-----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, VMPZpqGEcA+gtlqySvAXpE25eERaprx1xzDxCM/fWHltK7m/b1XZlT5RXQcFh3WC ArmSfCL+vweF9BKQOZLOtQ== 0000950152-96-001101.txt : 19960325 0000950152-96-001101.hdr.sgml : 19960325 ACCESSION NUMBER: 0000950152-96-001101 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960322 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: 96537351 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 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 December 31, 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 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(B) OF THE ACT None SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT Name of each exchange Title of each class on which registered - ----- -- ---- ----- -- ----- ---------- Common stock $1.00 par value 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 23, 1996 was approximately $272,675,948, based on a closing sales price of $23.00 per share on February 23, 1996. At February 23, 1996, the number of shares outstanding of the issuer's classes of common stock are as follows: Common stock, $1.00 par value 23,969,867 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 17, 1996. -1- 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 products and services currently sold is extensive. The Company's Document Management Division serves the document technology and information needs of its customers by offering custom printed business documents, electronic documents, pressure sensitive labels, document warehousing and distribution, workflow analysis and document design, document management system, along with imaging and fulfillment services. The Company's Document Systems Division provides scaleable, departmental printing and mailing solutions, which when combined with the products and services of the Document Management Division, result in more efficient ways for customers to produce, finish, and process documents. These solutions encompass intelligent printing systems, encoding equipment, automation identification systems, document processing equipment along with related maintenance service and supplies. The Company's Communicolor Division prints high color, personalized promotional direct mail products. In addition, the Advanced Medical Systems Division develops and markets materials management software for hospitals. The Company's products and services are marketed by direct selling and service organizations operating from offices located in principal cities throughout the United States. Forms are produced at thirty-nine 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 just-in-time 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 1995 of $7,813,000 compared to $7,475,000 in 1994 and $7,754,000 for 1993. 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 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 1995, the Company continued its Stanfast manufacturing operations in twenty 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 $48,332,000 in 1995, compared to $52,128,000 and $31,076,000 in 1994 and 1993, 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.) The Company has several patents which provide a competitive advantage or which generate license income. None of these, individually, have a material 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 3.4 to 1 at December 31, 1995 as compared to 3.6 to 1 at January 1, 1995 and 3.9 to 1 at January 2, 1994. Total debt, including long-term and current maturities, was 2.7% of equity at year-end 1995, compared to 4.6% and 6.7% for years-end 1994 and 1993, respectively. At year-end 1995, cash, cash equivalents and short-term investments exceeded current and long-term debt by $23,905,000. 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 December 31, 1995 was $53,817,000 compared to $69,173,000 and $51,897,000 at January 1, 1995 and January 2, 1994, respectively. The current year decline in backlog was attributable to the Company's successful efforts to offer faster turnaround of incoming orders, thereby improving customer service. 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 December 31, 1995, the Company had 6,439 employees compared to 6,201 and 5,769 at January 1, 1995 and January 2, 1994, 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 contributed a total of approximately $4.5 million in capital, equipment, and technological know-how. The joint venture named Polyforms J.V. began full operations at its St. Petersburg, Russia 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 Fayetteville, Arkansas, 146,000 sq. ft., printing plant Porterville, California, 174,000 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 and warehouse 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 Spring Grove, Illinois, 100,000 sq. ft., printing plant All plants are owned by the Company except for the Tampa location. The Company also operates twenty Stanfast print centers located nationwide, two imprint centers located in Tolland, Connecticut and Phoenix, Arizona, plus a plastic card embossing plant in Rochester, New York. These facilities are generally leased and are much smaller than the facilities listed above. 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 a significant liability has 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 is notwithstanding 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 on the NASDAQ National Market under the symbol SREG. The range of high and low closing sales prices for the common stock 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 5 ------------------------------------------------------------------------------------------------- Cash Quarter Dividend High Low Last ------- -------- ---- --- ---- 1st $0.18 18-1/4 15-1/4 17-3/4 2nd $0.18 20-1/8 17-1/4 19 3rd $0.18 21-3/4 18-3/4 21-1/2 4th $0.18 23-3/8 19-1/2 20-1/8
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
(b) Approximate number of security holders of the Company's common stock as of February 23, 1996 - 3,053 excluding individual holders whose shares are held by nominees. There are also 16 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 - ------------------------------
1995 1994 1993 1992 1991 ---- ---- ---- ---- ---- Thousands except for per share data ---------------------------------------------------------------------- Revenue $903,240 $767,415 $722,120 $705,215 $693,712 Net income before cumulative effect of accounting changes 47,759 43,876 42,185 39,372 32,707 Cumulative effect of accounting changes - - - ( 13,362) - Net income 47,759 43,876 42,185 26,010 32,707 Earnings per share: Net income before cumulative effect of accounting changes 1.67 1.53 1.47 1.37 1.14 Cumulative effect of accounting changes - - - ( .47) - Net income 1.67 1.53 1.47 .90 1.14 Selected Balance Sheet Data - --------------------------- Total assets $555,503 $525,659 $502,333 $482,463 $463,560 Long-term debt 4,600 11,071 17,546 24,454 35,189 Other - ----- Cash dividends paid per share .72 .68 .64 .60 .56
