-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, FHFJ6f0n/cPUSuQjD7a6618zutZse3WWICuuEsP8yr76ItLZmOl7iId0qdylgEBC RQ8E9r3wfrm4JK9Zzj1g5w== 0000950152-95-000452.txt : 199507120000950152-95-000452.hdr.sgml : 19950711 ACCESSION NUMBER: 0000950152-95-000452 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19950101 FILED AS OF DATE: 19950328 SROS: NASD 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-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 000-01097 FILM NUMBER: 95523756 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-K405 1 STANDARD REGISTER CO. 10-K405 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K [ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) For the fiscal year ended January 1, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the transition period from ________ to ________ Commission file number 1-1097 THE STANDARD REGISTER COMPANY (Exact name of Registrant as specified in its charter) OHIO 31-0455440 (State or other jurisdiction of (I.R.S. Employer incorporation or of organization) Identification No.) 600 ALBANY STREET, DAYTON, OHIO 45401 (Address of principal executive offices) (Zip Code) (513) 443-1000 (Registrant's telephone number, including area code) SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT Name of each exchange Title of each class on which registered - ----- -- ---- ----- -- ----- ---------- Common Over the counter 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 by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant' knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ] The aggregate market value of the voting stock held by non-affiliates of the Registrant at February 24, 1995 was approximately $187,231,710. At February 24, 1995, the number of shares outstanding of the issuer's classes of common stock are as follows: Common stock, $1.00 par value 23,940,017 shares Class A stock, $1.00 par value 4,725,000 shares
Part III incorporates information by reference from the Proxy Statement for Registrant's Annual Meeting of Shareholders to be held on April 19, 1995. Page 1 of 31 2 THE STANDARD REGISTER COMPANY FORM 10-K PART I ITEM 1. - BUSINESS The Standard Register Company began operations in 1912 in Dayton, Ohio. Throughout its history, its primary business has been the design, manufacture, and sale of business forms. However, to meet the needs of today's business environment, the Company provides a wide range of products and services that facilitate the recording, storage and communication of business transactions and information. The Company believes that it is the second largest in the highly competitive U.S. forms industry, which includes approximately 500 companies. Key differentiating factors within the industry include quality, level of service, and price. The variety of forms currently produced and sold is extensive, ranging from commodity type stock continuous forms to complex custom forms designed to meet the specific needs of individual customers. The Company emphasizes high value-added business forms that satisfy the customer's desire to simplify paperwork and thus improve efficiency. Standard Register also manufactures, sells, and services a variety of financial, bar coding and document processing equipment. Other printed products and services include personalized mail promotional materials and pressure sensitive labels. The Company's products including business forms, other printed products and equipment are marketed by direct selling and service organizations operating from offices located in principal cities throughout the United States. Forms are produced at thirty-seven plants located throughout the United States and are shipped directly to the customer or stored in warehouses for subsequent on-demand delivery. The management of forms inventories to provide timely, cost-effective delivery is a major element of customer service. The Company purchases raw paper in a wide variety of weights, grades, and colors from various paper mills in the United States and Canada. Carbonless paper, inks, carbon, and printing supplies are available nationally and purchased from leading vendors. Continuing efforts are made to assure adequate supplies to meet present and future sales objectives. The Company fills its needs by ordering from suppliers of long-standing relationship. The Company had engineering and research expense during 1994 of $7,475,000 compared to $7,754,000 in 1993 and $7,803,000 for 1992. These costs relate to the development of new products and to the improvement of existing products and services. These efforts are entirely company sponsored and involve approximately eighty-six professional employees. The Company had no expenditures during the last three years for customer sponsored research relating to the development of new products, services, or techniques or the improvement of existing products, services, or techniques. In 1994, the Company continued its STANFAST manufacturing operations in nineteen print centers located nationwide. These print centers are devoted to the manufacture and sale of business forms for customers requiring relatively small quantities on a quick turnaround basis. -2- 3 Expenditures for property, plant and equipment totaled $52,128,000 in 1994, compared to $31,076,000 and $22,697,000 in 1993 and 1992, respectively. No significant changes occurred in the types of products, manufacture, or method of distribution during the past fiscal year nor does the Company intend to change its method of doing business in the near future. Other items of information which may be pertinent to an understanding of the Company and its business are as follows: 1.) No material patents, trademarks, licenses, franchises, or concessions are held which have a significant effect upon the business. 2.) No material portion of the Company's business could be considered seasonal. 3.) The Company believes its working capital is sufficient for its current operations. The current ratio is 3.6 to 1 at January 1, 1995 as compared to 3.9 to 1 at January 2, 1994 and January 3, 1993. Total debt, including long-term and current maturities, was 4.6% of equity at year-end 1994, compared to 6.7% and 9.2% for years-end 1993 and 1992, respectively. At year-end 1994, cash and cash equivalents exceeded current and long-term debt by approximately $37,693,000. These relationships demonstrate the soundness of the Company's financial position. 4.) No material segment of the Company's business is dependent upon a single or a few customers. No single customer accounts for 10% or more of total revenue. 5.) The Company's backlog of custom printing orders at January 1, 1995 was $69,173,000 compared to $51,897,000 and $42,670,000 at January 2, 1994 and January 3, 1993, respectively. All orders were expected to be filled within the ensuing fiscal year. 6.) The Company has no significant exposure with regard to the renegotiation or termination of government contracts. 7.) Expenditures made by the Company in order to comply with federal, state, or local provisions of environmental protection have not had a material effect upon the Company's capital expenditures, earnings, or competitive position. 8.) At January 1, 1995, the Company had 6,201 employees compared to 5,769 and 5,724 at January 2, 1994 and January 3, 1993, respectively. 9.) Substantially all of the Company's products and services facilitate the recording, storage and communication of business transactions and information. 