<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 September 28, 1997
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
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. .
--- ---
CLASS OUTSTANDING AS OF September 28, 1997
Common Stock - $1.00 Par Value 23,688,385
Class A Stock - $1.00 Par Value 4,725,000
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THE STANDARD REGISTER COMPANY
INDEX
Page
No.
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PART I - FINANCIAL STATEMENTS
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Balance Sheet
September 28, 1997, December 29, 1996 3
Statement of Income
13 Weeks Ended September 28, 1997 and September 29, 1996
39 Weeks Ended September 28, 1997 and September 29, 1996 4
Statement of Cash Flows
39 Weeks Ended September 28, 1997 and September 29, 1996 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 29, 1996.
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 Results of
Operations and Financial Condition 6-7
PART II - OTHER INFORMATION AND SIGNATURE 8-10
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THE STANDARD REGISTER COMPANY
BALANCE SHEET
(Dollars in Thousands)
<TABLE>
<CAPTION>
ASSETS September 28, December 29,
1997 1996
(Unaudited) (Audited)
----------- ------------
<S> <C> <C>
CURRENT ASSETS
Cash and Cash Equivalents $ 78,567 $ 64,550
Investment held to maturity 16,339 1,215
Accounts Receivable, less Allowance
for Losses 168,655 178,711
Inventories
Finished Products 58,819 55,449
Jobs in Process 18,331 18,573
Materials and Supplies 10,024 12,130
Deferred Income Tax 8,206 8,206
Prepaid Expense 5,737 6,153
-------- --------
Total Current Assets 364,678 344,987
-------- --------
PLANT AND EQUIPMENT
Buildings and Improvements 65,610 61,711
Machinery and Equipment 261,957 224,702
Office Equipment 49,803 60,894
-------- --------
Total 377,370 347,307
-------- --------
Less Accumulated Depreciation 163,623 141,021
Depreciated Cost 213,747 206,286
Construction in Process 33,720 26,160
Land 4,081 3,512
-------- --------
Total Plant and Equipment 251,548 235,958
-------- --------
OTHER ASSETS
Goodwill, Patents, and Other 3,159 3,278
Investment in F3 5,277 2,890
Investment in Polyforms Joint Venture 250 1,000
-------- --------
Total Other Assets 8,686 7,168
-------- --------
TOTAL ASSETS 624,912 588,113
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable 20,587 20,225
Dividends Payable - 5,738
Accrued Compensation 33,853 34,355
Accrued Other Expense 947 5,536
Accrued Taxes, except Income 6,941 5,902
Income Taxes Payable 2,253 2,624
Customer Deposits 21,189 4,185
Deferred Service Contract Income 8,352 7,274
-------- --------
Total Current Liabilities 94,122 85,839
-------- --------
LONG-TERM LIABILITIES
Long-Term Debt 4,600 4,600
Retiree Healthcare 28,718 27,643
Deferred Income Taxes 16,785 16,785
-------- --------
Total Long-Term Liabilities 50,103 49,028
-------- --------
SHAREHOLDERS' EQUITY
Common Stock, $1.00 Par Value
24,302,091 Shares Issued in 1997 24,302
24,204,392 Shares Issued in 1996 24,204
Class A Stock, $1.00 Par Value
4,725,000 Shares Outstanding 4,725 4,725
Capital in Excess of Par Value 31,402 28,705
Retained Earnings 437,214 400,387
Treasury Stock, 613,706 Shares at Cost (16,956)
--------
239,486 Shares at Cost (4,775)
--------
Total Shareholders' Equity 480,687 453,246
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $624,912 $588,113
======== ========
</TABLE>
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THE STANDARD REGISTER COMPANY
STATEMENT OF INCOME
(In Thousands except Data Per Share)
(Unaudited)
<TABLE>
<CAPTION>
Third Quarter Nine Months
13 Weeks Ended 39 Weeks Ended
Sept 28, Sept 29, Sept 28, Sept 29,
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
TOTAL REVENUE $237,243 $230,853 $703,824 $699,878
-------- -------- -------- --------
COSTS AND EXPENSES
Cost of Products Sold 139,789 139,418 416,244 431,509
Engineering & Research 2,227 2,023 7,020 6,037
Selling and Administrative 58,059 53,687 171,010 159,418
Depreciation and Amortization 9,712 8,643 28,339 25,331
Interest 71 118 218 425
-------- -------- -------- --------
Total Costs and Expenses 209,858 203,889 622,831 622,720
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES 27,385 26,964 80,993 77,158
Income Taxes 11,135 10,899 32,796 31,444