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Significant Events - ------------------ In June 1994 the Company acquired the assets of the Promotional Graphics Division of UARCO Incorporated for approximately $22 million. The purchase added a direct mail printing and imaging plant in Eudora, Kansas, which increased Communicolor's production capacity and customer base. In September 1994 the Company entered into a joint venture agreement with Russian and Dutch partners to produce and market business forms in Russia. The Company has invested $4.5 million in the start-up operation through year end 1995, primarily composed of used printing equipment refurbished to meet the needs of the joint venture. The Company has a 41% ownership share. In March 1995 the Company paid $7.7 million for the assets of FCA, a division of Capital Graphics, Inc., a producer of custom business forms located in Spring Grove, Illinois. This acquisition brought needed capacity to meet growing business forms demand. -6- 7 In June 1995 the Company successfully defended a legal challenge to two of its key document security patents. Legal fees incurred in 1995 for this matter were $1.5 million. In August 1995 the Company entered into a settlement agreement with Travelers Express Company, Inc. related to a patent dispute. Standard Register agreed to compensate Travelers and to make modifications to certain money order disbursers. Total compensation and related legal fees of $3.7 million, were accrued in 1995. In September 1995 the Company purchased a 35% interest in F3 Software Corporation for $3.5 million. F3 is a provider of state-of-the-art forms design and electronic forms application software. During 1995, the Company sold its Hanford, California, and Bedford, Pennsylvania, plants, recording a total gain of $1.4 million. These two plants had been closed in previous years as part of restructuring programs. Results of Operations 1995 compared to 1994 - ------------------------------------------- Net income in 1995 was $47.8 million, a 9% increase compared to the $43.9 million result reported for 1994. On an operating basis, excluding the effect of unfavorable LIFO inventory adjustments, net profits were up 28%. The growth in operating profits was driven primarily by increased revenue, up 18% overall. All operating divisions posted revenue gains in 1995, led by Communicolor's 31% rise and Document Management Division's 17% increase. Revenues from Advanced Medical Systems and Document Systems Division were up 13% and 7%, respectively. Within the Document Management Division, traditional business forms products continued to play a decreasing role. Sales of custom continuous, unit set, and stock forms increased 11% and represented slightly less than half of the division's 1995 revenue. Revenues from operating groups established to exploit growth opportunities -- Pressure Sensitive, Imaging, Stanfast, Distribution Services, and Electronic Products were up 20%. A majority of the division's revenue increase was attributable to higher document prices. Communicolor operated near capacity for much of 1995, reflecting strong demand for personalized, high-color promotional mail. Approximately one-half of the division's 31% revenue increase was a result of the 1994 acquisition of Promotional Graphics; unit growth is estimated at 6% with the balance attributed to higher net selling prices needed to recover increased paper costs. The January 1, 1995 rise in third-class postal rates did not have a material adverse effect on the division's revenue. The Document Systems Division reported overall revenue growth of 7%. The bulk of the growth occurred in the supplies and service segments, up 17% and 7%, respectively. Revenue from new equipment installations was disappointing, rising only 1%. This product segment will be a key divisional focus for 1996. Paper accounts for approximately one-half of the printing cost of a typical business document. Following a prolonged period of general weakness in paper prices, the demand for paper products strengthened in June 1994, increasing utilization rates at paper mills sufficiently to support a dramatic rise in market prices. By year-end 1995, the price for white bond papers had risen approximately 130%. The average price paid by the Company for paper in 1995, including white bond, carbonless, and other specialty grades, was 32% above the average for 1994. In response, the Company raised the prices of its printed documents during 1994 and 1995 and was generally successful in recovering the higher paper costs. Although paper prices have shown weakness early in 1996, the Company expects prices to be far less volatile in the coming year than during the preceding 18 months. For this reason, the Company's revenue increase in 1996 will likely be below that recorded in 1995. The rise in paper costs produced unfavorable LIFO inventory adjustments of $16.5 million or $.34 per share in 1995 and $1.9 million or $.04 per share in 1994. If paper prices vary, as expected, in a relatively narrow range around year-end 1995 prices, the 1996 LIFO charge should be minor. -7- 8 The reported gross margin for all products and services sold by the Company was 35.3% of revenue in 1995, compared to 36.7% for 1994. On an operating basis, excluding the effects of LIFO, the gross margin improved slightly from 37.0% in 1994 to 37.2% in the current year. This result indicates that the Company was able to maintain its margins despite the rapid escalation in paper costs. Total 1995 operating expenses were 14.5% higher than in 1994. Engineering and research expenditures were 5% higher. Selling and administrative expenses were 15% above the 1994 level, reflecting higher sales commissions, the cost of the Travelers' Express settlement, legal costs related to the successful defense of two document security patents, and increased sales support designed to increase sales productivity; excluding these items, this category of expense was up 6%. Depreciation increased 14% as a result of higher capital spending and the acquisitions of Promotional Graphics and FCA. Interest expense declined as the Company continued to pay down its outstanding debt. The effective income tax rate was 40.5%, up slightly from the 39.8% rate in the previous year as a result of increases in several non- deductible expense items. Advanced Medical Systems recorded a pretax operating loss of $1.2 million in 1995. This loss compares to losses in 1994 and 1993 of $2.8 million and $5.2 million, respectively. 1995's improved results reflected lower general and administrative costs and increased revenue from new installations of their materials management software. In the final analysis, two factors stand out in explaining the Company's improvement in net income: the growth of higher value-added, higher margin products and services, and the Company's ability to recover the increases in paper costs. Results of Operations 1994 compared to 1993 - ------------------------------------------- Net income was $43.9 million or $1.53 per share, compared to $42.2 million and $1.47 per share in 1993. Total revenue increased 6% to $767.4 million, with average selling prices and unit growth each up about 3%. The Document Management Division recorded revenue of $589.2 million, representing 77% of total Company sales. The forms market continued to be marked by excess productive capacity and aggressive price competition. The sale of traditional forms products declined 2%, while other categories, including pressure sensitive, imaging, Stanfast, cut sheet, and forms management services, rose 14%. The Company believes it gained market share in 1994, particularly in its targeted healthcare and financial markets. The overall unit growth, coupled with the changing product mix, required the division to add production capacity. Among other product categories, the sale of document systems, maintenance, and supplies rose 10% and accounted for 11% of total Company revenue. Promotional direct mail revenue was up 7%, primarily as a result of the mid-year acquisition of Promotional Graphics in Eudora, Kansas. The Eudora facility operated below capacity, but contributed to operating profits. The Company's gross margin, revenue less cost of products sold, increased $11.7 million but represented a lower percentage of revenue -- 36.7% in 1994 vs. 37.4% in 1993. Key factors that contributed to the narrowed margin percentage included the rapid growth in higher cost equipment maintenance, the below capacity utilization at the Eudora facility, higher paper costs not fully recovered by higher forms selling prices, and a $1.9 million LIFO inventory charge. Operating expenses increased 5% and were in line with management's expectations. Interest expense was 5% below the 1993 level, reflecting lower debt balances offset in part by higher interest rates. The effective income tax rates for 1994 and 1993 were almost identical at 39.8% and 39.9%, respectively. -8- 9 Overall, the increase in Net Income was driven primarily by the favorable spread between the growth rates in revenue and expense. Environmental Matters - --------------------- The Company has been named as one of a number of Potentially Responsible Parties at several waste disposal sites, none of which has ever been Company owned. The Company has accrued for investigation and remediation at sites where costs were probable and estimable. 