<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For The Transition Period From to
Commission File Number 01-1097
THE STANDARD REGISTER COMPANY
OHIO CORPORATION 31-0455440
600 ALBANY STREET, DAYTON, OHIO 45401
TELEPHONE NUMBER 513-443-1000
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Secu-
rities 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. .
CLASS OUTSTANDING AS OF June 30, 1996
Common Stock - $1.00 Par Value 23,967,924
Class A Stock - $1.00 Par Value 4,725,000
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THE STANDARD REGISTER COMPANY
INDEX
Page
No.
PART I - FINANCIAL STATEMENTS
Balance Sheet
June 30, 1996, December 31, 1995 3
Statement of Income
13 Weeks Ended June 30, 1996 and July 2, 1995 4
26 Weeks Ended June 30, 1996 and July 2, 1995
Statement of Cash Flows
26 Weeks Ended June 30, 1996 and July 2, 1995 5
The financial statements of the Registrant included herein have
been prepared, without audit, pursuant to the rules and regulations
of the Securities and Exchange Commission. Although certain
information normally included in financial statements prepared in
accordance with generally accepted accounting principles has been
condensed or omitted, the Registrant believes that the disclosures
are adequate to make the information presented not misleading. It
is suggested that these financial statements be read in conjunction
with the financial statements and notes thereto included in the
Annual Report on Form 10-K of the Registrant for the year ended
December 31, 1995.
The financial statements included herein reflect all adjustments
(consisting only of normal recurring accruals) which, in the
opinion of management, are necessary to present a fair statement of
the results for the interim periods.
The results for interim periods are not necessarily indicative of
trends or of results to be expected for a full year.
Management's Discussion and Analysis of the Interim
Financial Statements 6-7
PART II - OTHER INFORMATION AND SIGNATURE 8-10
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<TABLE>
THE STANDARD REGISTER COMPANY
BALANCE SHEET
(Dollars in Thousands)
(Unaudited)
<CAPTION>
June 30, December 31,
ASSETS 1996 1995
<S> <C> <C>
CURRENT ASSETS
Cash and Cash Equivalents $ 66,722 $ 33,646
Investment held to maturity 1,315 1,330
Accounts Receivable, less Allowance
for Losses 157,776 181,709
Inventories
Finished Products 53,602 57,150
Jobs in Process 24,536 24,953
Materials and Supplies 8,954 15,714
Deferred Income Tax 10,611 10,611
Prepaid Expense 4,946 3,878
Total Current Assets $328,462 $328,991
PLANT AND EQUIPMENT
Buildings and Improvements $ 59,221 $ 57,340
Machinery and Equipment 231,279 212,221
Office Equipment 41,884 43,945
Total 332,384 313,506
Less Accumulated Depreciation 144,186 127,871
Depreciated Cost 188,198 185,635
Construction in Process 36,013 27,027
Land 3,312 3,312
Total Plant and Equipment $227,523 $215,974
OTHER ASSETS
Goodwill, Patents, and Other 3,239 2,842
Investment in F3 2,370 3,150
Investment in Polyforms Joint Venture 4,703 4,546
Total Other Assets $ 10,312 $ 10,538
TOTAL ASSETS $566,297 $555,503
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current Maturities of Long-Term Debt $ 3,235 $ 6,471
Accounts Payable 15,794 19,025
Dividends Payable - 5,441
Accrued Compensation 28,059 31,973
Accrued Retirement Expense 7,083 2,886
Accrued Other Expense 5,076 6,774
Accrued Taxes, except Income 5,726 5,140
Income Taxes Payable 2,430 2,534
Customer Deposits 5,483 8,334
Deferred Service Contract Income 9,313 8,455
Total Current Liabilities $ 82,199 $ 97,033
LONG-TERM LIABILITIES
Long-Term Debt $ 4,600 $ 4,600
Retiree Healthcare 26,475 26,101
Deferred Income Taxes 16,552 16,552
Total Long-Term Liabilities $ 47,627 $ 47,253
SHAREHOLDERS' EQUITY
