<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 28, 1997
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)
(937) 443-1000
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT
Name of each exchange
Title of each class on which registered
- ------------------- -------------------
Common stock $1.00 par value New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT
None
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. [ ]
The aggregate market value of all stock held by non-affiliates of the Registrant
at March 10, 1998 was approximately $405,846,000, based on a closing sales price
of $32.75 per share on March 10, 1998.
At March 10, 1998, the number of shares outstanding of the issuer's classes of
common stock are as follows:
Common stock, $1.00 par value 23,706,612 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 15, 1998.
-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, the Company's primary business has been the design,
manufacture, and sale of business forms. To meet the needs of today's business
environment, the business form has evolved to incorporate a wide range of
sophisticated features and related services that facilitate the recording,
storage and communication of business transactions and information.
On December 31, 1997, the Company acquired the stock of Uarco
Incorporated (UARCO) for $245 million in cash. The acquisition was in line with
the Company's goal to become the leading document management company in the
industry. The addition of UARCO enhances the Company's positions in key industry
and product growth segments and creates the opportunity for significant
economies of scale. With the acquisition, Standard Register believes it will be
the largest company in the U.S. forms and pressure sensitive label market with
an approximate 15 percent share. Moore Corporation is estimated to be a close
second in the U.S. market.
The UARCO acquisition occurred after the December 28, 1997 cut-off for
the Company's fiscal year and was therefore not reflected in the Company's 1997
financial statements. UARCO's estimated 1997 sales were $474 million, nearly 50
percent the size of Standard Register's $966 million in revenue. The Company
filed reports dated January 15, 1998 and March 13, 1998 on Forms 8K and 8K/A
with respect to the acquisition.
Effective January 1, 1998, the Company realigned its products and
services into two divisions. The Document Management and Systems Division
produces and delivers document management solutions to customers, including
workflow consulting, document design, custom printed forms and labels,
electronic forms, distribution services, and distributed intelligent printing
and mailing systems. The Company's Impressions Division is built generally
around the application of variable imaging technology, providing print on
demand, promotional direct mail, and document and plastic card fulfillment
services.
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. Documents are printed at 68 geographically
disbursed locations in the U.S., including 15 sites obtained in the UARCO
acquisition. Documents are shipped directly to customers or are stored by the
Company in warehouses for subsequent on-demand delivery. The management of
document 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, and printing supplies are available nationally and are 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 1997 of $9.1
million compared to $7.8 million for both 1996 and 1995. 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 seventy-two
professional employees.
-2-
<PAGE> 3
Expenditures for property, plant and equipment totaled $61.3 million in
1997, compared to $57.8 million and $48.3 million in 1996 and 1995,
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 3.5 to 1 at December 28, 1997 as
compared to 4.0 to 1 at December 29, 1996 and 3.4 to 1 at December 31,
1995. Total debt, including long-term and current maturities, was 0.9%
of total capital at year-end 1997, compared to 1.0% and 2.6% for
years-end 1996 and 1995, respectively. At year-end 1997, cash, cash
equivalents and short-term investments exceeded current and long-term
debt by $79 million. Following the close of the fiscal year, the
Company financed the $245 million acquisition of UARCO by applying $15
million of cash and borrowing $230 million under a $300 million
revolving credit agreement. On a pro-forma basis, adjusting for the
effects of the acquisition, the Company's year-end 1997 current ratio
would be 3.6 to 1 and the net debt (total debt less cash, cash
equivalents, and short-term investments) to total capital ratio would
be 25.4 percent. These relationships demonstrate the soundness of the
Company's financial position.
4.) The business of the Company taken as a whole is not dependent upon
any single customer 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 February 28, 1998
was $85.7 million compared to $53.8 million and $58.2 million at
February 28, 1997 and February 29, 1996, respectively. The February
28, 1998 backlog included $17.6 million of business acquired in the
UARCO acquisition. All orders are 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 February 28, 1998, the Company had 9,743 employees compared to
6,488 and 6,460 at February 28, 1997 and February 29, 1996,
respectively. The February 28, 1998 count included 2,894 employees
resulting from the UARCO acquisition.
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.
-3-
<PAGE> 4
In 1994, the Company entered into a joint venture with Russian and
Dutch partners to manufacture and market business forms in Russia. The Company's
$5.9 million investment was primarily in the form of refurbished equipment no
longer required by the Company in its U.S. operations. As a result of the
difficult business environment in Russia, the Company has written off its
investment, taking pretax charges of $4.9 million and $1.0 million in years 1996
and 1997, respectively.
ITEM 2 - PROPERTIES
The Company's principal production facilities are located in the
following cities:
- Dayton, Ohio
- Newark, Ohio
- Eudora, Kansas
- Shelbyville, Indiana
- Middlebury, Vermont
- York, Pennsylvania
- Fayetteville, Arkansas
- Porterville, California
- Cincinnati, Ohio
- Murfreesboro, Tennessee
- Terre Haute, Indiana
- Salisbury, Maryland
- Rocky Mount, Virginia
- Kirksville, Missouri
- Tampa, Florida
- Spring Grove, Illinois
- Charlotte, North Carolina
The following principal production facilities are from the acquisition
of UARCO:
- Corning, Iowa
- Deep River, Connecticut
- Fulton, Kentucky
- Roseburg, Oregon
- Radcliff, Kentucky
- Toccoa, Georgia
- Watseka, Illinois
With the exceptions of Tampa, Florida and Toccoa, Georgia, these
facilities are owned by the Company. In addition, the Company operates 38
smaller Stanfast Print Centers (including eight from the acquisition) and
fourteen Imagining Service Centers. In most cases these facilities are located
in major metropolitan locations in the U.S. and are leased.
The Company's current capacity, augmented by modest capital additions,
is expected to be sufficient to meet production requirements for the foreseeable
future. Capacity utilization varies significantly by press size and feature
capability. Most presses are in the 50 - 95 percent utilization range, averaging
an estimated 70 percent overall. The Company believes its production facilities
are suitable to meet future production needs.
-4-
<PAGE> 5
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.
EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
Officer
Name Age Office and Experience Since
---- --- --------------------- -----
<S> <C> <C> <C>
Alan L. Baughn 62 Vice President and Secretary. Mr. Baughn has served 1995
in this position since April 1997. He previously
served as Vice President, Corporate Planning and
Development from March 1995 to April 1997 and Assistant
Vice President, Corporate Planning and Development from
August 1992 to March 1995.
Craig J. Brown 48 Senior Vice President, Administration, Treasurer and 1987
Chief Financial Officer. Mr. Brown has served in his
current position since March 1995, having previously
served as Vice President, Finance and Treasurer from April
1987 to March 1995.
Brian W. Calabro 41 Vice President, Sales and Marketing, Document Management 1997
Division. Mr. Calabro has served in his current position
since April 1997. He previously served as General Sales
Manager, National Accounts since July 1994 and Manager,
National Account Sales since November 1990.
