-----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, CTxnSJHzNcBMOqpOtc0EglWW4Jxj5Qoh8BWXosk6zqATTgVUMDR2HyNGFRx1Tj2k H7yvRb0nhZ0EYSCl5iocAQ== 0000906318-99-000051.txt : 19990518 0000906318-99-000051.hdr.sgml : 19990518 ACCESSION NUMBER: 0000906318-99-000051 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990404 FILED AS OF DATE: 19990517 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: 0103 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-11699 FILM NUMBER: 99627736 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 April 4, 1999 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 (I.R.S. Employer of 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 issuer's classes of common stock, as of the latest practicable date. CLASS OUTSTANDING AS OF May 7, 1999 - ----- ----------------------------- Common Stock - $1.00 Par Value 23,564,171 Class A Stock - $1.00 Par Value 4,725,000 INDEX Page Part I - Financial Information Item 1. Financial Statements a) Statement of Income for the 13 Weeks Ended April 4, 1999 and March 29, 1998 . . . . . . . . . . . . 4 b) Balance Sheet as of April 4, 1999 and January 3, 1999 . . 5 c) Statement of Cash Flows for the 13 Weeks Ended April 4, 1999 and March 29, 1998 . . . . . . . . . . . . 6 d) Note to Financial Statements. . . . . . . . 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . . . 8-11 Item 3. Quantitative and Qualitative Disclosure About Market Risk . . . . . . . . . . . . 11 Part II - Other Information Item 1. Legal Proceedings . . . . . . . . . . . . . 12 Item 2. Changes in Securities and Use of Proceeds . 12 Item 3. Defaults upon Senior Securities . . . . . . 12 Item 4. Submission of Matters to a Vote of Security Holders. . . . . . . . . . . . . . 12 Item 5. Other Information . . . . . . . . . . . . . 12 Item 6. Exhibits and Reports on Form 8-K. . . . . . 12 Signature . . . . . . . . . . . . . . . . . . . . . . 13 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 3, 1999, and Current Report on Form 8-K as filed on April 15, 1999. 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. a) STATEMENT OF INCOME (In Thousands except Data Per Share) First Quarter 13 Weeks Ended April 4, March 29, 1999 1998 -------- --------- TOTAL REVENUE $326,986 $320,089 -------- -------- COSTS AND EXPENSES Cost of Products Sold 198,891 204,043 Engineering and Research 1,960 2,696 Selling and Administrative 87,309 82,726 Depreciation and Amortization 12,212 11,267 Interest 3,484 3,430 -------- -------- Total Costs and Expenses 303,856 304,162 -------- -------- INCOME BEFORE INCOME TAXES 23,130 15,927 Income Taxes 9,426 6,303 -------- -------- Income From Continuing Operations 13,704 9,624 Discontinued Operations: Current Year (Loss)/Income, Net of Tax (509) 67 Gain on Disposal, Net of Tax 13,759 - -------- -------- NET INCOME $ 26,954 $ 9,691 -------- -------- -------- -------- Average Number of Shares Outstanding 28,392 28,423 Average Number of Shares Outstanding - Diluted 28,567 28,626 EARNINGS PER SHARE DATA - BASIC: Income From Continuing Operations $ 0.48 $ 0.34 Discontinued Operations, Current Year (Loss) $ (0.02) $ 0.00 Gain on Disposal $ 0.49 $ 0.00 Net Income $ 0.95 $ 0.34 EARNINGS PER SHARE DATA - DILUTED: Income From Continuing Operations $ 0.48 $ 0.34 Discontinued Operations, Current Year (Loss) $ (0.02) $ 0.00 Gain on Disposal $ 0.48 $ 0.00 Net Income $ 0.94 $ 0.34 Dividends Paid Per Share $ 0.22 $ 0.21 See note to financial statements. b) BALANCE SHEET (Dollars in Thousands) Apr 4, Jan 3, ASSETS 1999 1999 ------ ------- CURRENT ASSETS Cash and Cash Equivalents $ 86,968 $ 9,792 Short Term Investments 6,530 6,530 Accounts Receivable, less Allowance for Losses 261,339 288,103 Inventories Finished Products 121,768 104,982 Jobs in Process 4,248 18,075 Materials and Supplies 12,385 15,319 Deferred Income Taxes 19,065 19,065 Prepaid Expense 15,070 11,929 ------- --------- Total Current Assets 527,373 473,795 PLANT AND EQUIPMENT Buildings and Improvements 89,949 93,552 Machinery and Equipment 266,471 306,658 Office Equipment 62,490 98,209 ------- --------- Total 418,910 498,419 Less Accumulated Depreciation 148,132 182,218 ------- --------- Depreciated Cost 270,778 316,201 Construction in Process 46,092 44,732 Land 10,208 7,228 ------- --------- Total Plant and Equipment 327,078 368,161 OTHER ASSETS Goodwill 55,148 57,825 Prepaid Pension Expense 73,051 73,538 Other 15,134 11,758 ------- --------- Total Other Assets 143,333 143,121 ------- --------- TOTAL ASSETS $997,784 $985,077 ------- --------- ------- --------- LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Current Portion of Long-Term Debt 555 525 Accounts Payable 28,510 29,967 Dividends Payable - 6,251 Accrued Compensation 