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Proc-Type: 2001,MIC-CLEAR
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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 April 2, 2000 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 1-1097 THE STANDARD REGISTER COMPANY (Exact name of Registrant as specified in its charter) 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 the each of the issuer's classes of common stock, as
of the latest practicable date. THE STANDARD REGISTER COMPANY FORM 10-Q For the Quarter Ended April 2, 2000 INDEX THE STANDARD REGISTER COMPANY FORM 10-Q For the Quarter Ended April 2, 2000 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 January 2, 2000. 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. ========= =========
OHIO
31-0455440 (State or other jurisdiction of
(I.R.S. Employer incorporation or organization)
Identification No.)
600 ALBANY STREET, DAYTON OHIO
45408 (Address of principal executive offices)
(Zip Code)
(937) 221-1000 (Registrant's telephone number, including area code)
Class
Outstanding as of May 1, 2000 Common stock, $1.00 par value
22,637,589 shares Class A stock, $1.00 par value
4,725,000 shares
Page Part I - Financial Information
Item 1. Financial Statements
3
a)
Statement of Income
for the 13 Weeks Ended April 2, 2000 and April 4, 1999
4
b)
Balance Sheet
as of April 2, 2000 and January 2, 2000
5-6
c)
Statement of Cash Flows
for the 13 Weeks Ended April 2, 2000 and April 4, 1999
7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
8-10
Item 3. Quantitative and Qualitative Disclosure About Market Risk
10
Part II - Other Information
Item 1. Legal Proceedings
11
Item 2. Changes in Securities and Use of Proceeds
11
Item 3. Defaults upon Senior Securities
11
Item 4. Submission of Matters to a Vote of Security Holders
11
Item 5. Other Information
11
Item 6. Exhibits and Reports on Form 8-K
11
Signature
12
THE STANDARD REGISTER COMPANY
STATEMENT OF INCOME
(Dollars in thousands, except per share amounts)
First Quarter
13 Weeks Ended
Apr. 2
Apr. 4
2000
1999
TOTAL REVENUE
$314,241
$326,986
COSTS AND EXPENSES
Cost of products sold
194,083
198,891 Engineering and research
2,439
1,960 Selling and administrative
86,253
87,309 Depreciation and amortization
14,332
12,212 Interest
3,145
3,484 Restructuring
17,200
- Total costs and expenses
317,452
303,856
(LOSS) INCOME BEFORE INCOME TAXES
(3,211)
23,130 Income taxes (benefit)
(1,296)
9,426
(Loss) Income from continuing operations
(1,915)
13,704
Discontinued operations:
(Loss), net of tax benefit
0
(509) Gain on disposal, net of tax
0
13,759
NET (LOSS) INCOME
$ (1,915)
$ 26,954
Average number of shares outstanding - basic
27,349
28,392 Average number of shares outstanding - diluted
27,349
28,567
EARNINGS PER SHARE DATA - BASIC
(Loss) Income from continuing operations
($0.07)
$0.48 Discontinued operations
$0.00
($0.02) Gain on disposal
$0.00
$0.49 Net (loss) income
($0.07)
$0.95
EARNINGS PER SHARE DATA - DILUTED
(Loss) Income from continuing operations
($0.07)
$0.48 Discontinued operations
$0.00
($0.02) Gain on disposal
$0.00
$0.48 Net (loss) income
($0.07)
$0.94
Dividends paid per share
$0.23
$0.22
THE STANDARD REGISTER COMPANY
BALANCE SHEET
(Dollars in thousands)
Apr. 2
Jan. 2 A S S E T S
2000
2000
CURRENT ASSETS
Cash and cash equivalents
$ 62,021
$ 56,957 Trading securities
380
380 Accounts receivable
244,294
265,482 Allowance for losses
(10,847)
(3,477) Inventories
Finished products
112,579
101,717 Jobs in process
16,082
18,321 Materials and supplies
12,311
11,716 Prepaid income taxes
3,488
1,448 Deferred income taxes
13,720
13,720 Prepaid expense
11,807
11,316 Total current assets
465,835
477,580
PLANT AND EQUIPMENT
Buildings and improvements
89,777
89,528 Machinery and equipment
254,365