H. Franklin Coffman 59 Vice President, Customer Service and Communications. 1995
Mr. Coffman has served in this position since March 1995.
Previously he held positions as Assistant Vice President,
Customer Service and Communications from January 1995 to
March 1995, Director, Field Automation and Customer
Support from October 1993 to January 1995, and National
Sales Manager from January 1992 to October 1993.
</TABLE>
-5-
<PAGE> 6
<TABLE>
<S> <C> <C> <C>
John L. Crawford 62 Vice President, Internal Auditing. Mr. Crawford was elected 1995
to this position in March 1995. He previously served as
Assistant Vice President, Internal Auditing since August
1992.
James H. DeYoung 59 Vice President, International Operations. Mr. DeYoung has 1995
served in this position since March 1995. He previously
served as Assistant Vice President, International
Operations from January 1994 to March 1995 and Director,
World Trade from October 1990 to January 1994.
Peter A. Dorsman 43 Senior Vice President and General Manager, Document Systems 1996
Division. Mr. Dorsman has served in this position since
April 1997. He served as Senior Vice President and General
Manager, Equipment Division from January 1996 to April
1997. Prior to joining Standard Register in January 1996,
he held a number of senior marketing, strategic planning,
and sales management positions with NCR Corporation.
Paul H. Granzow 70 Chairman, Board of Directors. Mr. Granzow has served has 1984
Chairman of the Board of Directors since January 1984. He
is co-trustee of the John Q. Sherman Trust and also serves
as Senior Vice President and Director of the Weston Paper
and Manufacturing Company.
Peter S. Redding 59 President and Chief Executive Officer. Mr. Redding has 1981
served in his current position since December 1994. He
previously served as Executive Vice President and Chief
Operating Officer from January 1994 to December 1994 and
Executive Vice President, Forms Division from January 1992
to January 1994.
C. Thomas Russell 44 Vice President, Electronic Products and Chief 1995
Information Officer. Mr. Russell has served in this position
since joining Standard Register in August 1995. Previously
he was a partner with a major management and software
consulting firm.
John E. Scarpelli 54 Vice President, Human Resources. Mr. Scarpelli was elected 1995
to this position in March 1995. He previously served as
Assistant Vice President, Human Resources from January
1993 to March 1995.
Joseph V. Schwan 61 Executive Vice President and Chief Operating Officer. 1991
Mr. Schwan has served in this position since April 1997.
Previously he served as Senior Vice President and General
Manager, Document Management Division from March 1995 to
April 1997 and Vice President, Forms Sales and Marketing
from August 1991 to March 1995.
Harry A. Seifert, Jr. 60 Vice President, Manufacturing. Mr. Seifert has held his 1987
current position since January 1997. Previously he had
been Vice President, Forms Manufacturing, Document
Management Division since August 1992.
</TABLE>
-6-
<PAGE> 7
<TABLE>
<S> <C> <C> <C>
Michael Spaul 50 Senior Vice President and General Manager, Communicolor. 1991
Mr. Spaul has served in this position since March 1995. He
served as Vice President and General Manager of the
Communicolor Division from January 1990 through March
1995.
</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.
PART II
ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
(a) The common stock of the Registrant is traded on the New York Stock
Exchange National Market under the symbol SR. Prior to May 14, 1996,
the common stock was traded on the NASDAQ National Market under the
symbol SREG. The range of high and low market prices and dividends
paid per share for each quarterly period during the two most recent
fiscal years are presented below.
<TABLE>
<CAPTION>
1997
--------------------------------------------------------------------------------------------------
Cash
Quarter Dividend High Low Last
------- -------- ---- --- ----
<S> <C> <C> <C> <C>
1st $0.20 $35.50 $31.75 $33.12
2nd $0.20 $35.75 $30.50 $30.50
3rd $0.20 $35.25 $30.50 $32.75
4th $0.20 $35.50 $32.00 $35.37
1996
--------------------------------------------------------------------------------------------------
Cash
Quarter Dividend High Low Last
------- -------- ---- --- ----
1st $0.19 $24.37 $19.00 $23.75
2nd $0.19 $28.87 $23.37 $24.62
3rd $0.19 $27.87 $22.87 $27.62
4th $0.19 $32.50 $25.37 $32.50
</TABLE>
(b) The number of shareholders of record of the Company's common stock as
of March 10, 1998 was 3,298, 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 quarterly
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.
-7-
<PAGE> 8
ITEM 6 - SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Selected Income Statement Data 1997 1996 1995 1994 1993
- ------------------------------ ---- ---- ---- ---- ----
Thousands except for per share data
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenue $965,674 $943,979 $903,240 $767,415 $722,120
Net income 66,894 63,157 47,759 43,876 42,185
Earnings per share:
Basic 2.35 2.20 1.67 1.53 1.47
Diluted 2.33 2.19 1.67 1.53 1.47
Selected Balance Sheet Data
- ---------------------------
Total assets $647,018 $588,113 $555,503 $525,659 $502,333
Long-term debt 4,600 4,600 4,600 11,071 17,546
Other
- -----
Cash dividends paid
per share .80 .76 .72 .68 .64
</TABLE>
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations: 1997 Compared to 1996
- --------------------------------------------
Net Income for 1997 was a record $66.9 million, 5.9 percent above
the $63.2 million reported for the prior year; Basic Earnings Per Share were
$2.35 compared to 1996's $2.20 result.
Total Revenue for 1997 was $965.7 million, up 2.3 percent from
$944.0 million in fiscal 1996. The largest of the Company's three divisions, The
Document Management Division, recorded a 4.3 percent increase in revenue to
$702.2 million, reflecting estimated gains of 2.1 percent in units and 2.2
percent in average selling prices. Within this Division, traditional business
forms and related services were down 1.9 percent, which compares favorably to an
estimated 4.0 percent decline in industry demand for these products. Revenues
for the Imaging Services and Stanfast Groups were up 21.0 percent and 26.2
percent, respectively, as the Company continued to exploit the significant
growth opportunities in these markets. The Company believes it continues to pick
up market share.
The Communicolor Division reported revenue of $97.3 million, down
4.2 percent from the prior year. The decline was attributed in part to the
mailing of fewer pieces by many of the Division's customers and competitive
pressures from commercial printers equipped with high resolution imaging
equipment. The Division took actions in 1997 to bolster its sales force and
product offering and saw consistent progress during the year; after seven
consecutive quarters of sales declines, fourth quarter revenue increased 5.0
percent.
