-----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, Ol/EqT7Sx+nm83Wsr26q6WBzfG9KBvc8xX/rBl6YTAhTAtmG8ghyiQJwDxlWMs3a Q5PrKpZ4nl5ZCg+O4LpJTw== 0000093456-98-000012.txt : 19981106 0000093456-98-000012.hdr.sgml : 19981106 ACCESSION NUMBER: 0000093456-98-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980927 FILED AS OF DATE: 19981105 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: 98738452 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 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 the Quarterly Period Ended September 27, 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 (Exact name of registrant as specified in its charter) OHIO CORPORATION 31-0455440 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 600 ALBANY STREET, DAYTON, OHIO, 45401 (Address of principal executive offices) (Zip Code) (937) 443-1000 (Registrant's telephone number, including area code) 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 Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date. CLASS OUTSTANDING AS OF October 22,1998 Common Stock - $1.00 Par Value 23,733,742 Class A Stock - $1.00 Par Value 4,725,000 INDEX Page Part I Financial Information Item 1. Financial Statements Statement of Income for the 13 Weeks Ended September 27, 1998 and September 28, 1997 and for the 39 Weeks Ended September 27, 1998 and September 28, 1997 3 Balance Sheet as of September 27, 1998 and December 28, 1997 4 Statement of Cash Flows for the 39 Weeks Ended September 27, 1998 and September 28, 1997 5 d) Note to Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7-9 Item 3. Quantitative and Qualitative Disclosure About Market Risk 9 Part II Other Information Item 1. Legal Proceedings 10 Item 2. Changes in Securities and Use of Proceeds 10 Item 3. Defaults upon Senior Securities 10 Item 4. Submission of Matters to a Vote of Security Holders 10 Item 5. Other Information 10 Item 6. Exhibits and Reports on Form 8-K 10 Signature 11 Exhibit Index 12 PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS 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 are 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.
STATEMENT OF INCOME (In Thousands except Data Per Share) Third Quarter Nine Months 13 Weeks Ended 39 Weeks Ended Sept. 27, Sept. 28, Sept. 27, Sept.28 1998 1997 1998 1997 TOTAL REVENUE $340,648 $237,243 $1,018,359 $703,824 COSTS AND EXPENSES Cost of Products Sold 210,409 139,789 643,059 416,244 Engineering and Research 2,305 2,227 7,528 7,020 Selling and Administrative 82,609 58,059 251,668 171,010 Depreciation and Amortization 12,802 9,712 39,847 28,339 Interest 3,371 71 10,415 218 Total Costs and Expenses 311,496 209,858 952,517 622,831 INCOME BEFORE INCOME TAXES 29,152 27,385 65,842 80,993 Income Taxes 11,935 11,135 26,566 32,796 NET INCOME $17,217 $16,250 $39,276 $48,197 Average Number of Shares Outstanding (000s): Basic 28,454 28,498 28,442 28,498 Diluted 28,603 28,699 28,607 28,699 DATA PER SHARE: Earnings Per Share Basic $ 0.61 $ 0.57 $ 1.38 $ 1.69 Diluted 0.60 0.57 1.37 1.68 Dividends Paid $ 0.21 $ 0.20 $ 0.63 $ 0.60
See note to financial statements. a) BALANCE SHEET (Dollars in Thousands) Sept. 27, Dec. 28, ASSETS 1998 1997 CURRENT ASSETS Cash and Cash Equivalents $ 36,351 $ 67,556 Short Term Investments 834 16,055 Accounts Receivable, less Allowance for Losses 269,449 191,031 Deferred Accounts Receivable, less Allowance for Losses 2,476 - Inventories Finished Products 127,939 58,675 Jobs in Process 28,980 16,500 Materials and Supplies 10,361 10,371 Deferred Income Tax 6,168 6,168 Prepaid Expense 11,860 12,462 Total Current Assets 494,418 378,818 PLANT AND EQUIPMENT Buildings and Improvements 96,219 67,874 Machinery and Equipment 327,469 237,320 Office Equipment 63,357 67,324 Total 487,045 372,518 Less Accumulated Depreciation 193,240 155,634 Depreciated Cost 293,805 216,884 Construction in Process 68,896 39,070 Land 9,137 4,081 Total Plant and Equipment 371,838 260,035 OTHER ASSETS Goodwill, Patents, and Other 32,148 3,099 Prepaid Pension Expense 75,742 - Investment in F3 4,785 5,066 Total Other Assets 112,675 8,165 TOTAL ASSETS $978,931 $647,018 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts Payable 53,886 25,296 Dividends Payable 3,570 5,968 Accrued Compensation 37,832 34,817 Accrued Other Expense 9,150 4,581 Accrued Taxes, except Income 10,203 6,977 Income Taxes Payable 4,064 1,155 Customer Deposits 19,802 21,003 Deferred Service Contract Income 10,594 7,222 Accrued Restructuring 22,276 - Total Current Liabilities 171,377 107,019 LONG-TERM LIABILITIES Long-Term Debt 234,630 4,600 Deferred Compensation 2,653 - Retiree Healthcare 54,477 28,779 Deferred Income Taxes 652 18,685 Total Long-Term Liabilities 292,412 52,064 SHAREHOLDERS EQUITY Common Stock, $1.00 Par Value 24,384,570 Shares Issued in 1998 24,385 24,308,437 Shares Issued in 1997 24,308 Class A Stock, $1.00 Par Value 4,725,000 Shares Issued 4,725 4,725 Capital in Excess of Par Value 33,740 31,599 Retained Earnings 471,583 444,259 Treasury Stock 651,152 Shares at Cost (18,279) 615,073 Shares at Cost (16,956) Common Stock held in Grantor Trust 26,284 Shares at Cost (1,012) - Total Shareholders Equity 515,142 487,935 TOTAL LIABILITIES AND SHAREHOLDER EQUITY $978,931 $647,018