32,805 44,406 Accrued Other Expense 4,176 12,158 Accrued Taxes, except Income 4,687 9,329 Income Taxes Payable 27,176 1,335 Customer Deposits 223 3,138 Deferred Service Contract Income 9,908 8,404 Accrued Restructuring 19,285 14,843 ------- --------- Total Current Liabilities 127,325 130,356 ------- --------- LONG-TERM LIABILITIES Long-Term Debt 233,520 234,075 Deferred Compensation 5,914 3,795 Retiree Healthcare 55,057 55,057 Deferred Income Taxes 31,416 40,829 ------- --------- Total Long-Term Liabilities 325,907 333,756 SHAREHOLDERS' EQUITY Common Stock, $1.00 Par Value 24,402,034 Shares Issued in 1999 24,402 24,391,072 Shares Issued in 1998 24,391 Class A Stock, $1.00 Par Value 4,725,000 Shares Issued 4,725 4,725 Capital in Excess of Par Value 34,405 33,957 Accumulated Other Comprehensive Income (1,161) (1,161) Retained Earnings 506,631 479,679 Treasury Stock 789,894 Shares at Cost (22,470) 701,152 Shares at Cost (19,614) Common Stock held in Grantor Trust 62,289 Shares at Cost (1,980) 26,284 Shares at Cost - (1,012) ------- --------- Total Shareholders' Equity 544,552 520,965 ------- --------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $997,784 $985,077 ------- --------- ------- --------- See note to financial statements. c) STATEMENT OF CASH FLOWS (Dollars in Thousands) First Quarter 13 Weeks Ended April 4, March 29, 1999 1998 --------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES Net Income $26,954 $ 9,691 ------- ------- Add Items Not Affecting Cash: Depreciation and Amortization 14,819 13,521 (Gain)/Loss on Sale of Plant Assets (23,109) 63 Net Change to Investments 0 138 Net Change to Retiree Healthcare 0 523 Net Change to Deferred Income Taxes (9,413) 0 Net Change to Deferred Compensation 2,119 2,525 Increase/(Decrease) in Cash Arising from Changes in Assets and Liabilities: Accounts Receivable 10,281 12,181 Deferred Accounts Receivable 631 26,036 Inventories (3,505) (35,010) Other Assets (8,186) (1,957) Prepaid Pension 487 (1,556) Accounts Payable and Accrued Expenses (20,881) (17,790) Accrued Restructuring Expenses 4,442 (2,931) Income Taxes Payable 25,841 2,834 Customer Deposits (2,915) 5,222 Deferred Service Income 1,505 1,840 ------- ------- Net Adjustments (7,884) 5,639 ------- ------- Net Cash Provided by Operating Activities 19,070 15,330 ------- ------- ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from Sale of Facilities 98,021 50 Additions to Plant and Equipment (19,298) (14,664) Acquisition (10,414) (245,000) Maturity of Short-Term Investments - 15,295 Purchase of Short-Term Investments - (15,000) Investment in F3/Keyfile Corporation (58) (1,000) ------- ------- Net Cash Provided by (Used in) Investing Activities 68,251 (260,319) ------- ------- ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from Long-Term Debt - 230,000 Payments of Long-Term Debt (525) (1,254) Proceeds from Issuance of Common Stock 459 657 Redemption of Common Stock (3,825) (557) Dividends Paid (6,254) (5,970) ------- ------- Net Cash (Used in) Provided by Financing Activities (10,145) 222,876 ------- ------- ------- ------- NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 77,176 (22,113) Cash and Cash Equivalents, Beginning 9,792 67,556 ------- ------- CASH AND CASH EQUIVALENTS, ENDING $86,968 $45,443 ------- ------- ------- ------- See note to financial statements. d) NOTE TO FINANCIAL STATEMENTS 1. SEGMENT REPORTING INFORMATION - (SEE NOTE 15 TO FINANCIAL STATEMENTS AT JANUARY 3, 1999). Financial information about the Company's reportable operating segments is as follows: First Quarter First Quarter (Dollars in Thousands) 1999 1998 ---- ---- REVENUE: DM&SD $ 252,066 $ 253,363 Impressions 74,770 66,452 Corporate 150 274 Total Revenue $ 326,986 $ 320,089 INCOME BEFORE INCOME TAXES: DM&SD $ 24,963 $ 17,738 Impressions 2,828 2,089 Corporate (4,661) (3,900) Total Income Before Income Taxes $ 23,130 $ 15,927 IDENTIFIABLE ASSETS AT END OF PERIOD: DM&SD $ 594,522 $ 621,956 Impressions 108,789 92,465 Corporate 294,473 176,617 Total Identifiable Assets $ 997,784 $ 891,038 Income Before Income Taxes for DM&SD and Impressions shown above incorporates allocations of all corporate expenses except interest, LIFO inventory adjustments and goodwill amortization. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS FROM OPERATIONS Significant Events On January 26, 1999, the Company announced the formation of a new operating group within the Impressions Division - the Commercial Print Group. This group will provide business customers high- quality commercial printing pieces, adding to the Company's already extensive portfolio of printed products and services. The Group's manufacturing facilities are located in Secaucus, New Jersey and Boothwyn, Pennsylvania - the Boothwyn plant being purchased March 1. On April 1, the Company sold the Communicolor promotional direct mail operation to R.R. Donnelley and Sons Company for $98 million, subject to post-closing adjustments, which are expected to be minor. The Company's annual revenue from this specialized direct mail segment was approximately $100 million, or about 7% of total revenue. The Company believes that shareholders will be better served by redirecting its investment to the Company's core document products and services. During the quarter, the Company also opened Stanfast print centers in Anchorage, Alaska and Milwaukee, Wisconsin bringing the total number of Stanfast facilities to 36. This continues the Company's program to put print centers in major metropolitan areas throughout the United States. Results of Operations Net income for the first quarter ended April 4, 1999 was $27.0 million or $.95 per basic share, compared to $9.7 million and $.34 per basic share for the first quarter 1998. On a diluted basis, net income per share was $.94 in the current quarter versus $.34 in the prior year. Net income for the first quarter 1999 included a gain of $13.8 million, or $.49 per basic share, on the sale of Communicolor(R). Excluding both this gain and the first quarter operating loss equivalent to $.02 per basic share on the discontinued Communicolor operation, the Company reported net income from continuing operations of $13.7 million, or $.48 per basic share, up 42% over the comparable period of 1998. Revenue from continuing operations for the first quarter was $327.0 million compared to $320.1 million for the first quarter 1998. A discussion of the underlying product results appears in the segment reporting section of this report. Gross margin from continuing operations improved from 36.3% of revenue in first quarter 1998 to 39.2% in first quarter 1999. This increase is attributable primarily to cost reductions achieved in the latter half of 1998 in conjunction with the integration of Uarco, Inc., acquired December 31, 1997. In addition, paper costs in the most recent quarter were on average slightly below that for the comparable quarter of 1998. The prices of white bond papers, which account for about 60% of paper purchases, rose approximately 10% in March of this year and are scheduled to go up an additional 7% in July. The Company has historically recovered paper cost increases in the form of higher product prices and expects to do so for these latest rounds of increases. The Company also reclassified the expenses associated with its Customer Support Centers for the first quarter 1999 from cost of sales to operating expense, which had the effect of improving the reported gross margin by .7% compared to the first quarter 1998, which was not restated. There were no LIFO inventory adjustments in the first quarter of either year. Selling, Administrative, and R&D expenses were 27.3% of revenue in the first quarter 1999 compared to 26.7% for 1998. Spending for year 2000 systems compliance was $1.2 million higher than in the first quarter 1998. First quarter 1999 spending was also higher by $.8 million for Uarco acquisition integration activities and $1.1 million for computer system costs related in part to the transfer of Uarco processing to Standard Register systems. Excluding these items and the expense reclassification described in the preceding paragraph, 1999's operating expenses would have been 25.7% compared to the 26.7% reported for 1998. Segment Reporting The Company aligns its products and services into two operating divisions. The Document Management and Systems (DM&S) Division provides document management solutions including workflow consulting, document design, custom printed forms and labels, electronic forms, distribution services, and distributed intelligent printing and mailing systems. The Company's Impressions(R) Division provides print on demand, document and plastic card fulfillment services, and commercial printing. Results from continuing operations for the Company's two divisions are summarized below with a comparison to the first quarter of the prior year. The divisional operating profits incorporate allocations of all corporate expenses except interest, LIFO inventory adjustments, goodwill amortization, and taxes. DM&S Division Impressions Division ---------------- ----------------------- 1st Qtr 1st Qtr 1st Qtr 1st Qtr 1999 1998 %Chg. 1999 1998 %Chg. ------- ------- ----- ------- ------- ----- Revenue $252.1 $253.4 -0.5% $74.8 $66.5 12.5% Operating Profit $25.0 $17.7 40.7% $2.8 $2.1 35.4% % Revenue 9.9% 7.0% 3.8% 3.1% DM&S Division revenue was $252.1 million, down 0.5% from the 1998 result due