Revenue for the Document Systems Division was $163.1 million, down
0.9 percent from 1996's result. New equipment installations were off 7.7 percent
reflecting the continuing transition from traditional forms handling equipment
to newer generation intelligent printing systems. Equipment maintenance was also
lower, off 2.9 percent, which resulted in part from an effort to trim
unprofitable business; parenthetically, dollar gross margins in the service
segment increased $3.5 million despite a $1.1 million drop in revenue. In other
product segments, supplies revenue rose 4.2 percent, Pressure Sensitive label
business grew 1.9 percent, and Electronic Services increased 19.4 percent.
-8-
<PAGE> 9
The gross margin improved from 39.1 percent of revenue in 1996 to
40.3 percent in the year just ended and was the major contributing factor to the
Company's increased profitability. This improvement is attributed primarily to
modestly improved pricing, lower average paper prices, and other manufacturing
cost improvements. After peaking at year-end 1995, paper prices generally fell
off until June 1997, when the first of the year's three price increases was
recorded. The Company raised the prices of its forms in December 1997 in
response to the rising costs of paper and other operating items. Notwithstanding
a competitive marketplace, the Company has historically been able to recover
higher paper costs over time by providing high value added products and services
to its customers.
Selling, administrative, and engineering costs increased 7.0 percent
from $225.6 million in 1996 to $241.5 million in 1997. The Company has increased
its investment in information services as part of a plan to implement integrated
systems to improve order management and management reporting. In addition, the
Company increased its level of sales support resource in the field as part of
its program to improve overall sales productivity.
A program to ensure that the Company's systems are Year 2000 compliant
by mid-year 1999 has been undertaken; $800,000 was incurred in 1997 and an
estimated $9.2 million will be spent during 1998 and 1999.
Depreciation and amortization rose 5.3 percent in response to higher
capital spending during the last two years. The income tax rate was 39.7 percent
compared to 41.4 percent in 1996. The lower tax rate is primarily attributed to
Russian joint venture capital losses incurred in 1996 and for which current or
future tax benefits were not provided.
Results of Operations: 1996 Compared to 1995
- --------------------------------------------
Net Income for 1996 was $63.2 million, 32.2 percent above 1995's $47.8
million result. Basic Earnings Per Share were $2.20 versus $1.67 in the prior
year. There were two significant adjustments in 1996 that essentially offset one
another: the write-down of the Company's investment in the Russian joint
venture, equivalent to approximately $0.13 per share after tax, and a favorable
LIFO inventory adjustment related to lower paper prices, also $0.13 per share.
There was an unfavorable LIFO inventory adjustment in 1995 equivalent
to $10.0 million after tax, or $0.34 per share. Excluding the LIFO adjustments
in both years and the Russian joint venture adjustment, Net Income was 9.7
percent higher.
Paper prices played significant roles in both years' results. The most
recent paper cycle began in June 1994 as the strengthening world-wide demand for
all paper products and relatively high utilization rates at paper mills
supported the first of many closely spaced price increases. By June 1995 the
weighted average of all papers purchased by the Company had risen nearly 45
percent. Paper prices remained stable for the balance of 1995 and fell during
the first four months of 1996, remaining at that level for the balance of the
year despite several attempts at increases by the paper companies. Average paper
prices in 1996 were 13 percent lower than in 1995.
Revenue in 1996 was $944.0 million, 4.5 percent above the $903.2
million reported for 1995. The Document Management Division reported $673.5
million in revenue, a 7.4 percent increase over 1995. Traditional business forms
revenue rose 0.9 percent while the Imaging Services, Stanfast, and Distribution
Services Groups produced a 23.7 percent overall increase.
The Communicolor Division, a producer of promotional direct mail,
reported revenue of $101.6 million, 11.5 percent below the 1995 result. This
reduction reflected fewer mailings, lower paper prices, and new competition from
commercial printers. Printing and imaging capacity added during 1996 was not
fully utilized, producing lower operating margins.
-9-
<PAGE> 10
The Document Systems Division generated revenue of $164.7 million, up
6.0 percent compared to 1995's $155.3 million. Note that these results were
restated for the reclassification of pressure sensitive labels and electronic
services to this Division from the Document Management Division. Revenue from
supplies was up 11.4 percent, but new equipment installations declined 2.3
percent and maintenance revenue was 5.5 percent below the prior year. The
reduction in equipment revenue reflects a product rationalization as part of the
Division's plan to focus primarily on intelligent printing applications. The
drop in maintenance revenue reflected the pruning of unprofitable accounts,
which produced a 4.0 percent increase in gross margin dollars despite the lower
revenue.
The Company's profit improvement was most evident at the gross margin
line. The gross margin for all products and services was 39.1 percent of revenue
in 1996, compared to 35.3 percent for 1995. Excluding the effects of LIFO
inventory adjustments in each of the years, the operating gross margin improved
from 37.2 percent to 38.4 percent, reflecting a favorable product mix, lower
paper costs, and the retention of some of the forms pricing gains made during
1995.
Selling, administrative, and engineering expenses totaled $225.5
million in 1996, 8.1 percent above the 1995 level. 1996's operating expenses
included the $4.9 million charge related to the Russian joint venture,
approximately $2.8 million in Electronic Services Group start-up costs, $2.7
million in roll-out costs for the Company's new order entry system, and $2.5
million for added sales support. Depreciation and amortization increased from
$29.3 million in 1995 to $34.8 million in 1996, primarily as a result of higher
capital spending in the last two years.
The increase in the income tax rate from 40.5 percent in 1995 to 41.4
percent in 1996 can be attributed to the Russian charge. The majority of this
charge was recorded as a capital loss which, in the absence of an offsetting
capital gain, did not permit a corresponding reduction in the tax provision.
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 are 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 remained very strong. The total
balance of cash and short-term investments was $83.6 million at year end,
compared to $4.6 million in total debt. Shareholders' equity ended the year at
$487.9 million.
Cash flow from operations was sufficient to fund a record $61.3
million of capital expenditures, $3.0 million of additional investment in F3
Corporation, $22.8 million of dividends, $12.2 million of stock repurchases, and
an increase in cash reserves of $17.8 million.
Capital expenditures in 1997 went in major part for manufacturing
capacity additions, automation of field sales offices, and internal application
software development. The Company expects 1998 capital spending to be in the $65
million to $75 million range.
On December 15, the Company entered into a $300 million unsecured
five-year revolving credit agreement underwritten by KeyBank, N.A. to provide
financing for the acquisition of Uarco, Inc. and other general corporate
purposes. The Company closed on the $245 million acquisition on December 31,
1997, applying $15 million of corporate cash and borrowing $230 million under
the revolver. Under the terms of the agreement, the interest rate is
-10-
<PAGE> 11
set periodically at a spread over the London Interbank Offered Rate (LIBOR); the
spread is based upon the Company's ratio of net debt (debt less cash and
short-term investments) to total capital. On a pro-forma basis, the Company's
net debt to total capital ratio following the December 31 acquisition was 25.4
percent. The Company subsequently entered into a five-year swap agreement that
effectively fixes the interest rate on $200 million of the debt at an all-in
cost of 6.0 percent.