-------- -------- -------- --------
NET INCOME $16,250 $16,065 $48,197 $45,714
======== ======== ======== ========
Average Number of Shares
Outstanding (000) 28,498 28,687 28,498 28,687
DATA PER SHARE
Net Income $ 0.57 $ 0.56 $ 1.69 $ 1.59
Dividends Paid 0.20 0.19 0.60 0.57
</TABLE>
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THE STANDARD REGISTER COMPANY
STATEMENT OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months
39 Weeks Ended
Sept 28, Sept 29,
1997 1996
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net Income $ 48,197 $ 45,714
-------- --------
Add Items not Affecting Cash:
Depreciation and Amortization 28,339 25,330
Loss (Gain) on Sale of Facilities 245 (30)
Net Change to Investments 1,267 989
Net Change to Retiree Healthcare 1,075 945
Increase (Decrease) in Cash Arising from
Changes in Asset and Liabilities:
Accounts Receivable 10,056 27,719
Inventories (1,022) 15,855
Other Assets 417 (544)
Accounts Payable 362 1,379
Accrued Expenses (4,052) 817
Income Taxes Payable (371) 781
Customer Deposits 17,004 (2,264)
Deferred Service Income 1,078 138
-------- --------
Net Adjustments 54,398 71,115
-------- --------
Net Cash Provided by Operating Activities 102,595 116,829
======== ========
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from Sale of Facilities 401 951
Proceeds from Sale of Short-term investments - 115
Purchase of Short Term Investments 15,000) -
Additions to Plant and Equipment (44,456) (44,317)
Investment in F3 Corporation (3,028) (751)
Investment in Polyforms Joint Venture - (157)
-------- --------
Net Cash (Used in) Investing Activities (62,083) (44,159)
======== ========
CASH FLOWS FROM FINANCING ACTIVITIES
Principal Payments on Debt - (3,235)
Proceeds from Issuance of Common Stock 2,794 1,118
Redemption of Common Stock (12,181) 5
Dividends Paid (17,108) (16,355)
-------- --------
Net Cash (Used in) Financing Activities (26,495) (18,467)
======== ========
NET INCREASE IN CASH AND
CASH EQUIVALENTS 14,017 54,203
Cash and Cash Equivalents, Beginning 64,550 33,646
-------- --------
CASH AND CASH EQUIVALENTS, ENDING $ 78,567 $ 87,849
======== ========
</TABLE>
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THE STANDARD REGISTER COMPANY
MANAGEMENT DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Results of Operations
- ---------------------
Net Income for the third quarter 1997 rose 1.2% to $16.3 million or $.57 per
share, compared to $16.1 million or $.56 per share for the comparable quarter
of 1996. Revenue for the quarter was $237.2 million, a 2.8% increase
compared to the $230.9 million reported in the third quarter 1996. For the
nine months year-to-date period, Net Income was $48.2 million or $1.69 per
share, a 5.4% increase compared to 1996's $45.7 million and $1.59 per share
result. Revenue for the first nine months was $703.8 million compared with
$699.9 million for the comparable period in 1996. The 2.8% increase in
revenue for the quarter showed a slight improving trend compared to the .5%
decline reported in the first half of 1997. Overall, the growth in net
income was primarily attributable to improved gross margins, up 6.6% and 7.2%
for the quarter and year-to-date periods, respectively, offset by increases
in operating expenses and depreciation.
The Document Management Division reported revenue of $174.9 million and
$514.7 million for the quarter and year-to-date periods, representing
increases of 6.1% and 3.2%, respectively. The current quarter's strong
revenue growth was driven by the division's Stanfast on demand printing
group, up 26.1%, and the Imaging Services print processing and fulfillment
group, up 12.4%. The Stanfast Group's 26.1% growth includes the transfer of
envelope products previously subcontracted by the Company; restating the
prior year's revenue for the inclusion of envelopes, the Stanfast Group's
revenue increased 14.2%. The Document Management Division experienced
improved unit growth of 4% for the quarter.
The Communicolor Division reported revenue of $23.6 million for the third
quarter, 1997. While this was a 3.0% decline from the comparable period in
1996, it compared favorably to the average decline in the preceding four
quarters of 11.5%. On a year-to-date basis, the Communicolor Division
reported revenue of $68.9 million, down 7.5%.