242,641 Office equipment
100,902
100,614 Total
445,044
432,783 Less accumulated depreciation
172,219
161,849 Depreciated cost
272,825
270,934 Construction in process
54,903
46,966 Land
10,243
10,243 Total plant and equipment
337,971
328,143
OTHER ASSETS
Goodwill
51,137
52,140 Prepaid pension expense
91,322
88,111 Other
18,457
15,665 Total other assets
160,916
155,916
Total assets
$ 964,722
$ 961,639
THE STANDARD REGISTER COMPANY
BALANCE SHEET
(Dollars in thousands)
Apr. 2
Jan. 2 LIABILITIES AND SHAREHOLDERS' EQUITY
2000
2000
CURRENT LIABILITIES
Current portion of long-term debt
$ 590
$ - Accounts payable
32,380
38,356 Dividends payable
-
6,302 Accrued compensation
41,720
38,672 Accrued other expense
8,761
11,450 Accrued taxes, except income
5,241
7,452 Customer deposits
263
263 Deferred service contract income
8,114
7,892 Accrued restructuring
20,517
3,550 Total current liabilities
117,586
113,937
LONG-TERM LIABILITIES
Long-term debt
202,930
203,520 Deferred compensation
9,314
7,709 Retiree healthcare
54,164
54,164 Deferred income taxes
40,578
40,578 Total long-term liabilities
306,986
305,971
SHAREHOLDERS' EQUITY
Common stock, $1.00 par value
24,482,724 shares issued
24,483
24,467,544 shares issued
24,468 Class A stock, $1.00 par value
4,725,00 shares issued
4,725
4,725 Capital in excess of par value
35,580
35,669 Accumulated other comprehensive losses
(417)
(417) Retained earnings
523,922
525,835 Treasury stock, at cost
1,748,058 shares
(45,363)
1,793,395 shares
(46,540) Common stock held in grantor trust, at cost
99,957 shares
(2,780)
59,697 shares
(2,009) Total shareholders' equity
540,150
541,731
Total liabilities and shareholders' equity
$ 964,722
$ 961,639
THE STANDARD REGISTER COMPANY | |||
STATEMENT OF CASH FLOWS | |||
(Dollars in thousands) | |||
First Quarter | |||
13 Weeks Ended | |||
Apr. 2 | Apr. 4 | ||
2000 | 1999 | ||
CASH FLOWS FROM OPERATING ACTIVITIES | |||
Net (loss) income | $ (1,915) | $ 26,954 | |
Add items not affecting cash: | |||
Depreciation and amortization | 14,332 | 14,819 | |
Gain on sale of plant assets | (1,582) | (23,109) | |
Net change to deferred income taxes | - | (9,413) | |
Net change to deferred compensation | 1,713 | 2,119 | |
Increase/(decrease) in cash arising from changes in assets and liabilities: | |||
Accounts receivable | 28,558 | 10,281 | |
Deferred accounts receivable | - | 631 | |
Inventories | (9,218) | (3,505) | |
Prepaid income taxes | (2,040) | ||
Other assets | (3,246) | (8,186) | |
Prepaid pension | (3,211) | 487 | |
Accounts payable and accrued expenses | (7,828) | (20,881) | |
Accrued restructuring expenses | 16,967 | 4,442 | |
Income taxes payable | 25,841 | ||
Customer deposits | - | (2,915) | |
Deferred service income | 222 | 1,505 | |
Net adjustments | 34,667 | (7,884) | |
Net cash provided by operating activities | 32,752 | 19,070 | |
CASH FLOWS FROM INVESTING ACTIVITIES | |||
Proceeds from sale of plant assets | 86 | 98,021 | |
Additions to plant and equipment | (21,698) | (19,298) | |
Acquisition | - | (10,414) | |
Investment in F3/Keyfile Corporation | - | (58) | |
Net cash (used in) provided by investing activities | (21,612) | 68,251 | |
CASH FLOWS FROM FINANCING ACTIVITIES | |||
Payments on long-term debt | - | (525) | |
Proceeds from issuance of common stock | 224 | 459 | |
Redemption of common stock | - | (3,825) | |
Dividends paid | (6,300) | (6,254) | |
Net cash used in provided by financing activities | (6,076) | (10,145) | |
NET INCREASE IN CASH AND | |||
CASH EQUIVALENTS | 5,064 | 77,176 | |
Cash and cash equivalents, beginning | 56,957 | 9,792 | |
CASH AND CASH EQUIVALENTS, ENDING | $ 62,021 | $ 86,968 |
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS FROM OPERATIONS
Significant Events
