<PAGE> 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-
<PAGE> 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-
<PAGE> 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-
<PAGE> 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-
<PAGE> 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.
<TABLE>
<CAPTION>
1 9 9 5
-------------------------------------------------------------------------------------------------
Cash
Quarter Dividend High Low Last
------- -------- ---- --- ----
<S> <C> <C> <C> <C>
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
</TABLE>
<TABLE>
<CAPTION>
1 9 9 4
-------------------------------------------------------------------------------------------------
Cash
Quarter Dividend High Low Last
------- -------- ---- --- ----
<S> <C> <C> <C> <C>
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
</TABLE>
(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-
<PAGE> 6
ITEM 6 - SELECTED FINANCIAL DATA
Selected Income Statement Data
- ------------------------------
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
Thousands except for per share data
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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
</TABLE>
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-
<PAGE> 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-
<PAGE> 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-
<PAGE> 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-
<PAGE> 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.
<TABLE>
<CAPTION>
Position and Offices Presently Officer
Name Age Held and Business Experience Since
---- --- ---------------------------- ------
<S> <C> <C> <C>
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.
</TABLE>
-10-
<PAGE> 11
<TABLE>
<CAPTION>
Position and Offices Presently Officer
Name Age Held and Business Experience Since
---- --- ---------------------------- ------
<S> <C> <C> <C>
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.
</TABLE>
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-
<PAGE> 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-
<PAGE> 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-
<PAGE> 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-
<PAGE> 15
THE STANDARD REGISTER COMPANY
BALANCE SHEET
(Dollars in thousands)
December 31 January 1
A S S E T S 1995 1995
----------- ---------
<TABLE>
<S> <C> <C>
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
=========== =========
</TABLE>
-15-
<PAGE> 16
THE STANDARD REGISTER COMPANY
BALANCE SHEET
(Dollars in thousands)
<TABLE>
<CAPTION>
December 31 January 1
LIABILITIES AND SHAREHOLDERS' EQUITY 1995 1995
----------- ---------
<S> <C> <C>
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
========= =========
</TABLE>
See accompanying notes.
-16-
<PAGE> 17
THE STANDARD REGISTER COMPANY
STATEMENT OF INCOME
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
52 Weeks Ended 52 Weeks Ended 52 Weeks Ended
December 31 January 1 January 2
1995 1995 1994
------------- -------------- --------------
<S> <C> <C> <C>
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
============= ============== ==============
</TABLE>
See accompanying notes.
-17-
<PAGE> 18
THE STANDARD REGISTER COMPANY
STATEMENT OF SHAREHOLDERS' EQUITY
(Dollars in thousands)
<TABLE>
<CAPTION>
52 Weeks Ended 52 Weeks Ended 52 Weeks Ended
December 31 January 1 January 2
1995 1995 1994
-------------- -------------- --------------
<S> <C> <C> <C>
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
============== ============== ==============
</TABLE>
See accompanying notes.
-18-
<PAGE> 19
THE STANDARD REGISTER COMPANY
STATEMENT OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
52 Weeks Ended 52 Weeks Ended 52 Weeks Ended
December 31 January 1 January 2
1995 1995 1994
------------- -------------- --------------
<S> <C> <C> <C>
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 -
</TABLE>
See accompanying notes.
-19-
<PAGE> 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-
<PAGE> 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:
<TABLE>
<CAPTION>
(Dollars in thousands)
December 31 January 1
1995 1995
----------- ----------
<S> <C> <C>
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
======= =======
</TABLE>
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-
<PAGE> 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:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
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
=========== ========= =========
</TABLE>
The following table sets forth the plans' funded status and amounts
recognized in the Company's balance sheet at the respective year ends.
<TABLE>
<CAPTION>
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
-------------- ------------ ------------- -----------
<S> <C> <C> <C> <C>
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 ======== =======
</TABLE>
Pension fund assets are invested in a broadly diversified portfolio
consisting primarily of publicly-traded common stocks and fixed income
securities.