In management's opinion, the combination of the revolving credit
agreement and internally generated cash flow will be sufficient to provide for
the Company's near-term financing needs.
ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
Index to Financial Statements Page
<S> <C>
Independent Auditors' Report 15
Balance Sheet - December 28, 1997 and December 29, 1996 16-17
Statement of Income - Years ended December 28, 1997,
December 29, 1996 and December 31, 1995 18
Statement of Shareholders' Equity - Years ended
December 28, 1997, December 29, 1996 and December 31, 1995 19
Statement of Cash Flows - Years ended December 28, 1997,
December 29, 1996 and December 31, 1995 20
Notes to Consolidated Financial Statements 21-30
Index to Financial Statement Schedule, Years ended December 31, 1997,
December 29, 1996 and December 31, 1995
II. Valuation and Qualifying Accounts 31
</TABLE>
All other schedules have been omitted because the information is not applicable
or is not material or because the information required is included in the
financial statements or notes thereto.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
Items 10, 11, 12 and 13 are incorporated by reference from the
Company's Proxy Statement for the 1998 Annual Meeting of shareholders.
-11-
<PAGE> 12
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1 and 2. FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
The financial statements and financial statement schedule are
listed in the accompanying Index to Financial Statements on page
11 and are incorporated herein by reference.
3. EXHIBITS
The exhibits as listed on the accompanying index to exhibits on
page 14 are filed as part of this Form 10-K.
(b) REPORTS ON FORM 8-K
The Company filed no current reports on Form 8-K during the
quarter ended December 28, 1997. Form 8-K and amended Form 8-K/A
were filed on January 15, 1998 and March 13, 1998, respectively.
-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 27, 1998.
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 27, 1998:
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 27, 1998 as
attorney-in-fact for the following directors of the Registrant:
R. W. Begley, Jr. D. L. Rediker
F. D. Clarke, III A. Scavullo
G. G. Keeping J. J. Schiff, Jr.
P. S. Redding C. F. Sherman
J. Q. Sherman, II
/S/ P. H. Granzow
-------------------------------
P. H. Granzow
-13-
<PAGE> 14
INDEX TO EXHIBITS
3. Amended Articles of Incorporation of the Company and Code of
Regulations. Incorporated by reference to 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.
Incorporated by reference to Form 10-K for year ended December 31,
1995.
10. Material contracts
10.3 The Standard Register Company Non-Qualified Retirement Plan.
Incorporated by reference to Form 10-K for year ended January 2,
1994.
10.4 The Standard Register Company Officers' Supplemental Non-Qualified
Retirement Plan. Incorporated by reference to Form 10-K for year
ended January 2, 1994.
10.6 The Standard Register Company Incentive Stock Option Plan.
Incorporated by reference to the Company's Proxy Statement for the
Annual Meeting of Shareholders held on April 17, 1996.
10.8 The Standard Register Company Deferred Compensation Plan.
Incorporated by reference to Registration Statement No. 333-43055.
10.9 The Standard Register Company Management Incentive Plan.
Incorporated by reference to the Company's Proxy Statement for the
Annual Meeting of Shareholders held April 16, 1997.
10.10 Stock Purchase Agreement dated November 26, 1997. Incorporated by
reference to Form 8-K filed January 15, 1998.
10.11 The Standard Register Dividend Reinvestment and Common Stock
Purchase Plan. Incorporated by reference to Registration Statement
No. 333-05321.
13. Financial Statements and Financial Statement Schedule.
23. Consent of Independent Auditors.
24. Power of Attorney of R.W. Begley, Jr., F.D. Clark III, G.G.
Keeping, P.S. Redding, D.L. Rediker, A. Scavullo, J.J. Schiff, Jr.,
C.F. Sherman, J.Q. Sherman II.
27. Financial Data Schedule (EDGAR version).
-14-
<PAGE> 15
EX-13
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 28, 1997 and December 29, 1996, and the related
statements of income, shareholders' equity, and cash flows for each of the three
years in the period ended December 28, 1997. Our audits also included the
financial statement schedule listed in Item 14(a)(2). These financial statements
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 28, 1997 and December 29, 1996, and the results
of its operations and its cash flows for each of the three years in the period
ended December 28, 1997, in conformity with generally accepted accounting
principles. Also, in our opinion, such financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
/S/ BATTELLE & BATTELLE LLP
BATTELLE & BATTELLE LLP
Certified Public Accountants
Dayton, Ohio
January 23, 1998
-15-
<PAGE> 16
THE STANDARD REGISTER COMPANY
BALANCE SHEET
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
December 28 December 29
A S S E T S 1997 1996
------------ -----------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 67,556 $ 64,550
Short-term investments 16,055 1,215
Accounts receivable, less allowance for losses
of $2,864 and $3,638, respectively 191,031 178,711
Inventories 85,546 86,152
Deferred income taxes 6,168 8,206
Prepaid pension expense 5,371 952
Prepaid other expense 7,091 5,201
-------- --------
Total current assets 378,818 344,987
-------- --------
PLANT AND EQUIPMENT
Buildings and improvements 67,874 61,711
Machinery and equipment 237,320 224,702
Office equipment 67,324 60,894
-------- ---------
Total 372,518 347,307
Less accumulated depreciation 155,634 141,021
-------- --------
Depreciated cost 216,884 206,286
Plant and equipment under construction 39,070 26,160
Land 4,081 3,512
------- --------
Total plant and equipment 260,035 235,958
-------- --------
OTHER ASSETS 8,165 7,168
-------- --------
Total assets $647,018 $588,113
======== ========
</TABLE>
-16-
<PAGE> 17
THE STANDARD REGISTER COMPANY
BALANCE SHEET
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
December 28 December 29
LIABILITIES AND SHAREHOLDERS' EQUITY 1997 1996
----------- -----------
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 25,296 $ 20,225
Dividends payable 5,968 5,738
Accrued compensation 34,817 34,355
Accrued other expense 4,581 5,536
Accrued taxes, except income 6,977 5,902
Income taxes payable 1,155 2,624
Customer deposits 21,003 4,185
Deferred service contract income 7,222 7,274
--------- ---------
Total current liabilities 107,019 85,839
--------- ---------
LONG-TERM LIABILITIES
Long-term debt 4,600 4,600
Retiree health care obligation 28,779 27,643
Deferred income taxes 18,685 16,785
--------- ---------
Total long-term liabilities 52,064 49,028
--------- ---------
SHAREHOLDERS' EQUITY
Common stock, $1.00 par value:
Authorized 50,500,000 shares
Issued 1997 - 24,308,437; 1996 - 24,204,392 24,308 24,204
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 31,599 28,705
Retained earnings 444,259 400,387
Cost of common shares in treasury:
1997 - 615,073 shares; 1996 - 239,486 shares (16,956) (4,775)
--------- ---------
Total shareholders' equity 487,935 453,246
--------- ---------
Total liabilities and shareholders' equity $ 647,018 $ 588,113
========= =========
</TABLE>
See accompanying notes.