Common Stock, $1.00 Par Value
24,197,313 Shares Issued in 1996 $ 24,197
24,141,758 Shares Issued in 1995 $ 24,142
Class A Stock, $1.00 Par Value
4,725,000 Shares Outstanding 4,725 4,725
Capital in Excess of Stated Value 28,513 27,450
Retained Earnings 383,520 359,334
Treasury Stock, 229,389 Shares at Cost (4,484)
227,446 Shares at Cost (4,434)
Total Shareholders' Equity $436,471 $411,217
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $566,297 $555,503
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</TABLE>
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<TABLE>
THE STANDARD REGISTER COMPANY
STATEMENT OF INCOME
(In Thousands except Data Per Share)
(Unaudited)
<CAPTION>
Second Quarter Six Months
13 Weeks Ended 26 Weeks Ended
June 30, July 2, June 30, July 2,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
TOTAL REVENUE $ 239,352 $ 222,523 $ 469,025 $ 427,022
COSTS AND EXPENSES
Cost of Products Sold $ 147,708 $ 145,433 $ 292,091 $ 275,423
Engineering & Research 1,995 1,912 4,014 3,924
Selling and Administrative 53,563 47,158 105,731 93,963
Depreciation and Amortization 8,433 7,543 16,688 14,918
Interest 142 263 307 540
Total Costs and Expenses $ 211,841 $ 202,309 $ 418,831 $ 388,768
INCOME BEFORE INCOME TAXES $ 27,511 $ 20,214 $ 50,194 $ 38,254
Income Taxes 11,425 8,173 20,545 15,432
NET INCOME $ 16,086 $ 12,041 $ 29,649 $ 22,822
Average Number of Shares
Outstanding (000) 28,686 28,657 28,686 28,657
DATA PER SHARE
Net Income Primary and
Fully Diluted $ 0.56 $ 0.42 $ 1.03 $ 0.80
Dividends Paid $ 0.19 $ 0.18 $ 0.38 $ 0.36
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</TABLE>
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<TABLE>
THE STANDARD REGISTER COMPANY
STATEMENT OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
<CAPTION>
Six Months
26 Weeks Ended
June 30, July 2,
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 29,649 $ 22,822
Add Items not Affecting Cash:
Depreciation and Amortization $ 16,688 $ 14,918
(Gain) Loss on Sale of Facilities (171) 52
Net Change to Investment 780 0
Net Change to Post-Retirement Healthcare 374 106
Increase (Decrease) in Cash Arising from
Changes in Asset and Liabilities:
Accounts Receivable 23,934 (1,408)
Inventories 10,725 (17,107)
Other Assets (1,046) (2,167)
Accounts Payable (3,231) (2,381)
Accrued Expenses (829) (3,998)
Income Taxes Payable (104) (2,204)
Customer Deposits (2,851) 5,231
Deferred Service Income 858 2,537
Net Adjustments 45,127 (6,421)
Net Cash Provided by Operating Activities $ 74,776 $ 16,401
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from Sale of Facilities $ 240 $ 71
Additions to Plant and Equipment (28,226) (25,324)
Proceeds from Sale of Short Term Investments 15 0
Loan to F3 Corporation (500) 0
Investment in Polyforms Joint Venture (157) (1,246)
Net Cash (Used in) Investing Activities $(28,628) $(26,499)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal Payments on Long-Term Debt $ (3,235) $ (3,235)
Proceeds from Issuance of Common Stock 1,118 1,000
Redemption of Common Stock (51) 0
Dividends Paid (10,904) (10,319)
Net Cash (Used in) Financing Activities $(13,072) $(12,554)
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS $ 33,076 $(22,652)
Cash and Cash Equivalents, Beginning $ 33,646 $ 55,235
CASH AND CASH EQUIVALENTS, ENDING $ 66,722 $ 32,583
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</TABLE>
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THE STANDARD REGISTER COMPANY
MANAGEMENT DISCUSSION AND ANALYSIS
OF THE INTERIM FINANCIAL STATEMENTS
Results of Operations
Net income for the second quarter 1996 was $16.1 million, a 34%
increase compared to the $12.0 million result for the comparable
quarter of 1995; earnings per share were $.56 vs. $.42 a year earlier.