-22-
<PAGE> 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:
<TABLE>
<CAPTION>
(Dollars in thousands)
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
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
====== ====== ======
</TABLE>
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:
<TABLE>
<CAPTION>
(Dollars in thousands)
December 31 January 1
1995 1995
------------ ----------
<S> <C> <C>
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
======= =======
</TABLE>
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-
<PAGE> 24
NOTE 7 - LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
(Dollars in thousands)
December 31 January 1
1995 1995
--------------- --------------
<S> <C> <C>
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
======== =======
</TABLE>
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:
<TABLE>
<CAPTION>
(Dollars in thousands)
Federal State Total
------- ----- -----
<S> <C> <C> <C>
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
======= ======= ======
</TABLE>
-24-
<PAGE> 25
NOTE 8 - INCOME TAXES (CONTINUED)
The significant components of the deferred tax expense (benefit) are
as follows:
<TABLE>
<CAPTION>
(Dollars in thousands)
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
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
-------- ======== =======
</TABLE>
The components of the net deferred tax asset and liability as of
December 31, 1995 and January 1, 1995 are as follows:
<TABLE>
<CAPTION>
(Dollars in thousands)
December 31 January 1
1995 1995
---------------- ------------
<S> <C> <C>
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
======= =======
</TABLE>
The reconciliation of the statutory federal income tax rate and the
effective tax rate follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
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%
===== ===== =====
</TABLE>
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-
<PAGE> 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:
<TABLE>
<CAPTION>
Computer and
(Dollars in Real Sales Transportation Other
thousands) Estate Offices Equipment Equipment Total
------ ------- -------------- --------- -----
<S> <C> <C> <C> <C> <C>
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
</TABLE>
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
<TABLE>
<CAPTION>
December 31, 1995 January 1, 1995
----------------------- -----------------------
(Dollars in thousands) Fair Value Cost Fair Value Cost
---------- ---- ---------- ----
<S> <C> <C> <C> <C>
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
</TABLE>
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-
<PAGE> 27
NOTE 13 - QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
(Dollars in thousands except per share amounts)
Quarters Ended
-----------------------------------------------------------------------
<S> <C> <C> <C>
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.
</TABLE>
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-
<PAGE> 28
SCHEDULE II
THE STANDARD REGISTER COMPANY
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE THREE YEARS ENDED DECEMBER 31, 1995
(Dollars in thousands)
<TABLE>
<CAPTION>
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
- ----------- ---------- ------------ --------- ---------- ---------
<S> <C> <C> <C> <C>
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
<FN>
(a) Net uncollectible accounts written off
(b) Obsolete inventory scrapped or written
down to realizable value
</TABLE>
-28-
<PAGE> 29
INDEX TO EXHIBITS
<TABLE>
<S> <C>
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).
</TABLE>
-29-
<PAGE> 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-
<PAGE> 1
EX-11
THE STANDARD REGISTER COMPANY
COMPUTATION OF EARNINGS PER SHARE
(Dollars in thousands except for shares and per share amounts)
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
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
==== ==== ====
<FN>
(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.
</TABLE>
-31-
<PAGE> 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-
<PAGE> 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.
<TABLE>
<S> <C>
/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
</TABLE>
Signed and acknowledged in the presence of:
<TABLE>
<S> <C>
/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]
</TABLE>
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-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
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.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 33,646
<SECURITIES> 1,330
<RECEIVABLES> 185,622
<ALLOWANCES> 3,913
<INVENTORY> 97,817
<CURRENT-ASSETS> 328,991
<PP&E> 343,845
<DEPRECIATION> 127,871
<TOTAL-ASSETS> 555,503
<CURRENT-LIABILITIES> 97,033
<BONDS> 11,071
<COMMON> 28,867
0
0
<OTHER-SE> 382,350
<TOTAL-LIABILITY-AND-EQUITY> 555,503
<SALES> 900,241
<TOTAL-REVENUES> 903,240
<CGS> 584,088
<TOTAL-COSTS> 823,013
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 3,656
<INTEREST-EXPENSE> 974
<INCOME-PRETAX> 80,227
<INCOME-TAX> 32,468
<INCOME-CONTINUING> 47,759
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 47,759
<EPS-PRIMARY> 1.67
<EPS-DILUTED> 1.67
</TABLE>