-17-
<PAGE> 18
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 28 December 29 December 31
1997 1996 1995
-------------- -------------- --------------
<S> <C> <C> <C>
REVENUE $ 965,674 $ 943,979 $ 903,240
--------- --------- ---------
COST AND EXPENSE
Cost of products sold 576,292 575,316 584,088
Engineering and research 9,100 7,842 7,813
Selling and administrative 232,418 217,671 200,812
Depreciation and amortization 36,646 34,814 29,326
Interest 288 532 974
--------- --------- ---------
Total cost and expense 854,744 836,175 823,013
--------- --------- ---------
INCOME BEFORE INCOME TAXES 110,930 107,804 80,227
--------- --------- ---------
INCOME TAXES
Current 40,098 42,009 32,752
Deferred 3,938 2,638 (284)
--------- --------- ---------
Total income taxes 44,036 44,647 32,468
--------- --------- ---------
NET INCOME $ 66,894 $ 63,157 $ 47,759
========= ========= =========
EARNINGS PER SHARE
Basic $ 2.35 $ 2.20 $ 1.67
========= ========= =========
Diluted $ 2.33 $ 2.19 $ 1.67
========= ========= =========
</TABLE>
See accompanying notes.
-18-
<PAGE> 19
THE STANDARD REGISTER COMPANY
STATEMENT OF SHAREHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
52 Weeks Ended 52 Weeks Ended 52 Weeks Ended
December 28 December 29 December 31
1997 1996 1995
-------------- -------------- --------------
<S> <C> <C> <C>
COMMON STOCK
Beginning balance $ 24,204 $ 24,142 $ 24,085
Add shares issued under:
Stock Incentive Plan 50 55 57
Dividend Reinvestment Plan 22 7 -
Stock Option Plan 32 - -
--------- --------- ---------
Ending balance 24,308 24,204 24,142
--------- --------- ---------
CLASS A STOCK 4,725 4,725 4,725
--------- --------- ---------
CAPITAL IN EXCESS OF PAR VALUE
Beginning balance 28,705 27,450 26,507
Add excess of market over par
value of shares issued under:
Stock Incentive Plan 1,562 1,062 943
Dividend Reinvestment Plan 709 193 -
Stock Option Plan 623 - -
--------- --------- ---------
Ending balance 31,599 28,705 27,450
--------- --------- ---------
RETAINED EARNINGS
Beginning balance 400,387 359,334 332,501
Add net income for year 66,894 63,157 47,759
Less cash dividends declared (23,022) (22,104) (20,926)
--------- --------- ---------
Ending balance 444,259 400,387 359,334
--------- --------- ---------
TREASURY SHARES
Beginning balance (4,775) (4,434) (3,852)
Cost of common shares purchased (12,181) (341) (582)
--------- --------- ---------
Ending balance (16,956) (4,775) (4,434)
--------- --------- ---------
Total shareholders' equity $ 487,935 $ 453,246 $ 411,217
========= ========= =========
</TABLE>
See accompanying notes.
-19-
<PAGE> 20
THE STANDARD REGISTER COMPANY
STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
52 Weeks Ended 52 Weeks Ended 52 Weeks Ended
December 28 December 29 December 31
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 66,894 $ 63,157 $ 47,759
--------- --------- ---------
Add (deduct) items not affecting cash:
Depreciation and amortization 36,646 34,814 29,326
Loss (gain) on sale of assets 346 1,508 (1,309)
Unrealized gain on investments (294) - -
Loss on other investments 1,852 4,383 830
Provision for deferred income taxes 3,938 2,638 (284)
Increase (decrease) in cash arising from
changes in assets and liabilities:
Accounts receivable (12,320) 2,998 (29,757)
Inventories 606 11,665 2,856
Other assets (6,309) (2,494) 202
Accounts payable and accrued expenses 6,789 1,762 8,159
Income taxes payable (1,469) 90 256
Customer deposits 16,818 (4,149) (1,473)
Deferred income (52) (1,181) 1,095
--------- --------- ---------
Net adjustments 46,551 52,034 9,901
--------- --------- ---------
Net cash provided by operating activities 113,445 115,191 57,660
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to plant and equipment (61,287) (57,783) (48,332)
Proceeds from sale of plant and equipment 432 1,692 3,330
Purchases of short-term investments (15,000) - (1,330)
Sales of short-term investments 455 115 -
Additions to other investments (3,028) (1,008) (5,555)
Other investing activities (36) (675)
--------- --------- ---------
Net cash used in investing activities (78,464) (56,984) (52,562)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on long-term debt - (6,471) (6,471)
Proceeds from issuance of common stock 2,998 1,317 1,000
Purchase of treasury stock (12,181) (341) (582)
Dividends paid (22,792) (21,808) (20,634)
--------- --------- ---------
Net cash used in financing activities (31,975) (27,303) (26,687)
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 3,006 30,904 (21,589)
Cash and cash equivalents at beginning of year 64,550 33,646 55,235
--------- --------- ---------
CASH AND CASH EQUIVALENTS
AT END OF YEAR $ 67,556 $ 64,550 $ 33,646
========= ========= =========
SUPPLEMENTAL CASH FLOW DISCLOSURES
Cash paid during the year for:
Interest $ 141 $ 565 $ 999
Income taxes $ 41,317 $ 42,115 $ 32,496
Non-cash investing activities:
Note receivable from sale of assets $ - $ 650 $ -
</TABLE>
See accompanying notes.
-20-
<PAGE> 21
THE STANDARD REGISTER COMPANY
NOTES TO FINANCIAL STATEMENTS
(Dollars in thousands except per share data)
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 document management services. 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 and assumptions that affect the amounts reported in the financial
statements and accompanying notes. 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 28, 1997, December 29,
1996, and December 31, 1995 had 52 weeks.
CASH EQUIVALENTS - The Company classifies as cash equivalents all
highly liquid investments with original maturities 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.
SHORT-TERM INVESTMENTS - Debt securities for which the Company has the
intent and ability to hold to maturity are classified as held-to-maturity and
are stated at amortized cost. Securities are classified as trading when held for
short-term periods in anticipation of market gains and are reported at fair
market value, with unrealized gains and losses included in income.
INVENTORIES - Inventories are valued at the lower of cost or market.
Substantially all inventory costs are determined by the last-in, first-out
(LIFO) method. Finished products include printed forms stored for future
shipment and invoicing to customers.