10.) No material portion of the Company's sales or net income is derived from sales to foreign customers. The Company does offer technical assistance to foreign business forms manufacturers and receives royalties for these services. Royalties from these foreign associates are approximately .1% of total revenue. In 1994, the Company entered into a joint venture with Russian and Dutch partners to manufacture and market business forms in Russia. In exchange for a 41% share, the Company will contribute a total of approximately $4.0 million in capital, equipment, and technological know-how. The joint venture named Polyforms will begin full operations at its St. Petersburg manufacturing location during 1995. -3- 4 ITEM 2 - PROPERTIES The principal production plants of the Company are located in the following cities: Dayton, Ohio, 677,000 sq. ft., printing and equipment products production plants and corporate headquarters Newark, Ohio, 234,000 sq. ft., promotional printing plant Eudora, Kansas, 120,000 sq. ft., promotional printing plant Shelbyville, Indiana, 61,000 sq. ft., printing plant Middlebury, Vermont, 113,000 sq. ft., printing plant York, Pennsylvania, 214,000 sq. ft., printing plant and warehouse Fayetteville, Arkansas, 146,000 sq. ft., printing plant Porterville, California, 126,000 sq. ft., printing plant Cincinnati, Ohio, 52,000 sq. ft., pressure sensitive label production plant Murfreesboro, Tennessee, 82,000 sq. ft., printing plant Terre Haute, Indiana, 54,000 sq. ft., pressure sensitive label production plant Salisbury, Maryland, 114,000 sq. ft., printing plant Rocky Mount, Virginia, 105,000 sq. ft., printing plant Kirksville, Missouri, 191,000 sq. ft., printing plant and warehouse Tampa, Florida, 38,000 sq. ft., pressure sensitive label production plant All plants are owned by the Company except for the Tampa location. STANFAST print centers are generally much smaller than the preceding plants and are in nineteen other locations nationwide. STANFAST also operates an imprint center in Tolland, Connecticut, a plastic card embossing plant in Rochester, New York and a printing plant in Phoenix, Arizona. STANFAST generally leases its plants. ITEM 3 - LEGAL PROCEEDINGS (a) No material claims or litigation are pending against the Company. (b) The Company has been named as a potentially responsible party by the U.S. Environmental Protection Agency or has received a similar designation by state environmental authorities in several situations. None of these matters have reached the stage where liabilities have been assessed against the Company. The Company has evaluated each of these matters and believes that none of them individually, nor all of them in the aggregate, would give rise to a material charge to earnings or a material amount of capital expenditures. This assessment does not take into account the ability of the Company to recover on existing insurance policies or from other parties which the Company believes would be held as joint and several obligors under any such liabilities. However, since these matters are in various stages of process by the relevant environmental authorities, future developments could alter these conclusions. However, management does not now believe that there is a likelihood of a material adverse effect on the financial condition of the Company in these circumstances. ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to shareholders during the fourth quarter of the fiscal year. -4- 5 PART II ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS (a) The common stock $1.00 par value of the Registrant is traded in the over-the-counter market and is quoted on the NASDAQ National Market System. The range of quotations as supplied by NASDAQ stock market and dividends paid per share on such securities for each quarterly period during the two most recent fiscal years are presented below.
1 9 9 4 --------------------------------------------------------------------- Cash Quarter Dividend High Low Last ------- -------- ---- --- ---- 1st $0.17 23 3/4 20 1/4 21 1/2 2nd $0.17 22 1/4 20 3/4 21 1/2 3rd $0.17 22 1/4 19 3/4 19 3/4 4th $0.17 19 7/8 14 1/2 17 1/2
1 9 9 3 --------------------------------------------------------------------- Cash Quarter Dividend High Low Last ------- -------- ---- --- ---- 1st $0.16 21 3/4 17 19 1/4 2nd $0.16 20 1/4 16 18 1/2 3rd $0.16 20 1/4 17 1/4 18 1/2 4th $0.16 21 18 20 3/4
(b) Approximate number of security holders of the Company's common stock as of February 24, 1995 - 3,267 excluding individual holders whose shares are held by nominees. There are also 17 holders of Class A stock. (c) Dividend policy - The Company expects to continue paying cash dividends in the future, however, the amounts paid will be dependent upon earnings and the future financial condition of the Company. No events have occurred which would indicate a curtailment of the payment of dividends. -5- 6 ITEM 6 - SELECTED FINANCIAL DATA Selected Income Statement Data - ------------------------------
1994 1993 1992 1991 1990 ---- ---- ---- ---- ---- Thousands except for per share data --------------------------------------------------- Revenue $767,415 $722,120 $705,215 $693,712 $716,410 Net income before cumulative effect of accounting changes 43,876 42,185 39,372 32,707 21,794 Cumulative effect of accounting changes - - 13,362 - - Net income 43,876 42,185 26,010 32,707 21,794 Earnings per share: Net income before cumulative effect of accounting changes 1.53 1.47 1.37 1.14 .74 Cumulative effect of accounting changes - - .47 - - Net income 1.53 1.47 .90 1.14 .74 Selected Balance Sheet Data - --------------------------- Total assets $525,659 $502,333 $482,463 $463,560 $453,725 Long-term debt 11,071 17,546 24,454 35,189 41,940 Other - ----- Cash dividends paid per share .68 .64 .60 .56 .56
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 1994 Compared to 1993 - --------------------- Net income was a record $43.9 million or $1.53 per share, compared to $42.2 million and $1.47 in 1993. This profit improvement can be attributed in major part to growth in revenue, which also established a record at $767.4 million. Total revenue increased 6.3%, with unit volume and average selling prices each up approximately 3%. Within the forms industry, excess capacity and aggressive price competition continued to be the norm, especially for some traditional products that have recently experienced flat or declining demand. The Company's 1994 revenue from business forms increased 5.5% overall. The traditional categories of custom continuous, unit sets, and stock forms declined 1.6% and represented just 39% of total revenue, down from 42% in 1993. In stark contrast, other forms categories, including pressure sensitive labels, Imprinted products, STANFAST -6- 7 products, forms management services, and customer cut sheet products rose 14% and now account for 38% of total revenue. Management believes that the Company gained market share in 1994, particularly in its targeted health care and financial markets. The overall unit growth, coupled with the mix shift outlined above, required the addition of production capacity in 1994. Additional capacity expansion is also planned for 1995. The sale of document processing equipment and related maintenance services and supplies increased 10.1%, contributing 11.4% of total revenue. This growth was attributable to increases in equipment maintenance services. Revenue from promotional direct mail was up 6.6% as a result of the mid-year acquisition of the Promotional Graphics Division of Uarco. The acquisition provided additional production capacity, broadened the product offering, and added to the customer base. The acquired Division operated below capacity, but contributed to operating profits. A 14% rise in third-class postal rates became effective January 1, 1995, adding to the cost of promotional mailings. Based on past experience, this increase is expected to have a modest and short-lived unfavorable effect on promotional mail revenues. The gross margin, revenue less cost of products sold, increased $11.7 million but represented a lesser percentage of revenue -- 36.7% in 1994 vs. 37.4% in 1993. Contributing factors to the narrowed gross margin included the rapid growth in equipment maintenance services which carry a higher cost of sales, the acquisition of Promotional Graphics which operated below capacity, higher paper costs not yet fully recovered by higher forms selling prices, and a $1.9 million LIFO inventory charge. The price of paper, which represents about 50% of the manufacturing cost of a typical business form, began