For the six months year-to-date period, net income was $29.6 million or
$1.03 per share, a 30% increase compared to 1995's $22.8 million and
$.80 per share result.
The Document Management Division reported revenue of $189.6 million and
$370.2 million for the quarter and year-to-date periods, representing
increases of 13% and 14%, respectively. The second quarter increase
reflects unit growth of 6%. Revenues from targeted growth products -
Pressure Sensitive, Imaging, Stanfast, Distribution Services, and
Electronic Products - continued its double digit growth, up 23%, while
revenues from traditional business forms products rose 5%.
Communicolor's revenue declined 18% for the second quarter to $25.1
million; the year-to-date result of $50.2 million was down 10%. The
promotional mail market has experienced softened demand for the past
two quarters related to tightened advertising budgets caused by last
year's higher paper costs. Recent incoming order levels and fourth
quarter press scheduling indicates that this down trend should begin to
reverse itself during the fourth quarter.
The Document Systems Division's revenue rose a modest 2% in the second
quarter to $23.3 million with supplies revenue up 19%, equipment 2%
higher and maintenance down 5%. The division's year-to date revenue
was $46.1 million, up 3%. Management expects maintenance revenue to
decline slightly in 1996 from 1995 levels due to the elimination of
selected unprofitable contracts.
Gross margin improved for both the second quarter and first half.
Gross margin as a percentage of revenue was 38.3% in the second quarter
of 1996, compared to 34.6% in the prior year period. For the first
half, gross margin was 37.7%, 2.2 percentage points better than the
comparable period of 1995. The improvement is attributed to lower
paper price levels and the absence of a LIFO inventory adjustment for
both the second quarter and year-to-date periods in 1996. The Company
recorded LIFO inventory charges of $5.0 million pre-tax or $.11 per
share after tax in the second quarter of 1995 and $7.5 million pre-tax
or $.16 per share after tax charge for the first half of 1995.
Excluding the prior year LIFO inventory charges, gross margin as a
percentage of revenue improved 1.4 percentage points for the second
quarter and .4 percentage points for the first half of 1996. Paper
prices are expected to remain below year-end 1995 levels for the
balance of 1996. Accordingly, the Company expects to record a
favorable year-end LIFO inventory adjustment.
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Selling and administrative expenses increased 14% and 13% for the quarter
and year-to-date periods, respectively, reflecting higher sales
commissions, increased sales support expenses associated with new national
accounts, and increased information systems expenses to strengthen the
Company's technological infrastructure. Depreciation expense rose 12% for
both the quarter and year-to-date periods, reflecting higher capital
spending and the effect of the March, 1995 acquisition of the FCA division
of Capital Graphics, Inc. Interest expense decreased 43% on a year-to-
date basis as a result of a $6.5 million decrease in debt level compared
to the prior year.
Liquidity and Capital Resources
The Company's financial condition remains exceptionally strong. Cash and
cash equivalents of $66.7 million exceeded total debt of $7.8 million,
including current maturities, by $58.9 million. Net cash flow for the
first half 1996 was $33 million resulting primarily from improved working
capital management. Despite higher revenue, accounts receivable were down
13% and inventories dropped 11%. Current assets were 4.0 times the level
of current liabilities. The company believes that a combination of
internally generated funds and current cash reserves will be adequate to
meet operating and financing needs for the near term.
Capital expenditures for the first six months totaled $28.2 million. 1996
capital expenditures are expected to approach $60 million, including the
August, 1996 acquisition of the Piedmont Printing Company, Inc., described
below.