On February 17, 2000, the Company announced the closing of its Corning, Iowa forms printing plant and the phasing out of its Dayton, Ohio production of certain forms handling equipment products. Also announced was the consolidation of field sales management and an enhanced early retirement option to a number of its Dayton, Ohio corporate headquarters employees. On April 28, 2000, the company announced the immediate closing of its Toccoa, Georgia forms printing plant and consolidation of operations with plants nationwide. The plant's adjacent supply chain service center will remain in operation as Standard Register increases utilization of the center's state-of-the-art customer order entry and document design services. These actions resulted in a pre-tax charge of $17.2 million, or $.37 per diluted share after tax. The $17.2 million consisted of asset write-downs and cash closing costs. Annual savings will recover the cash closing costs in approximately one year.
Results of Operations
Net loss for the first quarter ended April 2, 2000 was $1.9 million or $.07 per diluted share, compared to net income of $27.0 million and $.94 per diluted share for the first quarter 1999.
Excluding restructuring and discontinued operations, net income from continuing operations was $8.3 million, or $.31 per diluted share compared to $13.7 million, or $.48 per diluted share for the same period last year.
$ Millions | First Quarter Net Income(Loss) | ||||||||||
2000 | 1999 | Chg. | |||||||||
Continuing Operations before Restructuring | $ 8.3 | $13.7 | <$ 5.4> | ||||||||
Restructuring (net of tax) | <10.2> | < 10.2> | |||||||||
Discontinued Operations (Communicolor) | 13.3 | < 13.3> | |||||||||
Total Reported | <$1.9> | $27.0 | <$28.9> |
Three factors were primarily responsible for the $5.4 million reduction in net income from continuing operations: lower revenue in three product categories, LIFO inventory adjustment, and the new software initiative described in the third quarter 1999 10Q report. These unfavorable factors were mitigated by growth in nontraditional product categories, such as pressure sensitive labels and Imaging Services, and lower selling, administration, and engineering costs.
Revenue from continuing operations for the first quarter was $314.2 million, 3.9% below the $327.0 million reported for the first quarter 1999. Product results from continuing operations for the Company are summarized below with a comparison to the prior year.
$ Millions | First Quarter | ||||||||||
2000 | 1999 | % Chg. | |||||||||
Business Forms & Services | $158.8 | $171.7 | -7.5% | ||||||||
Stanfast | 46.1 | 47.8 | -3.6% | ||||||||
Labels | 44.5 | 41.0 | 8.5% | ||||||||
Equipment and Supplies | 28.9 | 39.4 | -26.6% | ||||||||
Imaging Services | 27.3 | 23.4 | 16.7% | ||||||||
Commercial Printing | 8.0 | 3.5 | 128.6% | ||||||||
Interest Income & Other | 0.6 | 0.2 | |||||||||
Total Company | $314.2 | $327.0 | -3.9% |
Sales of traditional business forms and related services were down 7.5% for the quarter. This is generally in line with the overall industry trend of decline or slow growth in traditional forms products and faster growth in other print related products and services. Non-traditional products and services, which now account for approximately 49% of Standard Register revenue, include pressure sensitive labels, (Stanfast) print on demand, document systems, commercial printing, and (Imaging Services) print outsourcing and fulfillment. Revenue from these non-traditional product categories, taken as a whole, was flat for the quarter. The uncharacteristic decline in Equipment and Supplies revenue primarily reflects a delay in realizing anticipated large one-time sales. Revenue from the non-traditional products and services excluding the Equipment and Supplies was up 9.1%.