PLANT AND EQUIPMENT - These assets are stated at cost less accumulated
depreciation. Costs of normal maintenance and repairs are charged to expense
when incurred. When the assets are retired or otherwise disposed of, their cost
and related depreciation are removed from the respective accounts and the
resulting gain or loss is included in current income. Impairment of asset value
is recognized whenever events or circumstances indicate that carrying amounts
are not recoverable.
DEPRECIATION - For financial statement purposes, depreciation is
computed by the straight-line method over the expected useful lives of the
depreciable assets. Depreciation expense was $36,431 in 1997, $34,601 in 1996,
and $29,143 in 1995. Estimated asset lives are:
Classification Years
-------------- -----
Buildings and improvements 10-40
Machinery and equipment 5-15
Office equipment 5-15
-21-
<PAGE> 22
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
REVENUE RECOGNITION - The Company generally recognizes product and
related services revenue at the time of shipment to the customer. 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.
EARNINGS PER SHARE - Statement of Financial Accounting Standards (SFAS)
No. 128, "Earnings Per Share" is effective for the Company's 1997 fiscal year.
This new standard changes the manner in which earnings per share (EPS) amounts
are calculated and presented. Basic EPS is the per share allocation of net
income available to shareholders based on the weighted average number of shares
outstanding during the period. Diluted EPS represents the per share allocation
of net income based on the weighted average number of shares outstanding plus
all common shares that potentially could have been issued under the Company's
stock option program.
ACCOUNTING FOR STOCK OPTIONS - The Company follows Accounting
Principles Board (APB) Opinion No. 25 "Accounting for Stock Issued to Employees"
in accounting for its employee stock options. Under APB 25, no compensation
expense is recognized in the financial statements because the exercise price of
employee stock options equals the market price of the underlying stock on the
date of the grant. The Company has adopted the disclosure-only provisions of
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation."
NEW ACCOUNTING PRONOUNCEMENT - In June 1997, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards (SFAS) No.
131, "Disclosures about Segments of an Enterprise and Related Information". This
Statement significantly changes the way public business enterprises report
information about operating segments in annual financial statements. SFAS 131
uses a "management approach" to disclose financial and descriptive information
about an enterprise's reportable operating segments which is based on reporting
information the way management organizes the segments for making operating
decisions and assessing performance. SFAS 131 will be effective for the
Company's 1998 fiscal year and the reported business segments will reflect the
organizational structure of the Company at that time.
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 (FIFO) method had
been used, these inventories would have been $35,601 higher at December 28, 1997
and $34,885 higher at December 29, 1996.
Inventories at the respective year-ends are as follows:
<TABLE>
<CAPTION>
December 28 December 29
1997 1996
----------- -----------
<S> <C> <C>
Finished products $ 58,675 $ 55,449
Jobs in process 16,500 18,573
Materials and supplies 10,371 12,130
------- -------
Total $ 85,546 $ 86,152
======= =======
</TABLE>
-22-
<PAGE> 23
NOTE 3 - LONG-TERM DEBT
Long-term debt consists of industrial development revenue bonds
issued by Rutherford County, Tennessee. Interest is payable semi-annually at
6.125%. Required annual principal payments subsequent to December 28, 1997 are
as follows: 1998 - None; 1999 - $525; 2000 - $555; 2001 - $590; and 2002 - $630.
NOTE 4 - INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Current
Federal $ 32,933 $ 33,285 $ 26,386
State and local 7,165 8,724 6,366
Deferred 3,938 2,638 ( 284)
-------- -------- -------
Total $ 44,036 $ 44,647 $ 32,468
======= ======= =======
</TABLE>
The significant components of the deferred tax expense (benefit) are as
follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Depreciation $ 2,357 $ 853 $ 1,128
Pension 2,039 1,712 391
Inventories 110 267 976
Compensation and benefits ( 431) ( 33) ( 1,331)
Allowance for doubtful accounts 312 111 ( 690)
Retiree health care benefits ( 457) ( 620) ( 393)
Other 8 348 ( 365)
--------- ------- ----------
Total $ 3,938 $ 2,638 ($ 284)
======= ======= ========
</TABLE>
The components of the net deferred tax asset and liability as of
December 28, 1997 and December 29, 1996 are as follows:
<TABLE>
<CAPTION>
December 28 December 29
1997 1996
----------- -----------
<S> <C> <C>
Deferred tax asset:
Allowance for doubtful accounts $ 1,153 $ 1,465
Inventories 2,524 2,634
Compensation and benefits 5,127 4,696
Pension ( 2,739) ( 700)
Other 103 111
-------- ---------
$ 6,168 $ 8,206
======= ========
Deferred tax liability:
Depreciation $ 30,272 $ 27,915
Retiree health care benefits ( 11,587) ( 11,130)
------ -------
$ 18,685 $ 16,785
======= =======
</TABLE>
-23-
<PAGE> 24
NOTE 4 - INCOME TAXES (CONTINUED)
The reconciliation of the statutory federal income tax rate and the
effective tax rate follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Statutory federal income tax rate 35.0% 35.0% 35.0%
State and local income taxes 5.3 5.3 5.3
Other ( .6) 1.1 .2
---- ---- ----
Effective tax rate 39.7% 41.4% 40.5%
==== ==== ====
</TABLE>
NOTE 5 - CAPITAL STRUCTURE
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 23,693,364 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.
NOTE 6 - EARNINGS PER SHARE DATA
The following per share data show the amounts used in computing
earnings per share (EPS) and the dilutive effects of stock options:
<TABLE>
<CAPTION>
52 Weeks Ended December 28, 1997
--------------------------------
Net Shares Income
Income (000's) Per Share
------ ------- ---------
<S> <C> <C> <C>
Basic $ 66,894 28,498 $2.35
====
Dilutive effect of stock options - 203
-------- -------
Diluted $ 66,894 28,701 $2.33
======== ====== ====
52 Weeks Ended December 29, 1996
--------------------------------
Net Shares Income
Income (000's) Per Share
------ ------- ---------
<S> <C> <C> <C>
Basic $ 63,157 28,687 $2.20
====
Dilutive effect of stock options - 118
-------- ------
Diluted $ 63,157 28,805 $2.19
======== ====== ====
</TABLE>
<TABLE>
<CAPTION>
52 Weeks Ended December 31, 1995
--------------------------------
Net Shares Income
Income (000's) Per Share
------ ------- ---------
<S> <C> <C> <C>
Basic $ 47,759 28,653 $1.67
====
Dilutive effect of stock options - -
-------- ------
Diluted $ 47,759 28,653 $1.67
======== ====== ====
</TABLE>
The effects of stock options on diluted EPS are reflected through the
application of the treasury stock method. Under this method, proceeds received
by the Company, based on assumed exercise, are hypothetically used to repurchase
the Company's shares at the average market price for the period.