to firm in June 1994 after several years of relative weakness. Improving economic conditions have increased world-wide demand for paper products at a time when output has been reduced by the closing of paper machines and the diversion of some capacity to non-business forms grades. The resulting higher capacity utilization at paper mills has supported rapidly escalating paper prices. In the seven months from June 1, 1994 to January 1, 1995, weighted average paper prices (including white bond, carbonless, and specialty grades) rose 28%, reversing the declining price trend experienced through the first half of 1994. At this writing, two additional price hikes have been announced for February and March, 1995, raising weighted average prices an additional 10%. The average price paid for paper in 1994 was slightly below that for 1993. However, at currently announced prices, average 1995 paper prices will be 30% above the average 1994 level. In response, the Company has raised the prices of its business forms in an attempt to recover the higher paper costs. Given the tight supply of paper, the Company expects to successfully recover the higher costs over the near term. Operating expenses, including engineering, selling, and administrative, increased 4.5% over 1993 levels, well below the 6.3% growth in revenue and in line with management expectations. Depreciation remained at the 1993 level of 3.4% of revenue. Interest expense was 4.6% below that for 1993, reflecting lower average debt balances offset by higher interest rates. Pretax profit as a percent of revenue was 9.5% compared to 9.7% in 1993. The effective income tax rates for 1993 and 1994 were almost identical at 39.9% and 39.8%, respectively. The Advanced Medical Systems division, a provider of materials management software to hospitals, recorded a pretax operating loss of $2.8 million -- equivalent to $.06 per share. The 1993 loss was $5.2 million or $.11 per share. Several of the operations were consolidated in 1994 to lower costs and improve customer service. Software enhancements developed during 1994 have been well received by the marketplace and the Company expects AMS to become profitable during 1995. -7- 8 During the year, the Company executed a joint venture agreement with Russian and Dutch partners to manufacture and market business forms in Russia. The Company will contribute approximately $4 million in capital, equipment, and technological know-how and will receive a 41% ownership share. The joint venture named Polyforms J.V. is expected to begin full operations in St. Petersburg during 1995. The Company has been named as one of a number of Potentially Responsible Parties at several waste disposal sites, none of which have ever been company owned. As a matter of policy, the Company accrues for the costs of investigation and remediation as reliable estimates become available. However, at this writing, there are no identified environmental liabilities that are expected to have a material adverse effect on the operating results or financial condition of the Company. 1993 Compared to 1992 - --------------------- Net income for 1993 was $42.2 million or $1.47 per share, a 7.1% increase compared to the $39.4 million and $1.37 operating result reported for 1992. Revenue increased 2.4%, a combination of 1.2% fewer shipment units and 3.6% higher average selling prices, excess industry capacity notwithstanding. Fundamental product mix changes were evident in 1993. Traditional business form products declined about 5% and now represent approximately 42% of total revenue. The most significant drop within the traditional forms category was in low value added, low margin stock forms which declined 26% and now represent only 4% of total revenue. Emerging growth products such as cut sheet, STANFAST, imprint, labels, and distribution services recorded a 15% increase. Rounding out the remaining major product categories, forms related equipment and services rose 4% and promotional direct mail increased 15%. The percentage gross margin improved, rising to 37.4% compared to 36.6% for year 1992. This trend reflects the generally improving product mix, actions to reduce excess capacity, and the higher average selling prices mentioned earlier. Paper prices, taken as a whole, averaged about the same in 1993 as in 1992. Paper companies are anxious to repair their depressed margins and are expected to increase prices when supply and demand conditions permit. The Company will attempt to recover any paper price increases by raising the price of its business forms. Selling and administrative expenses dropped in relation to revenue, reflecting improved productivity. Engineering and research expenses have been maintained at their targeted 1.1% of revenue. Among other expense categories, depreciation and amortization has edged higher in relation to revenue, but this has been offset by reductions in interest expense as a result of lower debt balances and falling interest rates. Overall, operating expenses dropped to 27.7% of revenue compared to last year's 27.9%. This, coupled with the improved gross margins, pushed the pretax profit margin to 9.7% vs. 8.8% in 1992. Pretax profit dollars were up 13.6% in 1993 vs. 1992. The effective income tax rate in 1993 was 39.9%, 3.6% above the 1992 rate. This increase reflects the 1.0% rise in the Federal rate, higher state and local tax rates, and the absence of favorable investment tax credit amortization. The higher tax rate reduced earnings per share in 1993 by $.09 and halved the 13.6% pretax growth to 7% after taxes. -8- 9 The AMS Division recorded a loss in 1993 equivalent to $.11 per share as a result of major investments to improve management depth, standardize business practices, improve customer service and release upgraded application software. The results also reflected nonrecurring charges for bad debt and other adjustments unrelated to 1993 operations. Liquidity and Capital Resources - ------------------------------- 1994 expenditures for the start up of the Russian Joint Venture and the acquisition of Promotional Graphics totalled approximately $24 million. Excluding the effect of these investment outlays, the ending cash position was essentially unchanged from that of the outset of the year as cash flow from operations was sufficient to finance $31.5 million in capital expenditures, $19.5 million in dividends, and $6.5 million in debt repayment. 1995 capital expenditures are expected to approximate $35 million, including normal equipment replacement, capacity expansion, and application software development to improve internal productivity. Dividend and debt payments are forecasted at $20.7 million and $6.5 million, respectively. The financial condition remains very strong. The cash and equivalent balance at year-end 1994 was $55.2 million. Total debt, including current maturities, was $17.5 million, providing a net surplus cash position of $37.7 million. Current assets were 3.6 times the level of current liabilities. The Company expects to meet its 1995 operating, investing and financing needs from a combination of internally generated funds and existing cash resources. ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Index to Financial Statements
Page Independent Auditors' Report 13 Consolidated Balance Sheet - January 1, 1995 and January 2, 1994 14-15 Consolidated Statement of Income - Years ended January 1, 1995, January 2, 1994 and January 3, 1993 16 Consolidated Statement of Shareholders' Equity - Years ended January 1, 1995, January 2, 1994 and January 3, 1993 17 Consolidated Statement of Cash Flows - Years ended January 1, 1995, January 2, 1994 and January 3, 1993 18 Notes to Consolidated Financial Statements 19-26 Quarterly Results of Operations 25-26
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None -9- 10 PART III ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information concerning directors is incorporated by reference from the Company's proxy statement for the 1995 annual meeting of shareholders.