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. Liquidity and Capital Resources - ------------------------------- The Company's financial condition remains exceptionally strong. Cash and investments exceeded total debt at year-end 1995 by $24.0 million; this net cash position compares to $37.7 million at year-end 1994. This $13.7 million reduction in the net cash position is approximately equivalent to the acquisition price for FCA plus the value of investments made in Polyforms and F3. Putting these three investments aside, internal cash flow was sufficient to finance increases in working capital, dividends, and capital investment. The increase in working capital was driven by higher priced FIFO inventories, increases in custom forms inventories stored for future customer delivery, and higher receivables related to the growth in revenue. Capital spending, excluding the effect of the FCA acquisition, was $40.6 million. This represents a substantial increase over the comparable 1994 and 1993 figures of $30.0 million and $31.1 million, respectively. Approximately $14.0 million of 1995's capital additions were made to add capacity and enhance capabilities in Communicolor, principally at the acquired Eudora, Kansas, facility. Another $10.5 million was spent on the development of systems to improve the Company's order entry, inventory management, and reporting systems. The majority of the remaining capital spending went for capacity additions within the Document Management Division. The Company expects 1996 capital spending, excluding any acquisitions, to be around $50 million. The Company expects to finance its 1996 requirements for working capital, capital investment, debt repayment, and dividends through a combination of existing cash reserves and internally generated funds. ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Index to Financial Statements Page Independent Auditors' Report 14 Consolidated Balance Sheet - December 31, 1995 and January 1, 1995 15-16 Consolidated Statement of Income - Years ended December 31, 1995, January 1, 1995 and January 2, 1994 17 Consolidated Statement of Shareholders' Equity - Years ended December 31, 1995, January 1, 1995 and January 2, 1994 18 Consolidated Statement of Cash Flows - Years ended December 31, 1995, January 1, 1995 and January 2, 1994 19 Notes to Consolidated Financial Statements 20-27 Quarterly Results of Operations 27 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 1996 annual meeting of shareholders.
Position and Offices Presently Officer Name Age Held and Business Experience Since ---- --- ---------------------------- ------ Rebecca H. Appenzeller 43 Ms. Appenzeller serves as Corporate Secretary and 1992 In-House Counsel. She joined Standard Register in 1992 and is responsible for maintaining compliance with laws and regulations that affect the conduct of Standard Register's business. Prior to joining the Company, Ms. Appenzeller worked as an attorney in corporate and private practice. Alan L. Baughn 60 Vice President, Corporate Planning and Development. 1995 During his 40 year career with Standard Register, he gained sales, marketing, human resources and corporate planning management experience. His current responsibilities include planning, organizational development and acquisitions. Craig J. Brown 46 Senior Vice President, Administration, Treasurer and 1987 Chief Financial Officer. He joined Standard Register in 1986 and is now responsible for corporate finance, information services, human resources, and corporate communications. H. Franklin Coffman 57 Vice President, Customer Service & Communications. 1995 He began his career with Standard Register in 1959 and has held a number of sales, marketing and operations management positions. He is responsible for corporate communications, marketing communications, employee safety and environmental affairs. John L. Crawford 60 Vice President, Internal Auditing. Mr. Crawford joined 1995 Standard Register 38 years ago and has held a number of finance and auditing positions. Reporting directly to the President, Mr. Crawford oversees operational auditing. James H. DeYoung 57 Vice President, International Operations. He joined 1995 Standard Register in 1966 and has held a number of engineering and research as well as management positions. He is responsible for establishing and maintaining relationships with Associates throughout the world. Peter A. Dorsman 41 Mr. Dorsman joined Standard Register in January, 1996 1996 as Senior Vice President and General Manager of the Document Systems Division. Prior to joining Standard Register, he served in a number of senior marketing, strategic planning, and sales management positions with NCR Corporation. Paul H. Granzow 68 Chairman of the Board of Directors. He was partner in 1984 the law firm of Turner, Granzow & Hollenkamp until December, 1983. He is co-trustee of the John Q. Sherman Trust and Senior Vice President and Director of the Weston Paper and Manufacturing Company.
-10- 11
Position and Offices Presently Officer Name Age Held and Business Experience Since ---- --- ---------------------------- ------ Peter S. Redding 57 President and Chief Executive Officer since December, 1981 1994. He is also a member of the Board of Directors. Most recently, Mr. Redding served as Executive Vice President and Chief Operating Officer. He has held a number of marketing, sales, human resources and administrative positions since he joined the company in 1962. Vincent J. Reidy 50 Vice President, Sales & Marketing of the Document 1995 Management Division. He joined Standard Register in 1967 and has held several management positions in marketing, sales, sales force automation and operations. C. Thomas Russell 42 Vice President, Electronic Products & Chief Information 1995 Officer. He is responsible for the application of information technology as well as the development and marketing of electronic forms products and services. He was most recently a partner with a major management and software consulting firm. John E. Scarpelli 52 Vice President, Human Resources. He joined Standard 1995 Register in 1986 and is currently responsible for the development and administration of corporate-wide benefits, personnel policies, staffing, management training, governmental compliance and employee relations. Joseph V. Schwan 59 Senior Vice President and General Manager of the 1991 Document Management Division. He joined Standard Register in 1991 as Vice President, Sales and Marketing. He has more than 30 years of sales and general management experience in the business forms industry. Harry A. Siefert, Jr. 58 Vice President of Manufacturing for the Document 1987 Management Division. Since joining Standard Register in 1962, he has held a number of engineering and manufacturing positions. In his current role, he is responsible for research and development, purchasing and the manufacturing operations. Michael Spaul 48 Senior Vice President & General Manager of the 1991 Communicolor Division. He joined Standard Register in 1986 and has held a number of manufacturing and engineering positions prior to assuming his current duties in 1988.