-24-
<PAGE> 25
NOTE 7 - 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 options have a term of ten years. The exercise price per share, determined
by a committee of the Board of Directors, may not be less than the fair market
value on the grant date. The options are exercisable over periods determined
when granted.
In April 1996, the Company's shareholders ratified the initial grant on
December 30, 1995 of 550,000 options with an exercise price of $20.125 per
share. Options to purchase 231,000 shares were granted on December 28, 1996 with
an exercise price of $32.375 per share. Options to purchase 214,000 shares were
granted on December 27, 1997 with an exercise price of $35.3125 per share.
The Company applies APB Opinion No. 25 "Accounting for Stock Issued to
Employees" and related interpretations in accounting for its stock option plan.
Accordingly, no compensation cost has been recognized in the Company's financial
statements. Had compensation cost for the Company's stock option plan been
determined based on the fair value of such awards at the grant dates, consistent
with the methods of Financial Accounting Standards Board Statement No. 123
"Accounting for Stock-Based Compensation", the Company's total and per share net
income would have been reduced as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C> <C>
Net income As reported $ 66,894 $ 63,157 $ 47,759
Pro forma 65,101 62,512 47,759
Basic earnings per share As reported $ 2.35 $ 2.20 $ 1.67
Pro forma 2.28 2.18 1.67
Diluted earnings per share As reported $ 2.33 $ 2.19 $ 1.67
Pro forma 2.27 2.17 1.67
</TABLE>
The fair values of options granted in fiscal years 1997, 1996, and 1995
were estimated at $10.58, $10.37, and $6.12 per share, respectively, using the
Black-Scholes option-pricing model based on the following assumptions:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Risk-free interest rate 5.7% 6.2% 5.4%
Dividend yield 2.0% 2.0% 2.0%
Expected life 5 years 5 years 5 years
Expected volatility 29.7% 31.5% 31.2%
</TABLE>
Following is a summary of the status of the Company's stock option plan
during fiscal years 1997, 1996, and 1995:
<TABLE>
<CAPTION>
1997 1996 1995
----------------------- ------------------- --------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Outstanding, beginning of year 776,000 $ 23.772 550,000 $ 20.125 - -
Granted 227,000 35.313 231,000 32.375 550,000 $20.125
Exercised ( 32,580) 20.125 - - - -
Canceled ( 46,000) 21.728 ( 5,000) 20.125 - -
--------- ------- -------
Outstanding, end of year 924,420 776,000 550,000
========= ======= =======
</TABLE>
-25-
<PAGE> 26
NOTE 7 - STOCK OPTION PLAN (CONTINUED)
Following is a summary of the status of stock options outstanding
at December 28, 1997:
<TABLE>
<CAPTION>
Number Number Exercise Remaining
Outstanding Exercisable Price Term
----------- ----------- ----- ----
<S> <C> <C> <C>
472,420 169,420 $ 20.125 8 years
225,000 123,600 32.375 9 years
227,000 - 35.313 10 years
------- -------
924,420 293,020
======= =======
</TABLE>
NOTE 8 - 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. The Company has non-qualified plans which provide benefits
in addition to those provided in the qualified plans.
Pension fund assets are invested in a broadly diversified portfolio
consisting primarily of publicly-traded common stocks and fixed income
securities.
Assumptions used in the respective accounting years to determine
pension costs, are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Discount rate 8.5% 8.5% 8.5%
Rate of increase in compensation levels 5.0% 5.0% 4.0%
Expected long-term rate of return on assets 10.5% 10.5% 9.5%
</TABLE>
Pension costs consist of the following components:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Service cost of benefits earned $ 6,476 $ 5,734 $ 4,776
Interest cost on projected benefit
obligation 13,265 12,431 10,573
Actual gain on plan assets ( 51,987) ( 22,507) ( 24,657)
Asset gain deferred 36,856 10,074 14,691
Amortization of transition asset ( 120) ( 605) ( 722)
Amortization of prior service costs 1,950 1,950 1,898
Amortization of net loss from prior periods 117 62 -
Cost of early retirement window 1,118 - -
------ ------- -------
Net pension cost $ 7,675 $ 7,139 $ 6,559
====== ======= =======
</TABLE>
-26-
<PAGE> 27
NOTE 8 - PENSION PLANS (CONTINUED)
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 28, 1997 December 29, 1996
---------------------------- ------------------------------
Assets Accumulated Assets Accumulated
Exceed Benefits Exceed Benefits
Accumulated Exceed Accumulated Exceed
Benefits Assets Benefits Assets
-------- ------ -------- ------
<S> <C> <C> <C> <C>
Actuarial present value of:
Accumulated benefit obligation
Vested $127,611 $ 5,172 $115,115 $ 3,050
Non-vested 8,685 - 8,724 390
-------- --------- -------- ---------
Total $136,296 $ 5,172 $123,839 $ 3,440
======== ========= ======== =========
Projected benefit obligation $169,206 $ 9,470 $155,513 $ 6,421
======== ========= ======== =========
Plan assets at fair value $204,935 $ - $150,857 $ -
======== ========= ======== =========
Plan assets greater (less) than
projected benefit obligation $ 35,729 ($ 9,470) ($ 4,656) ($ 6,421)
Unrecognized net (gain) loss ( 32,575) 4,290 61 1,806
Unrecognized prior service cost 7,509 1,439 9,227 1,670
Minimum liability adjustment - ( 1,431) - ( 495)
Unrecognized transition asset ( 120) - ( 240) -
-------- --------- -------- ---------
Prepaid (accrued) pension expense $ 10,543 ($ 5,172) $ 4,392 ($ 3,440)
======== ========= ======== =========
Net asset recognized in
balance sheet $ 5,371 $ 952
======== ========
</TABLE>
NOTE 9 - POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
In addition to providing pension benefits, the Company provides certain
health care benefits for eligible employees who retired prior to July 1, 1992.
The components of postretirement benefit costs are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Service cost - - -
Interest cost $ 2,401 $ 2,728 $ 2,495
Amortization of net loss from prior periods - 266 143
------ ------ ------
Postretirement benefit cost $ 2,401 $ 2,994 $ 2,638
====== ====== ======
</TABLE>
The funding policy is to pay claims as they occur. Payments for
postretirement health benefits, net of retiree contributions, amounted to
$1,265, $1,452 and $1,662 in 1997, 1996, and 1995, respectively.
-27-
<PAGE> 28
NOTE 9 - POSTRETIREMENT BENEFITS OTHER THAN PENSIONS (CONTINUED)
The funded status of the plan at December 28, 1997 and December 29,
1996 is as follows:
<TABLE>
<CAPTION>
December 28 December 29
1997 1996
----------- -----------
<S> <C> <C>
Accumulated postretirement benefit
obligation for retirees $ 25,597 $ 29,182
Plan assets - -
------- -------
Accumulated postretirement benefit
obligation in excess of plan assets 25,597 29,182
Unrecognized net gain (loss) 3,182 ( 1,539)
------- -------
Retiree health care obligation shown
in balance sheet $ 28,779 $ 27,643
======= =======
</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 10.5% in 1997 and gradually decreases to 6.5% in the year
2014.
