 4.6 1.3 230.0 235.9 234.7 Shareholders' Equity 487.9 245.0 (245.0) 487.9 497.7 Total Liabilities & Equity $647.0 $337.6 $ (15.0) $969.6 $973.9
A few items are noteworthy: The $245-million purchase price was financed with $15 million in cash and $230 million in borrowing under a $300-million five-year revolving credit agreement with several banks. For $200 million of the borrowing, the interest rate is fixed for five years at an all-in rate of 6.09% as a result of an interest rate swap. The balance of the debt floats at LIBOR plus a spread. - 8 of 12 - 9 Uarco's revenue recognition policy for custom forms storage produced revenue and a deferred accounts receivable when product went into the warehouse. When product was delivered to the customer, the receivable transferred to current status. The drop in this balance during the quarter and the increase in inventory reflects the shift to Standard Register's policy. Uarco's pension plan was over-funded by $67.0 million. This plan was merged with Standard Register's plan, also over-funded, on March 31, 1998. The Company established a $39.7-million restructuring liability to cover anticipated costs associated with the acquisition. One-half of this liability reflects severance and other cash costs; the balance reflects expected asset value reductions from discontinued operations. The Company announced several restructuring actions during the first quarter, including the following: The closure of 130 sales offices throughout the U.S. as sales regions of the two companies are merged. The closure and sale of the former Uarco headquarters in Barrington, Illinois. The closure of the Bedford, Illinois, equipment operation and the discontinuation of Uarco's equipment line, which was duplicative to Standard's. The closure of forms manufacturing plants in Roseburg, Oregon, and Deep River, Connecticut. Most production equipment is being relocated to other Standard Register forms plants. The conversion of the Radcliff, Kentucky, forms plant to pressure- sensitive label production. The closure of four former Uarco Impression Print Centers; here again, most equipment will be relocated to nearby Stanfast Print Centers. Based on the valuation of assets and liabilities acquired under purchase accounting, including the restructuring accrual, goodwill was established at $24.7 million. The goodwill will be amortized over 15 years. The Company produced net positive cash flow of $3.3 million in the quarter, as indicated in the table above as an increase in Cash and Short-term Investments of $2.1 million and a decrease in Long-term debt of $1.2 million. Capital expenditures during the first quarter were $14.7 million. The Company re- negotiated the buyout of several of Uarco's operating leases, most of which will be purchased during the second quarter of this year. Total capital spending for 1998, including the lease buyouts, will be approximately $80 million. The Company's financial condition remains very strong. Net Debt (Debt less Cash, Cash Equivalents, and Short-term Investments) to total capital (Net Debt plus Equity) was 25.8% at quarter-end and the current ratio was 3.4 times. The Company believes that the combination of existing cash reserves, internally generated funds, and credit available under the revolving credit agreement will be sufficient to complete the integration of Uarco and finance its normal operations over the next year. 9 of 12 10 PART II - OTHER INFORMATION ITEMS 1 THRU 3 None ITEM 4 Submission of Matters to a Vote of Security Holders The Company's Annual Meeting of Shareholders was held April 15, 1998. Following is the result of voting by the Shareholders regarding fixing and determining the number of Directors to be ten. IN FAVOR OPPOSED ABSTAINED 44,803,879 22,534 50,382 As a result of voting of the Shareholders, the following were elected to the Company's Board of Directors to hold office for the ensuing year. NOMINEE IN FAVOR WITHHELD Roy W. Begley, Jr. 44,825,561 51,547 F. David Clarke, III 44,835,700 41,408 Paul H. Granzow 44,828,830 48,277 Graeme G. Keeping 44,826,088 51,020 Peter S. Redding 44,824,372 52,735 Dennis L. Rediker 44,826,917 50,190 Ann Scavullo 44,834,259 42,848 John J. Schiff, Jr. 44,837,134 39,973 Charles F. Sherman 44,826,465 50,642 John Q. Sherman, II 44,826,406 50,702 An amendment to the 1995 Stock Option Plan to increase the number of shares of Common Stock available for option grants from 2,000,000 to 3,000,000 was approved as a result of the following vote: IN FAVOR OPPOSED ABSTAINED 40,241,574 4,563,795 71,426 Following is the result of voting by the Shareholders regarding selection of Battelle & Battelle LLP as the Company's Auditors for the year 1998. IN FAVOR OPPOSED ABSTAINED 44,833,995 13,527 29,273 ITEM 5 None ITEM 6 (a) Exhibits Exhibit No. Description 27 Financial Data Schedule (b) Forms 8-K and amended 8-K/A were filed on January 15, 1998 and March 13, 1998, respectively. These filings presented financial statements, pro forma financial information, and exhibits related to the December 31, 1997 acquisition of Uarco Incorporated. - 10 of 12 - 11 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934,the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. May 13, 1998 THE STANDARD REGISTER COMPANY AND SUBSIDIARY /s/ C. J. Brown By C. J. Brown, Sr. Vice President, Administration, Treasurer & Chief Financial Officer - 11 of 12 - 12 EXHIBIT INDEX Number Description 27 Financial Data Schedule - 12 of 12 - EX-27 2 EXHIBIT 27
5 This schedule contains summary financial information extracted from the Standard Register Company financial statements for the three months ended March 29 1998, and is qualified in its entirety by reference to such financial statements. 1,000 3-MOS JAN-03-1999 MAR-29-1998 $ 45,442 15,902 306,883 21,140 136,555 500,178 525,680 168,140 973,869 146,014 234,670 29,058 0 0 468,667 973,869 343,562 344,057 222,473 328,019 0 753 3,430 16,038 6,347 9,691 0 0 0 9,691 0.34 0.34 -----END PRIVACY-ENHANCED MESSAGE-----