<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 March 30, 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 March 30, 1997
----- --------------------------------
Common Stock - $1.00 Par Value 23,879,343
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
March 30, 1997, December 29, 1996 3
Statement of Income
13 Weeks Ended March 30, 1997 and March 31, 1996 4
Statement of Cash Flows
13 Weeks Ended March 30, 1997 and March 31, 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 the Interim
Financial Statements 6-7
PART II - OTHER INFORMATION AND SIGNATURE 8-10
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THE STANDARD REGISTER COMPANY
BALANCE SHEET
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
ASSETS March 30, December 29,
1997 1996
----------- ------------
<S> <C> <C>
CURRENT ASSETS
Cash and Cash Equivalents $ 81,052 $ 64,550
Investment held to maturity 1,215 1,215
Accounts Receivable, less Allowance
for Losses 164,437 178,711
Inventories
Finished Products 56,190 55,449
Jobs in Process 19,864 18,573
Materials and Supplies 10,528 12,130
Deferred Income Tax 8,206 8,206
Prepaid Expense 5,170 6,153
--------- ---------
Total Current Assets 346,662 344,987
--------- ---------
PLANT AND EQUIPMENT
Buildings and Improvements 61,170 61,711
Machinery and Equipment 251,614 224,702
Office Equipment 44,192 60,894
--------- ---------
Total 356,976 347,307
Less Accumulated Depreciation 145,092 141,021
--------- ---------
Depreciated Cost 211,884 206,286
Construction in Process 24,607 26,160
Land 3,512 3,512
--------- ---------
Total Plant and Equipment 240,003 235,958
--------- ---------
OTHER ASSETS
Goodwill, Patents, and Other 3,227 3,278
Investment in F3 5,417 2,890
Investment in Polyforms Joint Venture 750 1,000
--------- ---------
Total Other Assets 9,394 7,168
--------- ---------
TOTAL ASSETS 596,059 588,113
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable 19,551 20,225
Dividends Payable -- 5,738
Accrued Compensation 26,338 34,355
Accrued Pension Expense 789 --
Accrued Other Expense 28 5,536
Accrued Taxes, except Income 7,405 5,902
Income Taxes Payable 10,801 2,624
Customer Deposits 7,159 4,185
Deferred Service Contract Income 9,394 7,274
--------- ---------
Total Current Liabilities 81,465 85,839
--------- ---------
LONG-TERM LIABILITIES
Long-Term Debt 4,600 4,600
Retiree Healthcare 28,098 27,643
Deferred Income Taxes 16,785 16,785
--------- ---------
Total Long-Term Liabilities 49,483 49,028
--------- ---------
SHAREHOLDERS' EQUITY
Common Stock, $1.00 Par Value
24,280,229 Shares Issued in 1997 24,280
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 30,834 28,705
Retained Earnings 415,322 400,387
Treasury Stock, 400,886 Shares at Cost (10,050)
--------- ---------
239,486 Shares at Cost (4,775)
---------
Total Shareholders' Equity 465,111 453,246
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 596,059 $ 588,113
========= =========
</TABLE>
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THE STANDARD REGISTER COMPANY
STATEMENT OF INCOME
(In Thousands except Data Per Share)
(Unaudited)
<TABLE>
<CAPTION>
First Quarter
13 Weeks Ended
March 30, March 31,
1997 1996
-------- ------
<S> <C> <C>
TOTAL REVENUE $230,114 $229,673
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COSTS AND EXPENSES
Cost of Products Sold 136,525 144,383
Engineering & Research 2,481 2,019
Selling and Administrative 56,364 52,168
Depreciation and Amortization 9,156 8,255
Interest 77 165
-------- --------
Total Costs and Expenses 204,603 206,990
-------- --------
INCOME BEFORE INCOME TAXES 25,511 22,683
Income Taxes 10,563 9,120
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NET INCOME $ 14,948 $ 13,563
======== ========
Average Number of Shares
Outstanding (000) 28,616 28,687
DATA PER SHARE
Net Income Primary and
Fully Diluted $ 0.52 $ 0.47
Dividends Paid 0.20 0.19
</TABLE>
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THE STANDARD REGISTER COMPANY
STATEMENT OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
First Quarter
13 Wks Ended
March 30, March 31,
1997 1996
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net Income $ 14,948 $ 13,563
-------- --------
Add Items not Affecting Cash:
Depreciation and Amortization 9,156 8,255
Loss on Sale of Facilities 56 1
Net Change to Investments 750 390
Net Change to Retiree Healthcare 455 -