See Note to Financial Statements. STATEMENT OF CASH FLOWS (Dollars in Thousands) Nine Months 39 Weeks Ended Sept. 27, Sept. 28, 1998 1997 CASH FLOWS FROM OPERATING ACTIVITIES Net Income $39,276 $48,197 Add Items Not Affecting Cash: Depreciation and Amortization 39,847 28,339 Loss on Sale of Facilities 94 245 Net Change to Investments 21 1,267 Net Change to Retiree Healthcare (253) 1,075 Net Change to Deferred Compensation 2,653 - Increase/(Decrease) in Cash Arising from Changes in Assets and Liabilities: Accounts Receivable 3,743 10,056 Deferred Accounts Receivable 48,293 - Inventories (65,735) (1,022) Other Assets 3,306 417 Prepaid Pension (3,409) - Accounts Payable (5,006) 362 Accrued Expenses (2,786) (4,052) Accrued Restructuring Expenses (17,684) - Income Taxes Payable 808 (371) Customer Deposits (1,200) 17,004 Deferred Service Income 3,372 1,078 Net Adjustments 6,064 54,398 Net Cash Provided by Operating Activities 45,340 102,595 CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from Sale of Facilities 1,159 401 Additions to Plant and Equipment (55,457) (44,456) Acquisition (245,000) - Maturity of Short-Term Investments 30,481 - Purchase of Short-Term Investments (15,000) (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 (287,217) (62,083) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from Long-Term Debt 230,000 - Payments of Long-Term Debt (1,294) - Proceeds from Issuance of Common Stock 1,948 2,794 Redemption of Common Stock (2,052) (12,181) Dividends Paid (17,930) (17,108) Net Cash Provided by (Used in) Financing Activities 210,672 (26,495) NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (31,205) 14,017 Cash and Cash Equivalents, Beginning 67,556 64,550 CASH AND CASH EQUIVALENTS, ENDING $36,351 $78,567
See note to financial statements. a) NOTE TO FINANCIAL STATEMENTS c) Acquisition of Uarco Incorporated On December 31, 1997, the Company acquired all outstanding shares of Uarco Incorporated. Uarco Incorporated operated as a wholly owned subsidiary for three months until it was merged into The Standard Register Company on March 31, 1998. 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) Third Quarter Nine Months 13 Weeks Ended 39 Weeks Ended Sept. 27, Sept. 28, Sept. 27, Sept. 28, 1998 1997 1998 1997 . Total Revenue $340,648 $354,677 $1,018,359 $1,048,047 Net Income 17,217 9,220 39,276 25,541 Earnings Per Share Basic $ 0.61 $ 0.33 $ 1.38 $ 0.90 Diluted 0.60 0.32 1.37 0.89
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS FROM OPERATIONS Results of Operations Net Income for the third quarter ended September 27, 1998 was $17.2 million or $.61 per Basic Share, compared to $16.3 million and $.57 per Basic Share for the third quarter 1997. On a diluted basis, Net Income Per Share was $.60 in the current quarter versus $.57 in the prior year. Revenue for the third quarter was $340.6 million, 44% above the comparable quarter of 1997. The acquisition of Uarco, Incorporated on December 31, 1997 figured prominently in the results of operations reported thus far in 1998. Uarcos operating losses for the year 1997 were $39.2 million on revenues of $473.6 million. An overview of the plan to integrate Uarco was provided in the 10Q report for the second quarter 1998. In brief, the plan was to integrate Uarco quickly, to reduce operating costs, and to improve the price levels in acquired accounts that were not profitable. The Companys financial objective was to achieve meaningful improvements in earnings in each successive quarter of 1998. The integration of Uarco began promptly after the December 31st close and has proceeded on schedule. The previous 10Q report outlined sales office consolidations, the closing of the former Uarco headquarters, the consolidation of two forms plants and four smaller print centers into nearby Standard Register facilities, and other cost reduction actions taken in the first half of the year. During the third quarter, the Company announced the closure of an additional forms plant in Fulton, Kentucky and three additional print centers; in each case the majority of productive capacity was transferred to other manufacturing facilities. In managements judgment, the actions taken thus far in 1998 will produce annualized savings in excess of $55 million. Although there has been some progress, the Company has not yet achieved targeted price increases on unprofitable Uarco accounts. Efforts to raise prices have been hampered by weakening paper prices as the year has progressed. The lower paper costs have helped margins, but have not provided good footing for raising forms prices. In managements judgment, account profitability will improve during 1999 as a result of a stable or strengthening paper market and the introduction of new value added products and services to former Uarco accounts. A summary statement of operations is shown below. Dollar figures shown are in millions except for per share amounts. In keeping with our stated financial objective of achieving improving earnings in sequential quarters, the comments following the table will address the third quarter in comparison to the two preceding quarters of the year. Revenue 1st Qtr 2nd Qtr 3rd Qtr Shipments $375.1 $358.1 $343.0 Uarco Pre-98 Storage -31.0 -24.4 -2.4 Revenue 344.1 333.7 340.6 % Increase over prior year 49.5% 41.1% 43.6% Gross Margin 121.6 123.5 130.2 % Revenue 35.3% 37.0% 38.2% SG&A Expenses 88.6 85.7 84.9 EBITDA 33.0 37.8 45.3 % Revenue 9.6% 11.3% 13.3% Depreciation & Amortization 13.5 13.5 12.8 Interest Expense 3.4 3.6 3.4 Pretax Profit 16.1 20.7 29.1 Income Taxes 6.4 8.3 11.9 % Rate 39.6% 40.1% 40.9% Net Income 9.7 12.4 17.2 % Revenue 2.8% 3.7% 5.0% Earnings Per Share Basic $.34 $.44 $.61 Diluted $.34 $.43 $.60