Subsequent Events
On August 8, 1996, the Company announced it is pursuing the sale of its
Advanced Medical Systems Division, headquartered in West Trenton, New
Jersey. The division, with annual revenues of approximately $2.5 million,
develops and markets materials management software for hospitals. The
Company will focus its software development efforts on its electronic
forms, intelligent printing and related application products which have
wider strategic implications to the Company's core businesses in the
Document Management and Document Systems Divisions. The potential sale
of the division is not expected to have a material effect on 1996
financial results.
During August, 1996, the Company purchased the assets of the Piedmont
Printing Company, Inc., located in Monroe, North Carolina. The Company
will make additional investments in the facility to expand fulfillment
services offered by the Imaging Services Group to the financial
marketplace and will also install a STANFAST Print Center. This center
will be the 24th STANFAST location, part of an overall plan to place these
short run, high service print centers in all major metropolitan areas.
The Southeast is an area of rapid growth for the Company and this
acquisition will help to ensure that we continue our high level of
customer service.
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THE STANDARD REGISTER COMPANY
PART II - OTHER INFORMATION
ITEMS 1 THRU 3
None
ITEM 4 Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting of Shareholders was held April 17, 1996.
Following is the result of voting by the Shareholders regarding fixing and
determining the number of Directors to be ten.
IN FAVOR OPPOSED ABSTAINED
45,641,933 34,235 70,753
As a result of voting of the Shareholders, the following were elected to the
Company's Board of Directors to hold office for the ensuing year.
NOMINEE IN FAVOR WITHHELD
Roy W. Begley, Jr. 45,560,356 186,565
F. David Clarke, III 45,569,801 177,120
Paul H. Granzow 45,566,438 190,483
Graeme G. Keeping 45,567,685 179,236
Peter S. Redding 45,570,955 175,966
Dennis L. Rediker 45,568,679 178,242
Ann Scavullo 45,560,179 186,742
John J. Schiff, Jr. 45,022,479 724,442
Charles F. Sherman 45,565,362 181,559
John Q. Sherman, II 45,560,511 186,410
The 1995 Standard Register Company Stock Option Plan was adopted as a result
of the following vote.
IN FAVOR OPPOSED ABSTAINED
41,868,674 1,777,495 1,423,097
Following is the result of voting by the Shareholders regarding selection of
Battelle & Battelle PLL as the Corporation's Auditors for the year 1996.
IN FAVOR OPPOSED ABSTAINED
45,674,954 15,246 56,721
No broker non-votes were recorded.
ITEM 5
None
ITEM 6
(a) Exhibits
Exhibit No. Description
27 Financial Data Schedule
(b) There have been no reports on Form 8-K filed during the
quarter for which this report on Form 10-Q is being filed.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
August 13, 1996
THE STANDARD REGISTER COMPANY
/s/ C. J. Brown
By C. J. Brown, Senior Vice President, Administration,
Treasurer & Chief Financial Officer
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<PAGE> 10
EXHIBIT INDEX
Number Description
27 Financial Data Schedule
- 10 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The Standard Register Company
Financial Data Schedule
This schedule contains summary financial information from The
Standard Register Company for the six months ended June 30,
1996, and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-29-1996
<PERIOD-END> JUN-30-1996
<CASH> 66,722
<SECURITIES> 1,315
<RECEIVABLES> 163,819
<ALLOWANCES> 6,043
<INVENTORY> 87,092
<CURRENT-ASSETS> 328,462
<PP&E> 371,709
<DEPRECIATION> 144,186
<TOTAL-ASSETS> 566,297
<CURRENT-LIABILITIES> 82,199
<BONDS> 7,835
<COMMON> 28,922
0
0
<OTHER-SE> 407,549
<TOTAL-LIABILITY-AND-EQUITY> 566,297
<SALES> 467,780
<TOTAL-REVENUES> 469,025
<CGS> 292,091
<TOTAL-COSTS> 418,831
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 662
<INTEREST-EXPENSE> 307
<INCOME-PRETAX> 50,194
<INCOME-TAX> 20,545
<INCOME-CONTINUING> 29,649
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 29,649
<EPS-PRIMARY> 1.03
<EPS-DILUTED> 1.03
</TABLE>