Increase (Decrease) in Cash Arising from
Changes in Asset and Liabilities:
Accounts Receivable 14,275 17,264
Inventories (430) 749
Other Assets 983 (1,329)
Accounts Payable (674) 284
Accrued Expenses (11,233) (7,887)
Income Taxes Payable 8,177 6,629
Customer Deposits 2,974 6,504
Deferred Service Income 2,120 2,310
-------- --------
Net Adjustments 26,609 33,170
-------- --------
Net Cash Provided by Operating Activities 41,556 46,733
======== ========
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from Sale of Facilities 120 18
Proceeds from Sale of Short-term investments - 15
Additions to Plant and Equipment (13,326) (12,455)
Investment in F3 Corporation (3,028)
Investment in Polyforms Joint Venture - (64)
-------- --------
Net Cash (Used in) Investing Activities (16,233) (12,486)
======== ========
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Issuance of Common Stock 2,204 1,118
Redemption of Common Stock (5,275) -
Dividends Paid (5,750) (5,452)
-------- --------
Net Cash (Used in) by Financing Activities (8,821) (4,334)
======== ========
NET INCREASE IN CASH AND
CASH EQUIVALENTS 16,502 29,913
Cash and Cash Equivalents, Beginning 64,550 33,646
-------- --------
CASH AND CASH EQUIVALENTS, ENDING $ 81,052 $ 63,559
======== ========
</TABLE>
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THE STANDARD REGISTER COMPANY
MANAGEMENT DISCUSSION AND ANALYSIS
OF THE INTERIM FINANCIAL STATEMENTS
Results of Operations
- ---------------------
Net Income from the first quarter 1997 was $14.9 million, a 10.2% increase from
the $13.6 million recorded in the comparable quarter of 1996. Net Income Per
Share rose to $.52 per share up from $.47 per share for the comparable quarter
in 1996. Total Company revenue was $230.1 million compared with $229.7 million
for the prior year period. The growth in net income was primarily attributable
to improved gross margins as the result of lower paper costs.
Recently, the Company announced the realignment of the Pressure Sensitive Group
and the Electronic Systems Group from the Document Management Division to the
Document Systems Division. This realignment will facilitate improved customer
solutions and capitalize on the natural synergy between the groups. As such, the
following divisional results have been restated to reflect this change.
The Document Management Division reported revenue of $168.3 million for the
quarter representing an increase of 2.7%. Revenues from the Stanfast, Imaging
Services and Distribution Services Groups, all strategically targeted growth
opportunities, rose 11.9% and accounted for 37.5% of total division revenue. By
comparison, revenues from traditional business forms products declined 2.1%.
The Communicolor Division's revenue declined 10.1% for the quarter to $22.6
million. A majority of this decline is attributable to an 8% decline in price
levels between the comparable years' quarters. The Company's promotional direct
mail division continues to experience softened demand. The benefits of expanded
feature offerings and new sales initiatives are not expected to have an impact
before the second half of the year.
The Document Systems Division's revenue declined 2.4% in the first quarter to
$38.6 million as a result of declines in equipment and maintenance revenues of
14.4% and 12.5%, respectively. Offsetting these declines were improved sales in
supplies, up 11.7%, the Pressure Sensitive Group, up 5.2%, and the Electronic
Services Group, up 212.1%. Equipment gross margin improved from 30.5% of revenue
last year to 35.0% in the current period due to increased sales of higher margin
intelligent printing application products. Maintenance gross margin increased
32.4% reflecting the full impact of last year's pruning of unprofitable accounts
and the restructuring of the service organization. The Company's gross margin
for all products and services continued to improve for the first quarter,
increasing 9.7% over the comparable period in 1996. Gross margin as a percentage
of revenue was 40.7% in the current quarter compared to 37.1% in the prior year
period. No LIFO inventory adjustments were recorded in either quarter. The
improvement is attributed to lower paper price levels and favorable product mix.
Future paper price levels are expected to align more closely with price levels
experienced in the prior year's comparable periods.