Prior to January 1, 1998, Uarco and Standard Register had different revenue recognition policies with respect to custom forms placed in company warehouses for subsequent delivery to customers. Uarco took revenue credit when the forms went into the warehouse; Standard Register recorded revenue upon shipment from the warehouse to the customer. The value of custom finished storage inventory in Uarco warehouses as of the acquisition was carried as a deferred accounts receivable and could not be recognized as revenue when Standard Register delivered it to customers following the acquisition. The value of these deferred accounts receivable shipped in the first, second, and third quarters was $31.0 million, $24.4 million, and $2.4 million respectively. Most of the January 1, 1998 balance of arco deferred accounts receivable has been shipped to customers as of the end of the third quarter. The Companys business plan anticipated the loss of some Uarco revenue as a natural consequence of the acquisition, reflecting expected sales turnover and efforts to improve unprofitable accounts. The pattern of revenue in the first three quarters is primarily a function of the loss of former Uarco business. The rate of revenue erosion is expected to slow over the next few quarters. Seasonal factors should push fourth quarter revenue above the third quarter level. The gross margin continued its improving trend reflecting the effects of higher revenue, the cost reductions described earlier, and lower paper prices. The Company recorded a favorable LIFO inventory adjustment of approximately $2.0 million in the quarter. SG&A expenses continued to decline, again the result of the cost reduction program. Acquisition integration costs, including equipment relocation, training, and other expenditures not chargeable to the opening restructuring liability, were $3.6 million in the quarter, compared to $2.0 million in the first half of the year. Expenses to ensure that the Company's systems will be Year 2000 compliant were $1.2 million in the quarter, compared to $3.4 million in the first half. The Company expects to complete its Year 2000 system modifications and testing by mid year 1999, spending an additional $4.5 million. The drop in Depreciation and Amortization reflects the closure of facilities described earlier. Interest expense was slightly lower in the quarter as a result of lower rates; the balance of debt was unchanged. The tax rate was slightly higher in the third quarter, reflecting a lesser relative amount of tax exempt interest income on investments. Financial Condition The balance of Cash, Cash Equivalents, and Short-term Investments increased $1.5 million in the quarter to $37.2 million. Debt, which financed the majority of the $245 million Uarco acquisition on December 31, 1997, remained at $234.6 million. Netting the cash against the debt produces a net debt to net capital ratio of 27.7%. The Company's financial condition remains very strong. Capital expenditures were $12.0 million for the quarter. The current outlook for the year calls for capital spending in the $70 million to $75 million range, below our earlier estimate of $80 million. The Company believes that the combination of internally generated funds, existing cash reserves, and $70 million of available credit under the revolving credit agreement will be sufficient to finance its operations over the next year. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK Not Applicable PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS There have been no material legal proceedings within the reporting period that the Company has been involved with beyond those conducted in a normal course of business. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. ITEM 5. OTHER INFORMATION None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8K Exhibit Description Financial Data Schedule (filed only electronically with the SEC) Form 8K was not filed within the reporting period. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on behalf by the undersigned thereunto duly authorized. October 22, 1998 /s/ C. J. Brown By C. J. Brown, Sr. Vice President, Administration, Treasurer, Chief Financial Officer, and Chief Accounting Officer EX-27 2
5 This schedule contains summary financial information extracted from the Standard Register Company financial statements for the nine months ended September 27, 1998, and is qualified in its entirety by reference to such financial statements. 1,000 9-MOS JAN-03-1999 SEP-27-1998 36,351 834 289,991 18,066 167,280 494,418 565,078 193,240 978,931 171,377 234,630 0 0 29,110 486,032 978,931 1,016,813 1,018,359 643,059 942,102 0 3,161 10,415 65,842 26,566 39,276 0 0 0 39,276 1.38 1.37
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