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. Items 11, 12 and 13 are incorporated by reference from the Company's Proxy Statement for the 1996 Annual Meeting of shareholders. -11- 12 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. (b) Reports on Form 8-K No reports on Form 8-K were filed during the last quarter of the fiscal year. Page II. Valuation and Qualifying Accounts and Reserves 28 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 29 -12- 13 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 18, 1996. 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 18, 1996: Signatures Title ---------- ----- /S/ P. H. Granzow Chairman of the Board and Director - ---------------------------- P. H. Granzow /S/ C. J. Brown Senior Vice-President - Administration, - ----------------------------- 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 18, 1996 as attorney-in-fact for the following directors of the Registrant: R. W. Begley, Jr. D. L. Rediker R. R. Burchenal J. J. Schiff, Jr. F. D. Clarke III C. F. Sherman J. K. Darragh J. Q. Sherman II P. S. Redding /S/ P. H. Granzow ----------------------- P. H. Granzow -13- 14 INDEPENDENT AUDITORS' REPORT Board of Directors and Shareholders The Standard Register Company Dayton, Ohio We have audited the accompanying balance sheet of The Standard Register Company as of December 31, 1995 and January 1, 1995, and the related statements of income, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 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 financial statements referred to above present fairly, in all material respects, the financial position of The Standard Register Company as of December 31, 1995 and January 1, 1995, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. Also, in our opinion, such financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein. /S/ BATTELLE & BATTELLE PLL BATTELLE & BATTELLE PLL Certified Public Accountants 3400 S. Dixie Drive Dayton, Ohio January 26, 1996 -14- 15 THE STANDARD REGISTER COMPANY BALANCE SHEET (Dollars in thousands) December 31 January 1 A S S E T S 1995 1995 ----------- --------- CURRENT ASSETS Cash and cash equivalents $33,646 $55,235 Investments held to maturity 1,330 0 Accounts receivable, less allowance for losses of $3,913 and $2,200, respectively 181,709 151,952 Inventories 97,817 100,673 Deferred income taxes 10,611 9,592 Prepaid expense 3,878 4,039 ----------- --------- Total current assets 328,991 321,491 ----------- --------- PLANT AND EQUIPMENT Buildings and improvements 57,340 57,472 Machinery and equipment 212,221 193,187 Office and rental equipment 43,945 37,904 ----------- --------- Total 313,506 288,563 Less accumulated depreciation 127,871 121,267 ----------- --------- Depreciated cost 185,635 167,296 Plant and equipment under construction 27,027 28,720 Land 3,312 2,789 ----------- --------- Total plant and equipment 215,974 198,805 ----------- --------- OTHER ASSETS 10,538 5,363 ----------- --------- Total assets $555,503 $525,659 =========== =========
-15- 16 THE STANDARD REGISTER COMPANY BALANCE SHEET (Dollars in thousands)
December 31 January 1 LIABILITIES AND SHAREHOLDERS' EQUITY 1995 1995 ----------- --------- CURRENT LIABILITIES Current maturities of long-term debt $6,471 $6,471 Accounts payable 19,025 19,071 Dividends payable 5,441 5,149 Accrued compensation 31,973 27,994 Accrued pension expense 2,886 4,139 Accrued other expense 6,774 2,230 Accrued taxes, except income 5,140 5,181 Income taxes payable 2,534 2,278 Customer deposits 8,334 9,807 Deferred service contract income 8,455 7,360 --------- -------- Total current liabilities 97,033 89,680 --------- -------- LONG-TERM LIABILITIES Notes payable to banks and others 4,600 11,071 Retiree health care obligation 26,101 25,125 Deferred income taxes 16,552 15,817 --------- -------- Total long-term liabilities 47,253 52,013 --------- -------- SHAREHOLDERS' EQUITY Common stock, $1.00 par value: Authorized 50,500,000 shares Issued 1995 - 24,141,758; 1994 - 24,084,632 24,142 24,085 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 27,450 26,507 Retained earnings 359,334 332,501 Cost of common shares in treasury: 1995 - 227,446 shares; 1994 - 201,741 shares (4,434) (3,852) --------- --------- Total shareholders' equity 411,217 383,966 --------- --------- Total liabilities and shareholders' equity $555,503 $525,659 ========= =========
See accompanying notes. -16- 17 THE STANDARD REGISTER COMPANY STATEMENT OF INCOME (Dollars in thousands, except per share amounts)
52 Weeks Ended 52 Weeks Ended 52 Weeks Ended December 31 January 1 January 2 1995 1995 1994 ------------- -------------- -------------- REVENUE $ 903,240 $ 767,415 $ 722,120 ------------- -------------- -------------- COST AND EXPENSE Cost of products sold 584,088 485,738 452,163 Engineering and research 7,813 7,475 7,754 Selling and administrative 200,812 174,435 166,267 Depreciation and amortization 29,326 25,755 24,553 Interest 974 1,090 1,142 ------------- -------------- -------------- Total cost and expense 823,013 694,493 651,879 ------------- -------------- -------------- INCOME BEFORE INCOME TAXES 80,227 72,922 70,241 ------------- -------------- -------------- INCOME TAXES Current 32,752 27,129 26,920 Deferred (284) 1,917 1,136 ------------- -------------- -------------- Total income taxes 32,468 29,046 28,056 ------------- -------------- -------------- NET INCOME $ 47,759 $ 43,876 $ 42,185 ------------- -------------- -------------- DATA PER SHARE Net income $ 1.67 $ 1.53 $ 1.47 ============= ============== ==============