Executive Officers of the Registrant - ------------------------------------ Officer Name and Position Age Since ----------------- --- ------- Paul H. Granzow, Chairman of the Board of Directors 67 1984 Craig J. Brown, Vice President - Finance, Treasurer & Chief Financial Officer 45 1987 Rebecca A. Kagan - Corporate Secretary and In-House Counsel 42 1992 Peter S. Redding, President and Chief Executive Officer 56 1981 Joseph V. Schwan, Vice President - Forms Sales and Marketing 58 1991 Harry A. Seifert, Vice President - Forms Manufacturing 57 1987 Michael Spaul, Vice President and General Manager - COMMUNICOLOR Division 47 1991
There are no family relationships among any of the officers. Officers are elected at the annual meeting of the Board of Directors, which is held immediately after the annual meeting of shareholders, for a term of office covering one year. Effective December 17, 1994, Peter S. Redding was elected to the office of President and Chief Executive Officer. Previously, on January 1, 1994, Mr. Redding was appointed Executive Vice President and Chief Operating Officer. Prior to this appointment, Mr. Redding was serving as Executive Vice President and General Manager of the Forms Division. Also effective on January 1, 1994, Craig J. Brown was appointed to the position of Vice President of Finance, Treasurer and Chief Financial Officer. In addition to his corporate financial responsibilities, Mr. Brown also directs the operations of the Advanced Medical Systems Division. Mr. Brown joined Standard Register in 1975 and has held a number of financial management positions including his most recent - Vice President of Finance and Treasurer. Items 11, 12 and 13 are incorporated by reference from the Company's Proxy Statement for the 1995 Annual Meeting of shareholders. -10- 11 PART IV ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a)(1) Financial Statements: See Index to Financial Statements on Page 9. (a)(2) Financial Statement Schedules. Page II. Valuation and Qualifying Accounts and Reserves 27 Schedules other than those listed above are omitted for the reason that they are not required or are not applicable, or the required information is shown in the financial statements or notes thereto. Columns omitted from schedules filed have been omitted because the information is not applicable. (a)(3) Exhibits: See Index on Page 28 -11- 12 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, The Standard Register Company has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, on March 17, 1995. THE STANDARD REGISTER COMPANY By: /S/ P. S. REDDING ------------------------------------ P. S. Redding, President, Chief Executive Officer and Director Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of The Standard Register Company and in the capacities indicated on March 17, 1995: Signatures Title ---------- ----- /S/ P. H. Granzow Chairman of the Board and Director - ---------------------------- P. H. Granzow /S/ C. J. Brown Vice-President - Finance, Treasurer - ---------------------------- and Chief Financial Officer C. J. Brown P. H. Granzow, pursuant to power of attorneys which are being filed with this Annual Report on Form 10-K, has signed below on March 17, 1995 as attorney-in-fact for the following directors of the Registrant: R. W. Begley, Jr. P. S. Redding R. R. Burchenal J. J. Schiff, Jr. F. D. Clarke III C. F. Sherman J. K. Darragh J. Q. Sherman II M. C. Nushawg /S/ P. H. Granzow --------------------------------- P. H. Granzow -12- 13 INDEPENDENT AUDITORS' REPORT Board of Directors and Shareholders The Standard Register Company Dayton, Ohio We have audited the accompanying consolidated balance sheet of The Standard Register Company and subsidiary as of January 1, 1995 and January 2, 1994 and the related consolidated statements of income, shareholders' equity, and cash flows for each of the three years in the period ended January 1, 1995. Our audits also included the financial statement schedules listed in Item 14(a)(2). These financial statements and financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedules based upon our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of The Standard Register Company and subsidiary as of January 1, 1995 and January 2, 1994, and the results of their operations and their cash flows for each of the three years in the period ended January 1, 1995, in conformity with generally accepted accounting principles. Also in our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all material respects the information set forth therein. BATTELLE & BATTELLE PLL Certified Public Accountants 3400 S. Dixie Drive Dayton, Ohio 45439 January 26, 1995 -13- 14 THE STANDARD REGISTER COMPANY CONSOLIDATED BALANCE SHEET (DOLLARS IN THOUSANDS)
January 1 January 2 A S S E T S 1995 1994 --------- --------- CURRENT ASSETS Cash and cash equivalents 55 235 78 994 Accounts receivable, less allowance for losses of $2,200 and $2,534, respectively 151 952 135 067 Inventories 100 673 98 248 Deferred income taxes 9 592 10 860 Prepaid expense 4 039 4 558 ------- ------- Total current assets 321 491 327 727 ------- ------- PLANT AND EQUIPMENT Buildings and improvements 57 472 54 688 Machinery and equipment 193 187 181 645 Office and rental equipment 37 904 36 041 ------- ------- Total 288 563 272 374 Less accumulated depreciation 121 267 118 411 ------- ------- Depreciated cost 167 296 153 963 Plant and equipment under construction 28 720 17 801 Land 2 789 2 488 ------- ------- Total plant and equipment 198 805 174 252 ------- ------- OTHER ASSETS Goodwill, patents and other 2 391 354 Investment in joint venture 2 972 ------- ------- Total other assets 5 363 354 ------- ------- Total assets 525 659 502 333 ======= =======
-14- 15 STANDARD REGISTER COMPANY CONSOLIDATED BALANCE SHEET (DOLLARS IN THOUSANDS)
January 1 January 2 LIABILITIES AND SHAREHOLDERS' EQUITY 1995 1994 --------- --------- CURRENT LIABILITIES Current maturities of long-term debt 6 471 6 471 Accounts payable 19 071 20 582 Dividends payable 5 149 4 874 Accrued compensation 27 994 27 224 Accrued pension expense 4 139 7 805 Accrued other expense 2 230 1 223 Accrued taxes, except income 5 181 4 574 Income taxes payable 2 278 4 761 Customer deposits 9 807 Deferred service contract income 7 360 6 640 ------- ------- Total current liabilities 89 680 84 154 ------- ------- LONG-TERM LIABILITIES Notes payable to banks and others 11 071 17 546 Retiree health care obligation 25 125 24 482 Deferred income taxes 15 817 15 168 ------- ------- Total long-term liabilities 52 013 57 196 ------- ------- SHAREHOLDERS' EQUITY Common stock, $1.00 par value: Authorized 30,500,000 shares Issued 1994 - 24,084,632; 1993 - 24,036,796 24 085 24 037 Class A stock, $1.00 par value: Authorized 4,725,000 shares Issued - 4,725,000 4 725 4 725 Capital in excess of par value 26 507 25 562 Retained earnings 332 501 308 413 Cost of common shares in treasury: 1994 - 201,741 shares; 1993 - 90,086 shares ( 3 852) ( 1 754) ------- ------- Total shareholders' equity 383 966 360 983 ------- ------- Total liabilities and shareholders' equity 525 659 502 333 ======= =======
See accompanying notes. -15- 16 THE STANDARD REGISTER COMPANY CONSOLIDATED STATEMENT OF INCOME (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