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Selling, administrative, and engineering expenses increased 8.6% for the quarter
as a result of increased sales support personnel related to the rollout of the
STAR sales office automation project, increased advertising costs associated
with the SMARTworks(TM) suite of software forms automation tools, and an
additional $250,000 charge related to the Company's Russian joint venture. The
Company also recorded a non-recurring $764,000 charge for equipment modification
costs associated with the Travelers Express Company, Inc. August 1995 patent
settlement agreement; the Company does not expect further material costs related
to this matter.
Depreciation and amortization increased 10.9% to $9.2 million in line with prior
years higher capital spending levels. Interest expense decreased 53% as a result
of a $6.5 million decrease in debt level compared to the prior year.
Liquidity and Capital Resources
- -------------------------------
The Company's financial condition remains strong. Cash and cash equivalents of
$81.1 million exceeded total debt of $4.6 million by $76.5 million. Net cash
flow from operating activities for the first three months of 1997 was $41.6
million resulting primarily from increased net income and reductions in accounts
receivable, down 8.0%. Current assets were 4.3 times the level of current
liabilities.
Capital expenditures for the quarter totaled $13.3 million. 1997 capital
expenditures are estimated to range from $55 - $60 million. The Company also
invested an additional $3.0 million in F3 Software Corporation, a developer of
application software for our SMARTworks(TM) product offering, increasing the
Company's ownership position to 44%. In addition, the Company repurchased $5.3
million in company stock.
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.
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THE STANDARD REGISTER COMPANY
PART II - OTHER INFORMATION
ITEMS 1 THRU 3
- --------------
None
ITEM 4 Submission of Matters to a Vote of Security Holders
- ------
The Company's Annual Meeting of Shareholders was held April 16, 1997.
Following is the result of voting by the Shareholders regarding fixing and
determining the number of Directors to be ten.
IN FAVOR OPPOSED ABSTAINED
-------- ------- ---------
44,406,069 323,520 73,256
As a result of voting of the Shareholders, the following were elected to the
Company's Board of Directors to hold office for the ensuing year.
NOMINEE IN FAVOR WITHHELD
------- -------- --------
Roy W. Begley, Jr 44,738,243 64,602
F. David Clarke, III 44,751,450 51,395
Paul H. Granzow 44,750,974 51,871
Graeme G. Keeping 44,733,085 69,760
Peter S. Redding 44,750,914 51,931
Dennis L. Rediker 44,732,885 69,960
Ann Scavullo 44,738,924 63,921
John J. Schiff, Jr 44,751,920 50,925
Charles F. Sherman 44,749,543 53,302
John Q. Sherman, II 44,749,749 53,096
The Standard Register Company Management Incentive Compensation Plan was
approved as a result of the following vote:
IN FAVOR OPPOSED ABSTAINED
-------- ------- ---------
43,710,628 213,591 878,625
Following is the result of voting by the Shareholders regarding selection of
Battelle & Battelle LLP as the Company's Auditors for the year 1997.
IN FAVOR OPPOSED ABSTAINED
-------- ------- ---------
44,743,512 13,083 46,250
No broker non-votes were recorded.
ITEM 5
- ------
None
ITEM 6 (a) Exhibits
- ------
Exhibit No. Description
27 Financial Data Schedule
(b) There have been no reports on Form 8-K filed during the quarter for
which this report on Form 10-Q is being filed.
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SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
May 12, 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 THE THREE MONTHS ENDED MARCH 30, 1997,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-28-1997
<PERIOD-END> MAR-30-1997
<CASH> 81,052
<SECURITIES> 1,215
<RECEIVABLES> 170,432
<ALLOWANCES> 5,995
<INVENTORY> 86,582
<CURRENT-ASSETS> 346,662
<PP&E> 385,095
<DEPRECIATION> 145,092
<TOTAL-ASSETS> 596,059
<CURRENT-LIABILITIES> 81,465
<BONDS> 4,600
<COMMON> 29,005
0
0
<OTHER-SE> 436,106
<TOTAL-LIABILITY-AND-EQUITY> 596,059
<SALES> 229,447
<TOTAL-REVENUES> 230,114
<CGS> 136,525
<TOTAL-COSTS> 204,603
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 355
<INTEREST-EXPENSE> 77
<INCOME-PRETAX> 25,511
<INCOME-TAX> 10,563
<INCOME-CONTINUING> 14,948
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,948
<EPS-PRIMARY> 0.52
<EPS-DILUTED> 0.52
</TABLE>