The Document Systems Division reported revenue of $37.9 million for the third
quarter, down 6.7%, and $118.1 million on a year-to-date basis, down 3.9%.
Contributing to the third quarter decline was a 20.0% decline in equipment
revenue reflecting the on-going transition to new intelligent printing
application products, a 4.5% decline in maintenance revenue as a result of
last year's pruning of unprofitable accounts, and a 4.0% decline in the
Pressure Sensitive Group due to increased discounting of labels. Partially
offsetting these declines was an increase in supplies revenue, up 3.7% for
the quarter.
The Company's gross margin for all products and services continued to improve
for both the third quarter and nine months year-to-date, increasing 6.6% and
7.2%, respectively. Gross margin as a percentage of revenue was 41.1% for
the third quarter, slightly higher than the first half's 40.7%. Gross margin
as a percentage of revenue improved 1.5 percentage points over the prior
year's 39.6% for the quarter and 2.6 percentage points over the prior year-
to-date's 38.3%.
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The improvements in gross margin on a year-to-date basis continue to be
attributable to lower paper price levels in both the Document Management
Division and the Document Systems Division's Pressure Sensitive Group, along
with improved cost controls in the Document Systems Division's maintenance
group. No LIFO inventory adjustments were recorded on a year-to-date basis
in either year. During the third quarter, the price of white bond paper,
which accounts for approximately 50% of the total paper used by the Company,
increased approximately 6% and another 6% increase is expected in the fourth
quarter. The anticipated year-end price levels should be reflective of the
prices experienced at the end of 1996. Accordingly, the year end LIFO
inventory adjustment is not expected to have a material effect on earnings.
Selling, administrative, and engineering expenses increased 8.2% and 7.6% for
the quarter and year-to-date periods, respectively, reflecting increased
sales support expense related to the roll out of the STAR sales office
automation system and heavier investment in information services related to
the development and support of new internal client server applications.
Depreciation and amortization expense continued to increase approximately 12%
for both the quarter and year-to-date periods in line with higher capital
spending levels.
Liquidity and Capital Resources
- -------------------------------
The Company's financial condition remains strong. Cash and cash equivalents
of $78.6 million exceeded total long term debt of $4.6 million by $74.0
million. Net cash flow from operating activities on a year-to-date basis was
$102.6 million resulting from higher net income, a 5.6% reduction in accounts
receivable, and a $17 million increase in customer deposits. Current assets
were 3.9 times the level of current liabilities.
Capital expenditures on a year-to-date basis totaled $44.5 million including
the purchase of a $2.7 million Memphis, Tennessee manufacturing facility to
house a new Stanfast demand print center utilizing color digital technology.
The Company's anticipated annual capital expenditure level remains at $60
million. During the quarter, the Company also invested $15 million in short
term investments and repurchased an additional $.8 million of the Company's
stock, bringing the total year-to-date stock repurchases to $12.2 million.
The Company believes that a combination of internally generated funds and
current cash reserves will be adequate to meet operating and financing needs
in the near term.
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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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<PAGE> 9
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 11, 1997
THE STANDARD REGISTER COMPANY
/s/ C. J. Brown
-----------------------------------------
By C. J. Brown, Sr. 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>
This schedule contains summary financial information extracted from The
Standard Register Company financial statements for nine months ended
September 28, 1997, and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-28-1997
<PERIOD-END> SEP-28-1997
<CASH> 78,567
<SECURITIES> 16,339
<RECEIVABLES> 173,527
<ALLOWANCES> 4,872
<INVENTORY> 87,174
<CURRENT-ASSETS> 364,678
<PP&E> 415,171
<DEPRECIATION> 163,623
<TOTAL-ASSETS> 624,912
<CURRENT-LIABILITIES> 94,122
<BONDS> 4,600
<COMMON> 29,027
0
0
<OTHER-SE> 451,660
<TOTAL-LIABILITY-AND-EQUITY> 624,912
<SALES> 701,688
<TOTAL-REVENUES> 703,824
<CGS> 416,244
<TOTAL-COSTS> 622,813
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 126
<INTEREST-EXPENSE> 218
<INCOME-PRETAX> 80,993
<INCOME-TAX> 32,796
<INCOME-CONTINUING> 48,197
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 48,197
<EPS-PRIMARY> 1.69
<EPS-DILUTED> 1.69
</TABLE>