See accompanying notes. -17- 18 THE STANDARD REGISTER COMPANY STATEMENT OF SHAREHOLDERS' EQUITY (Dollars in thousands)
52 Weeks Ended 52 Weeks Ended 52 Weeks Ended December 31 January 1 January 2 1995 1995 1994 -------------- -------------- -------------- COMMON STOCK Beginning balance $ 24,085 $ 24,037 $ 23,986 Add shares issued under Stock Incentive Plan 57 48 51 -------------- -------------- -------------- Ending balance 24,142 24,085 24,037 -------------- -------------- -------------- CLASS A STOCK 4,725 4,725 4,725 -------------- -------------- -------------- CAPITAL IN EXCESS OF PAR VALUE Beginning balance 26,507 25,562 24,705 Add excess of market over par value of shares issued under Stock Incentive Plan 943 945 857 -------------- -------------- -------------- Ending balance 27,450 26,507 25,562 -------------- -------------- -------------- RETAINED EARNINGS Beginning balance 332,501 308,413 284,901 Add net income for year 47,759 43,876 42,185 Less cash dividends declared (20,926) (19,788) (18,673) -------------- -------------- -------------- Ending balance 359,334 332,501 308,413 -------------- -------------- -------------- TREASURY SHARES Beginning balance (3,852) (1,754) - Cost of common shares purchased (582) (2,098) (1,754) -------------- -------------- -------------- Ending balance (4,434) (3,852) (1,754) -------------- -------------- -------------- Total shareholders' equity $ 411,217 $ 383,966 $ 360,983 ============== ============== ==============
See accompanying notes. -18- 19 THE STANDARD REGISTER COMPANY STATEMENT OF CASH FLOWS (Dollars in thousands)
52 Weeks Ended 52 Weeks Ended 52 Weeks Ended December 31 January 1 January 2 1995 1995 1994 ------------- -------------- -------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 47,759 $ 43,876 $ 42,185 ------------- -------------- -------------- Add (deduct) items not affecting cash: Depreciation and amortization 29,326 25,755 24,553 (Gain) loss on sale of facilities (1,309) 255 (96) Loss on investments 830 - - Provision for deferred income taxes (284) 1,917 1,136 Increase (decrease) in cash arising from changes in: Accounts receivable (29,757) (16,885) (12,623) Inventories 2,856 (2,425) (10,671) Other assets 202 (1,738) 554 Accounts payable (46) (1,511) 2,378 Accrued expenses 8,205 (639) (2,162) Income taxes payable 256 (2,483) 1,895 Customer deposits (1,473) 9,807 - Deferred income 1,095 720 984 ------------- -------------- -------------- Net adjustments 9,901 12,773 5,948 ------------- -------------- -------------- Net cash provided by operating activities 57,660 56,649 48,133 ------------- -------------- -------------- CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of plant and equipment 3,330 28 2,134 Additions to short-term investments (1,330) - - Additions to plant and equipment (48,332) (52,128) (31,076) Additions to patents and other investments (6,230) (1,215) - ------------- -------------- -------------- Net cash used in investing activities (52,562) (53,315) (28,942) ------------- -------------- -------------- CASH FLOWS FROM FINANCING ACTIVITIES Principal payments on long-term debt (6,471) (6,475) (7,161) Proceeds from issuance of common stock 1,000 993 908 Purchase of common stock (582) (2,098) (1,754) Dividends paid (20,634) (19,513) (18,393) ------------- -------------- -------------- Net cash used in financing activities (26,687) (27,093) (26,400) ------------- -------------- -------------- NET (DECREASE) IN CASH AND CASH EQUIVALENTS (21,589) (23,759) (7,209) Cash and cash equivalents at beginning of year 55,235 78,994 86,203 ------------- -------------- -------------- CASH AND CASH EQUIVALENTS AT END OF YEAR $ 33,646 $ 55,235 $ 78,994 ============= ============== ============== SUPPLEMENTAL CASH FLOW DISCLOSURES: Cash paid during the year for: Interest $ 999 $ 1,085 $ 1,173 Income taxes 32,496 29,612 25,025 Non-cash investing activity: Transfer of equipment to joint venture - 1,757 -
See accompanying notes. -19- 20 THE STANDARD REGISTER COMPANY NOTES TO FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Standard Register Company is a leading domestic supplier of business forms, pressure sensitive labels, business equipment, direct mail marketing materials and application software. The Company markets its products and services through a direct sales organization located in offices throughout the United States. 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 financial statements are summarized below. USE OF ESTIMATES - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates that affect the amounts of assets, liabilities, revenues and expenses. Actual results could differ from those estimates. FISCAL YEAR - The Company's fiscal year ends on the Sunday nearest to December 31. Each of the fiscal years ending December 31, 1995, January 1, 1995 and January 2, 1994 had 52 weeks. CASH EQUIVALENTS - The Company classifies as cash equivalents all highly liquid investments with an original maturity of three months or less. These are 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. INVESTMENTS HELD TO MATURITY - The Company invests a portion of its available funds into government and corporate debt securities with maturities in excess of three months. It is the Company's intent to hold these investments to maturity. 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, 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. INVESTMENT IN JOINT VENTURE - The Company uses the equity method of accounting for its investment in a joint venture. INCOME TAXES - The Company accounts for income taxes using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences of temporary differences between the financial and tax bases, using enacted rates. -20- 21 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) REVENUE RECOGNITION - The Company generally recognizes product and related services revenue at the time of shipment. 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. 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 $41,269,000 higher at December 31, 1995 and $24,766,000 higher at January 1, 1995. Inventories at the respective year-ends are as follows:
(Dollars in thousands) December 31 January 1 1995 1995 ----------- ---------- Finished products $ 57,150 $ 48,823 Jobs in process 24,953 30,267 Materials and supplies 15,714 21,583 ------- -------- Total $ 97,817 $ 100,673 ======= =======
NOTE 3 - PLANT AND EQUIPMENT Plant and equipment are carried at cost less accumulated depreciation. Depreciation for financial reporting purposes was $29,143,000 in 1995, $25,535,000 in 1994, and $23,908,000 in 1993. 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 - OTHER INVESTMENTS The Company has a 41% joint venture interest in Polyforms J.V., a manufacturer of business forms located in St. Petersburg, Russia. The carrying value of this investment at December 31, 1995 and January 1, 1995 was $4,546,000 and $2,972,000, respectively. During 1995, the Company purchased $3,500,000 of preferred stock in the F3 Software Corporation, based in Boston, Massachusetts. The Corporation develops and markets forms design and electronic forms application software. The carrying value of this investment was $3,150,000 at December 31, 1995. -21- 22 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. Assumptions used in the respective accounting years to determine pension costs, are as follows:
1995 1994 1993 ---- ---- ---- Discount rate 8.5% 8.5% 8.5% Rate of increase in compensation levels 4.0% 4.5% 4.5% Expected long-term rate of return on assets 9.5% 10.5% 10.5% Pension costs consist of the following components: (Dollars in thousands) 1995 1994 1993 ---- ---- ---- Service cost of benefits earned $ 4,776 $ 5,055 $ 4,948 Interest cost on projected benefit obligation 10,573 10,031 9,780 Actual gain on plan assets ( 24,657) ( 3,927) ( 4,101) Asset gain (loss) deferred 14,691 ( 6,265) ( 6,514) Amortization of transition asset ( 722) ( 722) ( 722) Amortization of prior service costs 1,898 1,832 1,522 Amortization of loss - - 13 ----------- --------- --------- Net pension cost $ 6,559 $ 6,004 $ 4,926 =========== ========= =========
The following table sets forth the plans' funded status and amounts recognized in the Company's balance sheet at the respective year ends.
December 31, 1995 January 1, 1995 ------------------------------- -------------------------------- 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 $107,945 $ 1,921 $ 10,325 $ 90,442 Non-vested 8,975 357 574 5,992 -------- -------- ------- --------- Total $116,920 $ 2,278 $ 10,899 $ 96,434 ======= ======= ======= ======== Projected benefit obligation $145,262 $ 4,922 $ 10,899 $ 119,389 ======= ======= ======= ======= Plan assets at fair value $128,871 $ - 11,206 94,212 ======= ======== ======= ======== Plan assets (less than) in excess of projected benefit obligation ( 16,391) ( 4,922) 307 ( 25,177) Unrecognized net loss 6,190 1,116 1,963 7,063 Unrecognized prior service cost 10,437 1,901 1,150 12,430 Minimum liability adjustment - ( 372) - ( 309) Unrecognized transition asset ( 845) - ( 479) ( 1,087) -------- --------- -------- ------- Pension (liability) prepaid ($ 609) ($ 2,277) $ 2,941 ($ 7,080) ======== ======== ======= ======= Net liability recognized in consolidated balance ($ 2,886) ($ 4,139) sheet ======== =======
Pension fund assets are invested in a broadly diversified portfolio consisting primarily of publicly-traded common stocks and fixed income securities. -22- 23 NOTE 6 - POSTRETIREMENT BENEFITS OTHER THAN PENSIONS In addition to providing pension benefits, the Company provides health care benefits for eligible employees who retired prior to July 1, 1992. The components of postretirement benefit costs are as follows:
(Dollars in thousands) 1995 1994 1993 ---- ---- ---- Service cost - - - Interest cost $ 2,495 $ 2,333 $ 2,041 Amortization of net loss from earlier periods 143 84 - ------- ------- ------- Postretirement benefit cost $ 2,638 $ 2,417 $ 2,041 ====== ====== ======
Payments for postretirement health benefits amounted to $1,662,000, $1,773,000, and $2,069,000 in 1995, 1994, and 1993, respectively. The funded status of the plan at December 31, 1995 and January 1, 1995 is as follows:
(Dollars in thousands) December 31 January 1 1995 1995 ------------ ---------- Accumulated postretirement benefit obligation for retirees $ 33,139 $ 30,296 Plan assets - - -------- -------- Accumulated postretirement benefit obligation in excess of plan assets 33,139 30,296 Unrecognized net loss ( 7,038) ( 5,171) -------- -------- Retiree health care obligation shown in balance sheet $ 26,101 $ 25,125 ======= =======
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 11.0% in 1995 and gradually decreases to 6.5% in the year 2014. A 1% increase in the health care cost trend rates used would result in a $332,000 increase in the service and interest components of expense for 1995 ($332,000 for 1994) and a $4,016,000 increase in the postretirement benefit obligation at December 31, 1995 ($3,905,000 at January 1, 1995). -23- 24 NOTE 7 - LONG-TERM DEBT Long-term debt consists of the following:
(Dollars in thousands) December 31 January 1 1995 1995 --------------- -------------- Unsecured term notes dated December 9, 1986, bearing interest at 6.1875% and 6.375% at respective year ends, due in two remaining equal semi-annual installments payable to: The First National Bank of Boston $ 3,647 $ 7,294 Wachovia Bank and Trust Co. 1,412 2,824 Society Bank, N.A. 1,412 2,824 -------- -------- Total 6,471 12,942 Industrial development revenue bonds issued by Rutherford County, Tenn., bearing interest at 6-1/8%, due 1999 through 2003 4,600 4,600 -------- -------- Total 11,071 17,542 Less current maturities 6,471 6,471 -------- -------- Long-term debt $ 4,600 $ 11,071 ======== =======
The aggregate principal payments for the five fiscal years subsequent to December 31, 1995, are as follows: 1996 - $6,471; 1997 - none; 1998 - none; 1999 - $525; 2000 - $555. NOTE 8 - INCOME TAXES The provision (credit) for income taxes consists of the following:
(Dollars in thousands) Federal State Total ------- ----- ----- 1995 Current $ 26,386 $ 6,366 $ 32,752 Deferred ( 227) ( 57) ( 284) ------- -------- ------- Total $ 26,159 $ 6,309 $ 32,468 ======= ======== ======= 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 ======= ======= ======
-24- 25 NOTE 8 - INCOME TAXES (CONTINUED) The significant components of the deferred tax expense (benefit) are as follows:
(Dollars in thousands) 1995 1994 1993 ---- ---- ---- Depreciation $ 1,128 $ 877 $ 1,202 Pension 391 885 5 Inventories 976 729 ( 301) Compensation and benefits ( 1,331) ( 461) ( 26) Accounts receivable ( 690) 138 154 Plant reconfiguration - 71 314 Retiree health care ( 393) ( 228) ( 212) Patent litigation ( 403) - - Other 38 ( 94) - --------- --------- ---------- Total ($ 284) $ 1,917 $ 1,136 -------- ======== =======
The components of the net deferred tax asset and liability as of December 31, 1995 and January 1, 1995 are as follows:
(Dollars in thousands) December 31 January 1 1995 1995 ---------------- ------------ Deferred tax asset: Accounts receivable $ 1,576 $ 886 Inventories 2,901 3,877 Compensation and benefits 4,663 3,332 Pension 1,012 1,403 Patent litigation 403 - Other 56 94 ------- -------- Total $ 10,611 $ 9,592 ======= ======== Deferred tax liability: Depreciation $ 27,062 $ 25,934 Retiree health care benefits ( 10,510) ( 10,117) ------- ------- Total $ 16,552 $ 15,817 ======= =======
The reconciliation of the statutory federal income tax rate and the effective tax rate follows:
1995 1994 1993 ---- ---- ---- Statutory federal income tax rate 35.0% 35.0% 35.0% State and local income taxes 5.3 5.3 5.4 Other .2 ( .5) ( .5) ----- ----- ----- Effective tax rate 40.5% 39.8% 39.9% ===== ===== =====
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 23,914,312 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. During 1995, the shareholders approved an amendment to the Company's Articles of Incorporation to increase the number of shares of Common stock authorized from 30,500,000 to 50,500,000. -25- 26 NOTE 10 - STOCK OPTION PLAN During 1995, the Company adopted a stock option plan authorizing the issuance of options for 2,000,000 shares of common stock to selected employees. Under the terms of the plan, options may be either incentive or non-qualified. The exercise price, determined by a committee of the Board of Directors, may not be less than the fair market value of a share on the grant date. The Committee made an initial grant of 550,000 options on December 29, 1995, subject to shareholder approval of the plan. NOTE 11 - COMMITMENTS AND CONTINGENCIES Purchase commitments for capital improvements aggregated $8,889,000 at December 31, 1995. Also, the Company has purchase commitments for equipment for resale of $757,000 at December 31, 1995. In addition, the Company has entered into several agreements with suppliers to purchase specified minimum quantities of raw materials through 1996. The Company is obligated under several leases expiring at various dates. Annual expense under these leases was $21,692,000 in 1995, $18,233,000 in 1994, and $17,747,000 in 1993. Rental commitments under existing leases at December 31, 1995, are:
Computer and (Dollars in Real Sales Transportation Other thousands) Estate Offices Equipment Equipment Total ------ ------- -------------- --------- ----- 1996 $5,616 $7,811 $1,164 $1,756 $16,347 1997 4,208 5,489 846 1,376 11,919 1998 3,217 3,532 578 979 8,306 1999 2,135 1,923 356 444 4,858 2000 1,271 778 171 179 2,399 Later years 106 140 31 - 277
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 12 - FAIR VALUE OF FINANCIAL INSTRUMENTS
December 31, 1995 January 1, 1995 ----------------------- ----------------------- (Dollars in thousands) Fair Value Cost Fair Value Cost ---------- ---- ---------- ---- Assets Cash and equivalents $ 33,646 $ 33,646 $ 55,235 $ 55,235 Investments held to maturity 1,330 1,330 - - Liabilities Long-term debt including current maturities 11,156 11,071 17,411 17,542
Investments held to maturity are carried at cost which approximates market. The fair value of all financial instruments is based upon similarly marketed securities. -26- 27 NOTE 13 - QUARTERLY FINANCIAL DATA (UNAUDITED)
(Dollars in thousands except per share amounts) Quarters Ended ----------------------------------------------------------------------- April 2 July 2 October 1 December 31 1995 1995 1995 1995 -------- ------- ---------- ------------------ Revenue $204,499 $222,523 $227,922 $248,296 Gross margin* 74,509 77,090 78,455 89,098 Net income 10,781 12,041 11,718 13,219 Net income per share .38 .42 .41 .46 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 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 * Revenue less cost of products sold.