52 Weeks Ended 52 Weeks Ended 53 Weeks Ended January 1 January 2 January 3 1995 1994 1993 -------------- -------------- ------------- REVENUE 767 415 722 120 705 215 ------- ------- ------- COST AND EXPENSE Cost of products sold 485 738 452 163 446 772 Engineering and research 7 475 7 754 7 803 Selling and administrative 174 435 166 267 163 711 Depreciation and amortization 25 755 24 553 22 955 Interest 1 090 1 142 2 124 ------- ------- ------- Total cost and expense 694 493 651 879 643 365 ------- ------- ------- INCOME BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF ACCOUNTING CHANGES 72 922 70 241 61 850 ------- ------- ------- INCOME TAXES Current 27 129 26 920 22 451 Deferred 1 917 1 136 27 ------- ------- ------- Total income taxes 29 046 28 056 22 478 ------- ------- ------- NET INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGES 43 876 42 185 39 372 CUMULATIVE EFFECT OF ACCOUNTING CHANGES - - ( 13 362) ------- ------- ------- NET INCOME 43 876 42 185 26 010 ======= ======= ======= DATA PER SHARE Net income before cumulative effect of accounting changes $1.53 $1.47 $1.37 Cumulative effect of accounting changes - - ( .47) ----- ----- ----- Net income $1.53 $1.47 $ .90 ===== ===== =====
See accompanying notes. -16- 17 THE STANDARD REGISTER COMPANY CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DOLLARS IN THOUSANDS)
52 Weeks Ended 52 Weeks Ended 53 Weeks Ended January 1 January 2 January 3 1995 1994 1993 -------------- -------------- ------------- COMMON STOCK Beginning balance 24 037 23 986 23 948 Add shares issued under Stock Incentive Plan 48 51 50 Less shares purchased and retired - - (12) ------- ------- ------- Ending balance 24 085 24 037 23 986 ------- ------- ------- CLASS A STOCK 4 725 4 725 4 725 ------- ------- ------- CAPITAL IN EXCESS OF PAR VALUE Beginning balance 25 562 24 705 24 246 Add excess of market over par value of shares issued under Stock Incentive Plan 945 857 650 Less excess of cost over par value of shares purchased and retired - - (191) ------- ------- ------- Ending balance 26 507 25 562 24 705 ------- ------- ------- RETAINED EARNINGS Beginning balance 308 413 284 901 276 414 Add net income for year 43 876 42 185 26 010 Less cash dividends declared (19 788) (18 673) (17 523) ------- ------- ------- Ending balance 332 501 308 413 284 901 ------- ------- ------- TREASURY SHARES Beginning balance (1 754) Cost of common shares purchased (2 098) (1 754) ------- ------- Ending balance (3 852) (1 754) ------- ------- Total shareholders' equity 383 966 360 983 338 317 ======= ======= =======
See accompanying notes. -17- 18 THE STANDARD REGISTER COMPANY CONSOLIDATED STATEMENT OF CASH FLOWS (DOLLARS IN THOUSANDS)
52 Weeks Ended 52 Weeks Ended 53 Weeks Ended January 1 January 2 January 3 1995 1994 1993 -------------- -------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income 43 876 42 185 26 010 ------- ------- ------- Add (deduct) items not affecting cash: Cumulative effect of accounting changes - - 13 362 Depreciation and amortization 25 755 24 553 22 955 Loss (gain) on sale of facilities 255 (96) 77 Provision for deferred income taxes 1 917 1 136 27 Increase (decrease) in cash arising from changes in assets and liabilities: Accounts receivable (16 885) (12 623) 1 754 Inventories (2 425) (10 671) 5 349 Other assets (1 738) 554 (714) Accounts payable (1 511) 2 378 1 624 Accrued expenses (639) (2 162) 3 530 Income taxes payable (2 483) 1 895 (1 185) Customer deposits 9 807 - - Deferred income 720 984 1 729 ------- ------- ------- Net adjustments 12 773 5 948 48 508 ------- ------- ------- Net cash provided by operating activities 56 649 48 133 74 518 ------- ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of equipment 28 2 134 214 Additions to plant and equipment (52 128) (31 076) (22 697) Investment in joint venture (1 215) - - ------- ------- ------- Net cash (used in) investing activities (53 315) (28 942) (22 483) ------- ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES Principal payments on long-term debt (6 475) (7 161) (10 779) Proceeds from issuance of common stock 993 908 700 Purchase of common stock (2 098) (1 754) (203) Dividends paid (19 513) (18 393) (17 230) ------- ------- ------- Net cash (used in) financing activities (27 093) (26 400) ( 27 512) ------- ------- ------- NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (23 759) (7 209) 24 523 Cash and cash equivalents at beginning of year 78 994 86 203 61 680 ------- ------- ------- CASH AND CASH EQUIVALENTS AT END OF YEAR 55 235 78 994 86 203 ======= ======= ======= SUPPLEMENTAL CASH FLOW DISCLOSURES: Cash paid during the year for: Interest 1 085 1 173 2 198 Income taxes 29 612 25 025 23 636 Non-cash investing activity: Transfer of equipment to joint venture 1 757
See accompanying notes. -18- 19 THE STANDARD REGISTER COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Company operates in a single industry segment - providing products and services that facilitate the recording, storage and communication of business transactions and information. The accounting policies that affect the more significant elements of the consolidated financial statements are summarized below. CONSOLIDATION - The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. All significant intercompany accounts and transactions have been eliminated. FISCAL YEAR - The Company's fiscal year ends on the Sunday nearest to December 31. The fiscal years ending January 1, 1995 and January 2, 1994 had 52 weeks and the fiscal year ended January 3, 1993 had 53 weeks. CASH EQUIVALENTS - The Company classifies as cash equivalents all highly liquid investments, primarily composed of repurchase agreements, municipal notes and bond funds, which are convertible to a known amount of cash and carry an insignificant risk of change in value. Cash equivalents are valued at cost plus accrued interest which also approximates market value. INVENTORIES - Inventories are valued at the lower of cost or market. Substantially all inventory costs are determined by the last-in, first-out method (LIFO). Printed finished products include forms stored for future shipment and invoicing to customers. PLANT AND EQUIPMENT - Land, buildings and equipment, including significant improvements to existing facilities, are valued at cost. Maintenance and repairs are expensed as incurred. DEPRECIATION - For financial statement purposes, depreciation is computed by the straight-line method at rates adequate to recover the costs of the applicable assets over their expected useful lives. For income tax purposes, depreciation is computed by accelerated methods. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS - In 1992, the Company adopted Statement of Financial Accounting Standards No. 106 (SFAS 106), "Employers' Accounting for Postretirement Benefits Other Than Pensions". Prior to 1992, the cost of providing these benefits to retired employees was recognized as a charge to income as the health care claims were received, the prevalent practice prior to enactment of SFAS 106. INCOME TAXES - In 1992, the Company adopted Statement of Financial Accounting Standards No. 109 (SFAS 109), "Accounting for Income Taxes". Prior to 1992, the provision for income taxes was based on income and expense included in the consolidated statement of income. REVENUE RECOGNITION - The Company generally recognizes product and related services revenue at the time of shipment to customers. Under contractual arrangements with some customers, custom forms which are stored for future delivery are recognized as revenue when manufacturing is complete and the order is invoiced. Revenue from equipment service contracts is recognized ratably over the term of the contract. NET INCOME PER SHARE - Income per share is calculated using the average number of shares outstanding during the year. -19- 20 NOTE 2 - INVENTORIES Inventories are valued at the lower of cost or market determined by the last-in, first-out (LIFO) method. If the first-in, first-out method had been used, these inventories would have been $24,766,000 higher at January 1, 1995 and $22,836,000 higher at January 2, 1994. During 1992, the Company reduced certain inventory quantities which were valued at lower LIFO costs prevailing in prior years. The effect of this reduction was to increase 1992 net income by $1,763,000 or $.06 per share. Inventories at the respective year-ends are as follows:
(Dollars in thousands) January 1 January 2 1995 1994 --------- --------- Finished products $ 48,823 $ 52,571 Jobs in process 30,267 26,671 Materials and supplies 21,583 19,006 -------- -------- Total $100,673 $ 98,248 ======== ========
NOTE 3 - PLANT AND EQUIPMENT Plant and equipment are carried at cost less accumulated depreciation. Depreciation for financial reporting purposes was $25,535,000 in 1994, $23,908,000 in 1993, and $22,310,000 in 1992. Depreciation rates are based on estimates of useful lives:
Classification Years -------------- ----- Buildings and improvements 10-40 Machinery and equipment 5-15 Office equipment 5-15 Rental equipment 3-4 Leasehold improvements Life of leases
When equipment is retired or has been fully depreciated, its cost and the related accumulated depreciation are eliminated from the respective accounts. Gains or losses arising from the dispositions are reported as income or expense. NOTE 4 - INVESTMENT IN JOINT VENTURE In 1994, the Company entered into a joint venture with Russian and Dutch partners to manufacture and market business forms in Russia. In exchange for a 41% share, the Company will contribute a total of approximately $4.0 million in capital, equipment, and technological know-how. The joint venture named Polyforms will begin full operations at its St. Petersburg manufacturing location during 1995. NOTE 5 - PENSION PLANS The Company has qualified defined benefit plans covering substantially all of its employees. The benefits are based on years of service and the employee's compensation at the time of retirement, or years of service and a benefit multiplier. The Company funds its pension plans based on allowable federal income tax deductions. Contributions are intended to provide not only for benefits attributed to service to date but also for benefits expected to be earned in the future. In addition, the Company has non-qualified plans which provide benefits in addition to those provided in the qualified plan. -20- 21 NOTE 5 - PENSION PLANS (CONTINUED) Assumptions used in the respective accounting years to determine pension costs, are as follows:
1994 1993 1992 ------ ------ ------ Discount rate 8.5% 8.5% 8.5% Rate of increase in compensation levels 4.5% 4.5% 4.5% Expected long-term rate of return on assets 10.5% 10.5% 10.5%
Pension costs consist of the following components:
(Dollars in thousands) 1994 1993 1992 ------ ------ ------ Service cost of benefits earned $ 5,055 $ 4,948 $ 4,696 Interest cost on projected benefit obligation 10,031 9,780 9,410 Actual gain on plan assets (3,927) (4,101) (12,058) Asset (loss) gain deferred (6,265) (6,514) 2,481 Amortization of transition asset (722) (722) (722) Amortization of prior service costs 1,832 1,522 1,415 Amortization of loss 13 ------- ------- ------- Net pension cost $ 6,004 $ 4,926 $ 5,222 ======= ======= =======
The following table sets forth the plans' funded status and amounts recognized in the Company's consolidated balance sheet at the respective year ends.
January 1, 1995 January 2, 1994 ------------------------ ------------------------ Assets Accumulated Assets Accumulated Exceed Benefits Exceed Benefits Accumulated Exceed Accumulated Exceed (Dollars in thousands) Benefits Assets Benefits Assets ----------- ----------- ----------- ---------- Actuarial present value of: Accumulated benefit obligation Vested $ 10,325 $ 90,442 $ 97,065 $ 1,389 Non-vested 574 5,992 593 80 -------- -------- -------- ------- Total $ 10,899 $ 96,434 $ 97,658 $ 1,469 ======== ======== ======== ======= Projected benefit obligation $ 10,899 $119,389 $121,132 $ 3,251 ======== ======== ======== ======= Plan assets at fair value 11,206 94,212 101,639 0 ======== ======== ======== ======= Plan assets in excess of (less than) projected benefit obligation 307 (25,177) (19,493) (3,251) Unrecognized net loss 1,963 7,063 2,396 208 Unrecognized prior service cost 1,150 12,430 13,049 2,363 Minimum liability adjustment (309) (789) Unrecognized transition asset (479) (1,087) (2,288) 0 -------- -------- -------- ------- Prepaid pension (liability) $ 2,941 ($7,080) ($6,336) ($1,469) ======== ======== ======== ======= Net liability recognized in consolidated balance sheet ($ 4,139) ($7,805) ======== ========
Pension fund assets are invested in a broadly diversified portfolio consisting primarily of publicly-traded common stocks and fixed income securities. -21- 22 NOTE 6 - POSTRETIREMENT BENEFITS OTHER THAN PENSIONS The Company provides health care benefits for eligible employees who retired prior to July 1, 1992. In 1992, the Company adopted Statement of Financial Accounting Standards No. 106, "Employers Accounting for Postretirement Benefits Other than Pensions". This statement requires the accrual method of accounting for postretirement health care benefits over the employees' period of employment based upon actuarially determined costs. Previously, the Company expensed claims as incurred, the prevalent practice prior to enactment of SFAS 106. In fiscal 1992, the Company elected to immediately recognize the $24,510,000 pretax postretirement benefit obligation existing at December 30, 1991, as a cumulative effect of an accounting change. This equates to $14,850,000 or $.52 per share on an after tax basis. The Company continues to pay for retiree benefit costs as claims are incurred. Retirees' health claims paid in years 1994, 1993 and 1992 amounted to $1,773,000, $2,069,000, and $1,892,000, respectively. The accumulated benefit obligation was determined using the unit credit method and an assumed discount rate of 8.5%. The assumed current health care cost trend rate is 11.2% in 1994 and gradually decreases to 6.5% in the year 2014. The components of postretirement benefit costs for 1994, 1993 and 1992 are as follows:
(Dollars in thousands) 1994 1993 1992 ---- ---- ---- Service cost $ -0- $ -0- $ -0- Interest cost 2,333 2,041 1,970 Amortization of net loss from earlier periods 84 ------ ------ ------ Postretirement benefit cost $2,417 $2,041 $1,970 ====== ====== ======
The funded status of the plan at January 1, 1995 and January 2, 1994 is as follows:
January 1 January 2 1995 1994 --------- --------- Accumulated postretirement benefit obligation for retirees $30,296 $28,502 Plan assets -0- -0- ------- ------- Accumulated postretirement benefit obligation in excess of plan assets 30,296 28,502 Unrecognized net loss (5,171) (4,020) ------- ------- Retiree health care obligation shown in balance sheet $25,125 $24,482 ======= =======
A one percent increase or decrease in the health care cost trend rates used would result in a $332,000 increase or decrease in the service and interest components of expense for 1994 ($243,000 for 1993) and a $3,905,000 increase or decrease in the postretirement benefit obligation at January 1, 1995 ($2,858,000 at January 2, 1994). -22- 23 NOTE 7 - LONG-TERM DEBT
(Dollars in thousands) January 1 January 2 1995 1994 ---------- --------- Unsecured term notes dated December 9, 1986, bearing interest at 6.375% and 3.6875% at respective year ends, due in four remaining equal semi-annual installments payable to: The First National Bank of Boston $ 7,294 $10,943 Wachovia Bank and Trust Co. 2,824 4,235 Society Bank, N.A. 2,824 4,235 ------- ------- Total 12,942 19,413 Industrial development revenue bonds issued by Rutherford County, Tenn., bearing interest at 6-1/8%, due 1999 through 2003 4,600 4,600 Other obligations with various interest rates 4 ------- ------- Total 17,542 24,017 Less current maturities 6,471 6,471 ------- ------- Long-term debt $11,071 $17,546 ======= =======
The aggregate principal payments for the five fiscal years subsequent to January 1, 1995, are as follows: 1995 - $6,471; 1996 - $6,471; 1997 - None; 1998 - None; 1999 - $525. NOTE 8 - INCOME TAXES The provision (credit) for income taxes consists of the following:
U.S. Federal State Total ------- ----- ----- 1994 Current $21,765 $ 5,364 $27,129 Deferred 1,550 367 1,917 ------- ------- ------- Total $23,315 $ 5,731 $29,046 ======= ======= ======= 1993 Current $21,140 $ 5,780 $26,920 Deferred 918 218 1,136 ------- ------- ------- Total $22,058 $ 5,998 $28,056 ======= ======= ======= 1992 Current $18,012 $ 4,439 $22,451 Deferred (220) 247 27 ------- ------- ------- Total $17,792 $ 4,686 $22,478 ======= ======= =======
In 1992, the Company changed its method of accounting for income taxes as a result of adopting Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes". Under this method, deferred tax assets and liabilities are determined based upon the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The Company recorded a credit of $1,488,000 or $.05 per share which represents the net decrease in the net deferred tax liabilities as of that date. This amount was reported in the consolidated statement of income as a cumulative effect of an accounting change. -23- 24 NOTE 8 - INCOME TAXES (CONTINUED) The significant components of the deferred tax expense (benefit) are as follows:
(Dollars in thousands) 1994 1993 1992 ---- ---- ---- Depreciation $ 877 $1,202 $ 992 Pension 885 5 5 Inventories 729 (301) 562 Compensation and benefits (461) (26) (151) Receivables 138 154 70 Plant reconfiguration 71 314 (307) Retiree health care (228) (212) (16) Investment tax credit (1,128) Other (94) - - ------ ------ ------ Total $1,917 $1,136 $ 27 ====== ====== ======
The components of the net deferred tax asset and liability as of January 1, 1995 and January 2, 1994 are as follows:
(Dollars in thousands) January 1 January 2 1995 1994 ---------- --------- Deferred tax asset: Accounts receivable $ 886 $ 1,024 Inventories 3,877 4,606 Compensation and benefits 3,332 2,871 Pension 1,403 2,288 Other 94 71 ------- ------- $ 9,592 $10,860 ======= ======= Deferred tax liability: Depreciation $25,934 $25,057 Retiree health care benefits (10,117) ( 9,889) ------- ------- $15,817 $15,168 ======= =======
The reconciliation of the statutory federal income tax rate and the effective tax rate follows:
1994 1993 1992 ---- ---- ---- Statutory federal income tax rate 35.0% 35.0% 34.0% State and local income taxes 5.3 5.4 5.0 Investment tax credit - - (1.8) Other (.5) (.5) (.9) ---- ---- ---- Effective tax rate 39.8% 39.9% 36.3% ==== ==== ====
NOTE 9 - CAPITALIZATION The Company has two classes of capital stock issued and outstanding, Common and Class A. These are equal in all respects except voting rights and restrictions on ownership of the Class A. Each of the 23,882,891 shares of Common outstanding has one vote, while each of the 4,725,000 shares of Class A is entitled to five votes. Class A stock is convertible into Common stock on a share-for-share basis at which time ownership restrictions are eliminated. -24- 25 NOTE 10 - COMMITMENTS AND CONTINGENCIES Purchase commitments for capital improvements aggregated $1,817,000 at January 1, 1995. Also, the Company has purchase commitments for equipment for resale of $4,405,000 at January 1, 1995. In addition, the Company has entered into several agreements with suppliers to purchase specified minimum quantities of raw materials through 1995. The Company is obligated under several leases expiring at various dates. Annual expense under these leases was $18,233,000 in 1994, $17,747,000 in 1993, and $16,746,000 in 1992. Rental commitments under existing leases at January 1, 1995, were:
(Dollars in thousands) Computer and Real Sales Transportation Other Estate Offices Equipment Equipment Total ------ ------- -------------- --------- ----- 1995 $4,398 $7,725 $1,148 $2,208 $15,479 1996 2,924 5,741 812 1,756 11,233 1997 1,262 3,871 678 980 6,791 1998 552 2,126 596 655 3,929 1999 289 712 75 222 1,298 Later years 34 29 63
In the opinion of management, no litigation or claims, including proceedings under governmental laws and regulations related to environmental matters, are pending against the Company which will have an adverse material effect on its financial condition. NOTE 11 - QUARTERLY FINANCIAL DATA (UNAUDITED) Summarized quarterly financial data, in thousands of dollars except for per share amounts, follow:
Quarters Ended ------------------------------------------------ April 3 July 3 October 2 January 1 1994 1994 1994 1995 --------- -------- --------- --------- Revenue $183,875 $184,306 $190,008 $209,226 Gross margin* 67,617 69,500 69,629 74,931 Net income 10,016 10,560 10,307 12,993 Net income per share .35 .37 .36 .45
-25- 26 NOTE 11 - QUARTERLY FINANCIAL DATA (UNAUDITED) (CONTINUED)
Quarters Ended ------------------------------------------------ April 4 July 4 October 3 January 2 1993 1993 1993 1994 --------- -------- --------- --------- Revenue $169,295 $174,728 $179,104 $198,993 Gross margin* 64,222 64,724 65,712 75,299 Net income 9,366 9,546 9,749 13,524 Net income per share .33 .33 .34 .47 Quarters Ended ------------------------------------------------ March 29 June 28 September 27 January 3 1992 1992 1992 1993 -------- --------- ------------ --------- Revenue $168,541 $173,095 $170,177 $193,402 Gross margin* 62,908 63,623 61,845 70,067 Net income before cumulative effect of accounting changes 8,743 9,447 8,683 12,499 Cumulative effect of accounting changes (13,362) Net income (loss) (4,619) 9,447 8,683 12,499 Per share Net income (loss) before cumulative effect of accounting changes .30 .33 .31 .43 Cumulative effect of accounting changes (.47) Net income (loss) per share (.17) .33 .31 .43 * Revenue less cost of products sold and services rendered.