primarily to an approximate 5% drop in traditional business forms and related services. Conversely, revenue from pressure sensitive label products increased 14.3% and equipment, supplies, and maintenance revenues were up 9.6%. Despite the slight drop in overall division revenue, the gross margin was up approximately $6 million, or 2.6 percentage points in relation to revenue, primarily as a result of the plant consolidations and other cost saving actions taken after the first quarter of 1998. As indicated earlier, lower paper costs were also a minor factor in this improvement. The 9.6% revenue increase for equipment, supplies, and maintenance was accompanied by a 27.3% increase in dollar gross margin, reflecting improved product mix and cost reductions achieved in the maintenance component. The improved gross margin across virtually all product segments was the primary factor contributing to the 40.7% increase in operating profit for this division. For the Impressions Division, first quarter revenue from continuing operations was $74.8 million, up $8.3 million, or 12.5%, vs. the first quarter 1998 results. The March 1 purchase of DuPont's printing and publishing operation in Boothwyn, Pennsylvania and the related formation of the Commercial Print Group during the first quarter contributed approximately $1.0 million to the overall revenue increase. The Imaging Services and Stanfast Groups reported revenue increases of 4.4% and 8.7%, respectively. As was the case for the DM&S Division, 1998 cost reductions associated with the integration of Uarco, Inc. was the primary factor responsible for the significant improvements in the gross margin and operating profit for this division. Year 2000 Expenses incurred on year 2000 compliance projects totaled $1.8 million for the first quarter, which was in line with the Company's plan to complete its remediation and testing work by September of this year at a total 1999 cost of $6.0 million. The Company is on pace to complete the work as outlined in its January 3, 1999 report on Form 10K. Liquidity and Capital Resources The balance of Cash, Cash Equivalents, and Short-term Investments increased $77 million from the year-end 1998 position to $93 million at the end of the first quarter. Major factors contributing to this change include the sale of Communicolor for $98 million, the purchase of the Boothwyn, Pennsylvania operations for $10 million, and the repurchase of Company stock for $4 million. The additional $7 million reduction in cash reflects normal seasonal changes in working capital. Netting the $93 million of cash against total debt of $235 million produces a "net debt" to "total capital" ratio of 20.6%. On April 13, 1999, the Company announced plans to repurchase of up to one million shares of its common stock. The timing and actual number of shares purchased will depend upon overall market conditions. Since making the announcement, the Company has purchased a total of 190 thousand shares; total shares purchased thus far in 1999 are 325 thousand. On April 27, 1999, the Company repaid approximately $30 million of the debt outstanding under its revolving credit agreement. The remaining $200 million borrowed under the $300 million revolving credit agreement has been effectively converted to an all-in fixed rate of 6.09% as a result of the interest rate swap entered into in 1998. Capital expenditures were $30 million for the quarter including approximately $10 million used for the purchase of the Boothwyn operation. The current outlook for the year calls for capital spending in the $65 million to $70 million range. 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. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK There have been no material changes in market risk since the year ended January 3, 1999. 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 filed on April 15, 1999. This filing related to the disposition of assets of the Communicolor Division. The financial statements filed therewith reflect the proforma financial information. 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 17, 1999 /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 section contains summary financial information extracted from the Standard Register Company's financial statements for the three months ended April 4, 1999, and is qualified in its entirety by reference to such financial statements. 0000093456 THE STANDARD REGISTER COMPANY 1000 3-MOS JAN-02-2000 JAN-04-1999 APR-04-1999 86968 6530 276497 15158 138401 527373 475210 148132 997784 127325 234075 0 0 29127 515425 997784 326836 326986 198891 300372 0 901 3484 23130 9426 13704 13250 0 0 26954 0.95 0.94
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