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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 29, 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 937-443-1000
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 September 29, 1996
Common Stock - $1.00 Par Value 23,970,021
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
September 29, 1996, December 31, 1995 3
Statement of Income
13 Weeks Ended September 29, 1996 and October 1, 1995 4
39 Weeks Ended September 29, 1996 and October 1, 1995
Statement of Cash Flows
39 Weeks Ended September 29, 1996 and October 1, 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>
September 29, December 31,
ASSETS 1996 1995
<S> <C> <C>
CURRENT ASSETS
Cash and Cash Equivalents $ 87,849 $ 33,646
Investments Held to Maturity 1,215 1,330
Accounts Receivable, less Allowance
for Losses 153,990 181,709
Inventories
Finished Products 52,490 57,150
Jobs in Process 22,418 24,953
Materials and Supplies 7,054 15,714
Deferred Income Tax 10,611 10,611
Prepaid Expense 4,444 3,878
Total Current Assets $340,071 $328,991
PLANT AND EQUIPMENT
Buildings and Improvements $ 61,405 $ 57,340
Machinery and Equipment 246,357 212,221
Office Equipment 43,859 43,945
Total 351,621 313,506
Less Accumulated Depreciation 151,741 127,871
Depreciated Cost 199,880 185,635
Construction in Process 30,780 27,027
Land 3,512 3,312
Total Plant and Equipment $234,172 $215,974
OTHER ASSETS
Goodwill, Patents, and Other 3,926 2,842
Investment in F3 Corporation 2,161 3,150
Investment in Polyforms Joint Venture 4,703 4,546
Total Other Assets $ 10,790 $ 10,538
TOTAL ASSETS $585,033 $555,503
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current Maturities of Long-Term Debt $ 3,285 $ 6,471
Accounts Payable 20,404 19,025
Dividends Payable - 5,441
Accrued Compensation 32,109 31,973
Accrued Retirement Expense 4,528 2,886
Accrued Other Expense 5,557 6,774
Accrued Taxes, except Income 5,397 5,140
Income Taxes Payable 3,315 2,534
Customer Deposits 6,069 8,334
Deferred Service Contract Income 8,593 8,455
Total Current Liabilities $ 89,257 $ 97,033
LONG-TERM LIABILITIES
Long-Term Debt $ 5,037 $ 4,600
Retiree Healthcare 27,046 26,101
Deferred Income Taxes 16,552 16,552
Total Long-Term Liabilities $ 48,635 $ 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 394,134 359,334
Treasury Stock, 227,292 Shares at Cost (4,428)
227,446 Shares at Cost (4,434)
Total Shareholders' Equity $447,141 $411,217
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $585,033 $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>
Third Quarter Nine Months
13 Weeks Ended 39 Weeks Ended
Sept 29, Oct 1, Sept 29, Oct 1,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
TOTAL REVENUE $ 230,853 $ 227,922 $ 699,878 $ 654,944
COSTS AND EXPENSES
Cost of Products Sold $ 139,418 $ 149,467 $ 431,509 $ 424,890
Engineering and Research 2,023 2,016 6,037 5,940
Selling and Administrative 53,687 48,976 159,418 142,939
Depreciation and Amortization 8,643 7,578 25,331 22,496
Interest 118 225 425 765
Total Costs and Expenses $ 203,889 $ 208,262 $ 622,720 $ 597,030
INCOME BEFORE INCOME TAXES $ 26,964 $ 19,660 $ 77,158 $ 57,914
Income Taxes 10,899 7,942 31,444 23,374
NET INCOME $ 16,065 $ 11,718 $ 45,714 $ 34,540
Average Number of Shares
Outstanding (000) 28,687 28,657 28,687 28,657
DATA PER SHARE
Net Income Primary and
Fully Diluted $ 0.56 $ 0.41 $ 1.59 $ 1.21
Dividends Paid $ 0.19 $ 0.18 $ 0.57 $ 0.54
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</TABLE>
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<TABLE>
THE STANDARD REGISTER COMPANY
STATEMENT OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
<CAPTION>
Nine Months
39 Wks Ended
Sept 29, Oct 1,
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $45,714 $ 34,540
Add Items not Affecting Cash:
Depreciation and Amortization $ 25,330 $ 22,495
(Gain) on Sale of Facilities (30) (897)
Net Change to Post-Retirement Healthcare 945 366
Net Change to Investment 989 -
Increase (Decrease) in Cash Arising from
Changes in Assets and Liabilities:
Accounts Receivable 27,719 (11,669)
Inventories 15,855 (13,751)
Other Assets (544) (1,563)
Accounts Payable 1,379 (1,849)
Accrued Expenses 817 7
Income Taxes Payable 781 (806)
Customer Deposits (2,264) 1,153
Deferred Service Income 138 1,830
Net Adjustments 71,115 (4,684)
Net Cash Provided by Operating Activities $116,829 $ 29,856
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from Sale of Facilities $ 951 $ 1,998
Additions to Plant and Equipment (44,317) (34,973)
Proceeds from Sale of Short-Term Investments 115 -
Loan to F3 Corporation (751) -
Investment in F3 Corporation - (3,500)
Investment in Polyforms Joint Venture (157) (1,690)
Net Cash (Used in) Investing Activities $(44,159) $(38,165)
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 5 -
Dividends Paid (16,355) (15,479)
Net Cash (Used in) Financing Activities $(18,467) $(17,714)
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS $ 54,203 $(26,023)
Cash and Cash Equivalents, Beginning $ 33,646 $ 55,235
CASH AND CASH EQUIVALENTS, ENDING $ 87,849 $ 29,212
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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 third quarter 1996 was $16.1 million, or $.56 per share
compared with $11.7 million, or $.41 per share for the comparable quarter of
1995. Excluding LIFO accounting adjustments made in 1995, third quarter net
income increased 10.6%. For the first nine months of 1996, net income was
$45.7 million, or $1.59 per share compared to 1995's $34.5 million, or $1.21
per share result. Excluding the effect of prior year LIFO adjustments,
year-to-date earnings grew 9.2%.