NOTE 12 - CONCENTRATION OF CREDIT RISK The Company's concentration of credit risk is limited due to the large number of primarily domestic customers who are geographically dispersed. As disclosed on the balance sheet, the Company maintains an allowance for doubtful accounts to cover estimated credit losses. -26- 27 SCHEDULE II THE STANDARD REGISTER COMPANY VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR THE THREE YEARS ENDED JANUARY 1, 1995 (Dollars in thousands)
Column A Column B Column C Column D Column E - -------- -------- -------- -------- -------- Additions --------- (1) (2) Charged Balance at (Credited) Balance beginning to costs Other at end Description of period and expenses Additions Deductions of period - ----------- ---------- ------------ --------- ---------- --------- Year Ended January 1, 1995 - -------------------------- Allowance for doubtful accounts 2,534 1,922 2,256(a) 2,200 Inventory obsolescence 2,950 700 258(b) 3,392 Year Ended January 2, 1994 - -------------------------- Allowance for doubtful accounts 2,983 2,085 2,534(a) 2,534 Inventory obsolescence 3,024 1,377 1,451(b) 2,950 Year Ended January 3, 1993 - -------------------------- Allowance for doubtful accounts 3,164 2,312 2,493(a) 2,983 Inventory obsolescence 4,723 822 2,521(b) 3,024 (a) Net uncollectible accounts written off (b) Obsolete inventory scrapped or written down to realizable value
-27- 28 INDEX TO EXHIBITS 3. Amended Articles of Incorporation of the Company, Filed as Exhibit 4 to the Company's Registration Statement No. 33-8687. 10. Material contracts. 10.1 The Standard Register Company Key Employees Incentive Plan. Incorporated by reference to the Company's Proxy Statement for the Annual Meeting of Shareholders held on April 26, 1976. 10.2 The Standard Register Company Stock Incentive Plan. Incorporated by reference to the Company's Proxy Statement for the Annual Meeting of Shareholders held on April 19, 1978. 10.3 The Standard Register Company Non-Qualified Retirement Plan filed as exhibit to Form 10-K for year ended January 2, 1994. 10.4 The Standard Register Company Officers' Supplemental Non-Qualified Retirement Plan filed as exhibit to Form 10-K for year ended January 2, 1994. 10.5 The Standard Register Company Amended and Restated Stock Incentive Plan filed as exhibit to Form 10-K for year ended January 2, 1994. 11. Computation of Earnings Per Share. 24. Power of Attorney of R. W. Begley, Jr., R. R. Burchenal, F. D. Clark III, J. K. Darragh, M. C. Nushawg, P. S. Redding, J. J. Schiff, Jr., C. F. Sherman, J. Q. Sherman II. 27. Financial Data Schedule. -28- EX-11 2 STANDARD REGISTER CO. 10-K405 EXHIBIT 11 1 EX-11 THE STANDARD REGISTER COMPANY COMPUTATION OF EARNINGS PER SHARE (Dollars in thousands except for per share amounts)
1994 1993 1992 ---- ---- ---- Average shares outstanding 28,681,045 28,734,394 (1) 28,709,291 (2) ========== ========== ========== Net income before cumulative effect of accounting changes 43,876 42,185 39,372 Cumulative effect of accounting changes - - 13,362 ------- ------- ------- Net income 43,876 42,185 26,010 ======= ======= ======= Primary income per share: Net income before cumulative effect of accounting changes $1.53 $1.47 $1.37 Cumulative effect of accounting changes - - .47 ----- ----- ----- Net income $1.53 $1.47 $ .90 ===== ===== ===== (1) Includes 47,836 shares of common stock issued in 1994 under the Company's Stock Incentive Plan and repurchase of 111,655 shares during the year. (2) Includes 50,749 shares of common stock issued in 1993 under the Company's Stock Incentive Plan and repurchase of 90,086 shares during the year. (3) Includes 50,490 shares of common stock issued in 1992 under the Company's Stock Incentive Plan and repurchase of 12,570 shares during the year.
-29- EX-24 3 STANDARD REGISTER CO. 10-K405 EXHIBIT 24 1 EX-24 P O W E R O F A T T O R N E Y ----------------------------------- We, the undersigned Directors of The Standard Register Company (hereinafter called "Company"), an Ohio corporation, do hereby appoint Paul H. Granzow, Chairman of the Board of Directors of the Company, as our attorney-in-fact to sign on behalf of each of us as Directors of the Company the Annual Report on Form 10-K filed by the Company annually with the Securities and Exchange Commission. We, the undersigned Directors of the Company, have signed this Power of Attorney on December 15, 1994. /S/ R. W. Begley, Jr. /S/ P. S. Redding - ----------------------------------- ---------------------------------- R. W. Begley, Jr. P. S. Redding /S/ R. R. Burchenal /S/ J. J. Schiff, Jr. - ----------------------------------- ---------------------------------- R. R. Burchenal J. J. Schiff, Jr. /S/ F. D. Clark, III /S/ C. F. Sherman - ----------------------------------- ---------------------------------- F. D. Clark, III C. F. Sherman /S/ J. K. Darragh /S/ J. Q. Sherman, II - ----------------------------------- ---------------------------------- J. K. Darragh J. Q. Sherman, II /S/ M. C. Nushawg - ----------------------------------- M. C. Nushawg Signed and acknowledged in the presence of: /S/ P. H. Granzow /S/ R. A. Kagan - ----------------------------------- ---------------------------------- P. H. Granzow, Chairman of R. A. Kagan, Corporate Secretary the Board of Directors of & In-House Counsel of The Standard Register Company The Standard Register Company [Corporate Seal] STATE OF OHIO, MONTGOMERY COUNTY: The foregoing Directors of The Standard Register Company personally appeared before me, a Notary Public for the State of Ohio, and each of them acknowledged that they did sign this Power of Attorney, and that it is the free act and deed of each said Director. I have signed and sealed this Power of Attorney at Dayton, Ohio on December 15, 1994. /S/ Brynne A. Dailey ---------------------------------- Brynne A. Dailey Notary Public [Notary Seal] -30- EX-27 4 STANDARD REGISTER CO. 10-K405 EXHIBIT 27
5 This schedule contains summary financial information extracted from the Standard Register Company financial statements for the year ended January 1, 1995 and is qualified in its entirety by reference to such financial statements. 1,000 YEAR JAN-01-1995 JAN-01-1995 55,235 0 154,152 2,200 100,673 321,491 320,072 121,267 525,659 89,680 17,542 28,810 0 0 355,156 525,659 765,944 767,415 485,738 694,493 0 1,922 1,090 72,922 29,046 43,876 0 0 0 43,876 1.53 1.53
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