The reported gross margin from continuing operations decreased from 39.2% of revenue in the first quarter 1999 to 38.2% in the current quarter. As a result of rising paper prices, there was an unfavorable LIFO inventory charge in the first quarter 2000 of $2.1 million pretax. By comparison, there was no adjustment in the prior year's first quarter. Adjusting for the non-operating LIFO adjustments in the first quarter 2000, results in a quarter-to-quarter slight gross margin decrease of twenty basis points in relation to revenue. Management believes it has realized sufficient overall increases in the selling prices of its forms to recover the higher paper prices experienced thus far in 2000. The slight decrease in gross margin percentage can be attributed to the overall reduction in revenue identified above.
Management expects paper costs to continue to rise modestly during the rest of 2000 based on strong demand and relatively high mill operating rates. Historically, the Company has been able to recover most, if not all, of increases in paper costs and expects to continue to do so over the foreseeable future.
Total selling, administrative, and R&D expenses were $.6 million lower than the same period in 1999. In comparison to the first quarter of 1999, the total of these operating expenses was 90 basis points higher in relation to revenue 28.2% this year compared to 27.3% for 1999. This increase is primarily attributable to spending for the new software initiative that was outlined in the third quarter 1999 10Q report in the amount of $3.3 million, partially offset by a decrease of $1.8 million for Year 2000 spending in the first quarter of 1999. After adjusting for the new software initiative in 2000 and Year 2000 expenses in 1999, total selling, administrative, and R&D expenses were under the same period in 1999 by $2.1 million. This reduction is primarily attributable to cost reduction activities, lower information management cost as resources are dedicated to the new software initiative, and lower revenue.
Liquidity and Capital Resources
The balance of Cash, Cash Equivalents, and Short-term Investments increased $5 million during the quarter to $62 million. Netting the $62 million of cash against total long-term debt of $203 million produces a "net debt" to "total net capital" ratio of 20.7%.
Capital expenditures were $ 21.7 million for the quarter. The current outlook for the year calls for capital spending in the $75 million to $80 million range, including an estimated $25 million for the new software initiative.
The Company believes that its financial condition continues to be very strong and that the combination of internally generated funds, existing cash reserves, and $100 million of available credit under the revolving credit agreement will be sufficient to finance its operations over the next year.
Forward-Looking Statements
This report includes forward-looking statements covered by the safe harbor provisions of The Private Securities Litigation Reform Act of 1995. These statements involve important assumptions, risks, uncertainties and other factors that could cause the Company's actual results for fiscal year 2000 and beyond to differ materially from those expressed in such forward-looking statements. Factors that could cause materially different results include product demand and market acceptance, the frequency and magnitude of raw material price changes, the effect of economic conditions, competitive activities, and other risks described in the Company's filings with The Securities and Exchange Commission.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
There have been no material changes in market risk since the year ended January 2, 2000.
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
a) Exhibits pursuant to Item 601 of Regulation S-K
Exhibit 27 Financial Data Schedule (filed only electronically with the SEC)
b) Reports on Form 8K
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.
May 15, 2000
/S/ C. J. Brown
----------------------------------------- |
By C. J. Brown, Sr. Vice President, Administration, Treasurer |
Chief Financial Officer, and Chief Accounting Officer |