The Document Management Division reported revenue of $182.1 million and
$552.3 million for the quarter and year-to-date periods, representing
increases of 5.4% and 11.0%, respectively. Rising paper prices throughout
most of 1995 led to higher forms prices as the Company successfully passed
through the higher costs to customers. Paper prices stabilized during the
second half of 1995 and have weakened in 1996. In each successive quarter
of 1996, the spread between current and prior year average selling prices
has narrowed, reducing the division=s nominal revenue growth. Unit growth
on a year-to-date basis was 4%. Year-to-date revenues from targeted growth
products - Pressure Sensitive, Imaging, Stanfast, Distribution Services, and
Electronic Products - continued their double digit growth, up 25.8%. These
products now account for 50% of the division=s revenue, up from 44% in the
prior year. Revenues from traditional business forms products rose 1.4%.
The Communicolor Division=s revenue declined 12.8% for the third quarter to
$24.4 million; the year-to-date result of $74.5 million was down 10.9%. The
Company=s direct mail division has experienced softened demand in each of
the past three quarters. This trend is expected to continue through the
fourth quarter.
The Document Systems Division's revenue declined 8.2% in the third quarter
to $23.3 million as a result of declines in equipment and maintenance
revenues of 16.1% and 5.8%, respectively. Excluding the effect of an
exceptionally large order for laser printers in the third quarter of 1995,
equipment revenue increased 3.4%. Maintenance revenue declined due to the
elimination of selected unprofitable contracts. Supplies revenue increased
4.4% and 10.2% on a quarter and year-to-date basis. The division=s year-to-
date revenue has declined .8% to $69.3 million.
Gross margin continued to improve for both the third quarter and year-to-
date periods. Gross margin as a percentage of revenue was 39.6% in the
third quarter of 1996, compared to 34.4% in the prior year period. For the
year-to-date period, gross margin was 38.3%, 3.2 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 third quarter and year-to-date periods in 1996. The Company recorded
LIFO inventory charges of $4.7 million pre-tax or $.09 per share after tax
in the third quarter of 1995 and $12.2 million pre-tax or $.25 per share
after tax charge during the first nine months of 1995. Excluding the prior
year LIFO inventory charges, gross margin as a percentage of revenue
improved 3.1 percentage points for the third quarter and 1.3 percentage
points on a year-to-date basis. 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.
Selling and administrative expenses increased 9.6% and 11.5% for the quarter
and year-to-date periods, respectively, as a result of higher sales
commissions, increased sales support expenses associated with new national
accounts and office automation, and increased information systems expense to
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strengthen the Company=s technological infrastructure. Depreciation expense
rose 14.1% and 12.6% for the quarter and year-to-date periods, respectively,
reflecting higher capital spending and the effect of the March, 1995 asset
acquisition of the FCA division of Capital Graphics, Inc. Interest expense
decreased 44% on a year-to-date basis as a result of a $6.0 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 $87.8 million exceeded total debt of $8.3 million by
$79.5 million. Net cash flow for the first nine months of 1996 was $54.2
million resulting primarily from continued reductions in accounts
receivable, down 15.2%, and inventories, down 16.2%. Current assets were 3.8
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 nine months totaled $44.3 million. 1996
capital expenditures are expected to approach $60 million, including the
August, 1996 asset acquisition of the Piedmont Printing Company, Inc.,
located in Monroe, North Carolina. This facility will enable the Company to
expand fulfillment services to the financial marketplace and provide for the
addition of another STANFAST short run, high service print center.
Subsequent Events
On October 21, 1996, the Company completed the sale of its Advanced Medical
Systems Division, headquartered in West Trenton, New Jersey, to Montgomery
Associates, Inc. The division, with annual revenues of approximately $2.5
million, develops and markets materials management software for hospitals.
The sale of the division will not have a material effect on earnings.
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THE STANDARD REGISTER COMPANY
PART II - OTHER INFORMATION
ITEMS 1 THRU 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.
November 15, 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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EXHIBIT INDEX
Number Description
27 Financial Data Schedule
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<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 September 29,
1996, and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-29-1996
<PERIOD-END> SEP-29-1996
<CASH> 87,849
<SECURITIES> 1,215
<RECEIVABLES> 159,934
<ALLOWANCES> 5,944
<INVENTORY> 81,962
<CURRENT-ASSETS> 340,071
<PP&E> 385,913
<DEPRECIATION> 151,741
<TOTAL-ASSETS> 585,033
<CURRENT-LIABILITIES> 89,257
<BONDS> 8,322
<COMMON> 28,922
0
0
<OTHER-SE> 418,219
<TOTAL-LIABILITY-AND-EQUITY> 585,033
<SALES> 697,988
<TOTAL-REVENUES> 699,878
<CGS> 431,509
<TOTAL-COSTS> 622,720
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,145
<INTEREST-EXPENSE> 425
<INCOME-PRETAX> 77,158
<INCOME-TAX> 31,444
<INCOME-CONTINUING> 45,714
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 45,714
<EPS-PRIMARY> 1.59
<EPS-DILUTED> 1.59
</TABLE>