NOTE 14 - CONCENTRATION OF CREDIT RISK The Company's concentration of credit risk with respect to trade receivables is, in management's opinion, limited due to industry and geographic dispersion. As disclosed on the balance sheet, the Company maintains an allowance for doubtful accounts to cover estimated credit losses. -27- 28 SCHEDULE II THE STANDARD REGISTER COMPANY VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR THE THREE YEARS ENDED DECEMBER 31, 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 December 31, 1995 - ---------------------------- Allowance for doubtful accounts $ 2,200 $ 3,656 $ 1,943(a) $ 3,913 Inventory obsolescence 3,392 2,879 4,280(b) 1,991 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 (a) Net uncollectible accounts written off (b) Obsolete inventory scrapped or written down to realizable value
-28- 29 INDEX TO EXHIBITS 3. Amended Articles of Incorporation of the Company and Code of Regulations, Filed as Exhibit 4 to the Company's Registration Statement No. 33-8687. 3.1 Certificate of Amendment by the Shareholders to the Amended Articles of Incorporation of The Standard Register Company filed herewith. 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. 10.6 Incentive Stock Option Plan of 1995 filed as Appendix A to the Company's Proxy Statement for the Annual Meeting of Shareholders to be held on April 17, 1996. 11. Computation of Earnings Per Share. 23. Consent of Independent Auditors 24. Power of Attorney of R. W. Begley, Jr., R. R. Burchenal, F. D. Clark III, J. K. Darragh, P. S. Redding, D. L. Rediker, J. J. Schiff, Jr., C. F. Sherman, J. Q. Sherman II. 27. Financial Data Schedule (EDGAR version).
-29- EX-3.1 2 STANDARD REGISTER EXHIBIT 3.1 1 EX-3.1 CERTIFICATE OF AMENDMENT BY THE SHAREHOLDERS TO THE AMENDED ARTICLES OF INCORPORATION OF THE STANDARD REGISTER COMPANY Peter S. Redding, who is the President and Chief Executive Officer, and Rebecca A. Kagan, who is the Secretary of The Standard Register Company, an Ohio corporation for profit (sometimes hereinafter referred to as the "Corporation"), with its principal place of business located at 600 Albany Street, Dayton, Ohio 45401-1167, do hereby certify that at the Annual Meeting of Shareholders of The Standard Register Company which was duly called and held on Wednesday, April 19, 1995, at Dayton, Ohio, at which meeting a quorum of each class of shareholders was present in person or by proxy, the following resolution was adopted by the affirmative vote of the holders of shares entitled under the Amended Articles of Incorporation to exercise two-thirds of the voting power of The Standard Register Company: RESOLVED, that the first two paragraphs of Article Fourth of the Amended Articles of Incorporation of The Standard Register Company which presently provides as follows: FOURTH: The maximum number of shares of all classes of stock which the Corporation is authorized to have outstanding is 35,225,000 shares, of which 30,500,000 shares shall be known and designated as Common Stock and 4,725,000 shares shall be known and designated as Class A Stock. Each share of Common Stock and Class A Stock shall have a par value of $1.00. Each issued and outstanding share of Common Stock with no par value is hereby changed into two shares of Common Stock with a par value of $1.00 each, and each issued and outstanding share of Class A Stock with no par value is hereby changed into two shares of Class A Stock with a par value of $1.00 each. be deleted and that the following paragraph be substituted for the first two paragraphs of Article Fourth of the Amended Articles of Incorporation: FOURTH: The maximum number of shares of stock which the Corporation is authorized to have outstanding is 55,225,000 shares, of which 50,500,000 shares shall be known and designated as Common Stock and 4,725,000 shares shall be known and designated as Class A Stock. Each share of Common Stock and Class A Stock shall have a par value of $1.00. IN WITNESS WHEREOF, Peter S. Redding, as President and Chief Executive Officer, and Rebecca A. Kagan, as Secretary, acting for and on behalf of The Standard Register Company have hereunto subscribed their names and caused the seal of The Standard Register Company to be hereunto affixed this 15th day of May 1995. THE STANDARD REGISTER COMPANY, an Ohio corporation By: /S/ Peter S. Redding ---------------------------- Peter S. Redding Chief Executive Officer By: /S/ Rebecca A. Kagan --------------------------- Rebecca A. Kagan Secretary -30- EX-11 3 STANDARD REGISTER 1 EX-11 THE STANDARD REGISTER COMPANY COMPUTATION OF EARNINGS PER SHARE (Dollars in thousands except for shares and per share amounts)
1995 1994 1993 ---- ---- ---- Average shares outstanding 28,652,525 (1) 28,681,045 (2) 28,734,394 (3) ========== ========== ========== Net income $ 47,759 $ 43,876 $ 42,185 ======= ======= ======= Primary income per share: Net income $ 1.67 $ 1.53 $ 1.47 ==== ==== ==== (1) Includes 57,126 shares of common stock issued in 1995 under the Company's Stock Incentive Plan and repurchase of 25,705 shares during the year. (2) 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. (3) 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.
-31- EX-23 4 STANDARD REGISTER EXHIBIT 23 1 EX-23 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation in this Annual Report (Form 10-K) of The Standard Register Company of our report dated January 26, 1996 on our audits of the financial statements of The Standard Register Company as of December 31, 1995 and January 1, 1995 and for each of the three years in the period ended December 31, 1995. /S/ BATTELLE & BATTELLE PLL BATTELLE & BATTELLE PLL Dayton, Ohio March 15, 1996 -32- EX-24 5 STANDARD REGISTER 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 14, 1995. /S/ R. W. Begley, Jr. /S/ D. L. Rediker - ----------------------------------- ---------------------------------- R. W. Begley, Jr. D. L. Rediker /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. Q. Sherman, II - ----------------------------------- ---------------------------------- J. K. Darragh J. Q. Sherman, II /S/ P. S. Redding - ----------------------------------- P. S. Redding
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 14, 1995. /S/ Brynne A. Dailey ----------------------------------- Brynne A. Dailey Notary Public [ Notary Seal ] -33- EX-27 6 STANDARD REGISTER EXHIBIT 27
5 This schedule contains summary financial information extracted from the Standard Register Company financial statements for the year ended December 31, 1995 and is qualified in its entirety by reference to such financial statements. 1,000 YEAR DEC-31-1995 DEC-31-1995 33,646 1,330 185,622 3,913 97,817 328,991 343,845 127,871 555,503 97,033 11,071 28,867 0 0 382,350 555,503 900,241 903,240 584,088 823,013 0 3,656 974 80,227 32,468 47,759 0 0 0 47,759 1.67 1.67
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