A one percent increase in the health care cost trend rates used would
result in a $298 increase in the service and interest components of expense for
1997 ($341 for 1996) and a $3,048 increase in the postretirement benefit
obligation at December 28, 1997 ($3,503 increase at December 29, 1996).
NOTE 10 - CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Company to a
concentration of credit risk principally consist of cash and equivalents,
short-term investments, and trade receivables. The Company's credit risk with
respect to trade receivables are, in management's opinion, limited due to
industry and geographic diversification. As disclosed on the balance sheet, the
Company maintains an allowance for doubtful accounts to cover estimated credit
losses.
NOTE 11 - FAIR VALUE OF FINANCIAL INSTRUMENTS
<TABLE>
<CAPTION>
December 28, 1997 December 29, 1996
----------------- -----------------
Fair Carrying Fair Carrying
Value Amount Value Amount
----- ------ ----- ------
<S> <C> <C> <C> <C>
Assets
Cash and equivalents $ 67,556 $ 67,556 $ 64,550 $ 64,550
Securities held to maturity 760 760 1,215 1,215
Trading securities 15,295 15,295 - -
Liabilities
Long-term debt $ 4,695 $ 4,600 $ 4,654 $ 4,600
</TABLE>
The carrying amounts of cash equivalents and securities held to
maturity approximate fair value because of the short maturities of those
instruments. The fair value of trading securities is based on quoted market
prices. The fair value of long-term debt is estimated based on quoted market
prices for similar issues of the same remaining maturities.
-28-
<PAGE> 29
NOTE 12 - COMMITMENTS AND CONTINGENCIES
Purchase commitments for capital improvements aggregated $8,972 at
December 28, 1997. Also, the Company has purchase commitments for equipment for
resale of $483 at December 28, 1997. The Company has no purchase agreements with
suppliers extending beyond normal quantity requirements.
The Company is obligated under several leases expiring at various
dates. Annual expense under these leases was $25,450 in 1997, $23,320 in 1996,
and $21,692 in 1995.
Rental commitments under existing leases at December 28, 1997, are:
<TABLE>
<CAPTION>
Computer and
Real Sales Transportation Other
Estate Offices Equipment Equipment Total
------ ------- --------- --------- -----
<S> <C> <C> <C> <C> <C>
1998 $7,703 $7,672 $308 $2,856 $18,539
1999 6,517 6,092 287 2,290 15,186
2000 5,302 4,366 161 1,844 11,673
2001 3,496 3,053 141 1,135 7,825
2002 1,895 1,535 99 999 4,528
Later years - 172 230 54 456
</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 13 - SUBSEQUENT EVENTS
On December 31, 1997, the Company acquired all outstanding shares of
Uarco Incorporated (Uarco), a subsidiary of Settsu Corporation of Osaka, Japan,
pursuant to a definitive purchase agreement dated November 27, 1997. Uarco
produces and markets business forms, pressure sensitive labels, business
equipment, supplies, and workflow systems to the U.S. market. At December 31,
1997, Uarco had approximately 3,200 employees located in 18 production
facilities and 125 sales offices. The unaudited sales of Uarco during 1997 were
approximately $470 million, excluding operations divested prior to the
acquisition date.
The purchase price was $245 million in cash, of which $230 million was
financed under a new five-year, unsecured bank revolving credit agreement. The
credit line provides for borrowings up to $300 million and bears interest at a
floating rate of LIBOR plus a spread dependent upon the debt to equity ratio. On
January 23, 1998, $200 million of the outstanding debt was swapped to an
effective fixed interest rate of 6.09%.
The acquisition will be accounted for as a purchase in fiscal 1998. The
purchase price will be allocated to the assets acquired and liabilities assumed
based upon their estimated fair market values. The purchase price allocation
will be determined during 1998 when additional information becomes available.
Results of operations for Uarco will be included with those of the Company
beginning in fiscal 1998.
-29-
<PAGE> 30
NOTE 14 - QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data follow:
<TABLE>
<CAPTION>
Quarters Ended
----------------------------------------------------------------------
March 30 June 29 September 28 December 28
1997 1997 1997 1997
-------- ------- ------------ -----------
<S> <C> <C> <C> <C>
Revenue $230,114 $236,467 $237,243 $261,850
Gross margin* 93,589 96,537 97,454 101,802
Net income 14,948 16,999 16,250 18,697
Basic earnings per share .52 .60 .57 .66
Diluted earnings per share .52 .59 .57 .65
</TABLE>
<TABLE>
<CAPTION>
Quarters Ended
----------------------------------------------------------------------
March 31 June 30 September 29 December 29
1996 1996 1996 1996
-------- ------- ------------ -----------
<S> <C> <C> <C> <C>
Revenue $229,673 $239,352 $230,853 $244,101
Gross margin* 85,290 91,644 91,435 100,294
Net income 13,563 16,086 16,065 17,443
Basic earnings per share .47 .56 .56 .61
Diluted earnings per share .47 .56 .56 .60
</TABLE>
<TABLE>
<CAPTION>
Quarters Ended
-----------------------------------------------------------------------
April 2 July 2 October 1 December 31
1995 1995 1995 1995
------- ------ --------- -----------
<S> <C> <C> <C> <C>
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
Basic earnings per share .38 .42 .41 .46
Diluted earnings per share .38 .42 .41 .46
</TABLE>
* Revenue less cost of products sold.
-30-
<PAGE> 31
SCHEDULE II
THE STANDARD REGISTER COMPANY
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE THREE YEARS ENDED DECEMBER 28, 1997
(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 28, 1997
- ----------------------------
Allowance for doubtful
accounts $ 3,638 $ 1,051 $ 1,825(a) $ 2,864
Inventory obsolescence 2,303 2,915 2,362(b) 2,856
Year Ended December 29, 1996
- ----------------------------
Allowance for doubtful
accounts $ 3,913 $ 1,202 $ 1,477(a) $ 3,638
Inventory obsolescence 1,991 2,810 2,498(b) 2,303
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
</TABLE>
(a) Net uncollectible accounts written off
(b) Obsolete inventory scrapped or written
down to realizable value
-31-
<PAGE> 1
[Standard Register Logo]
Annual Report 1997
<PAGE> 2
Standard Register is a leading provider of document management products and
services to the healthcare, financial and general business markets. Based in
Dayton, Ohio, the Company has a nationwide network of sales offices,
manufacturing operations, print on demand centers and distribution centers. The
Company also offers training and technological support to International
Associates in 29 countries. Standard Register ranks in the top five* U.S. based
printing companies.
In recent years, industry demand changed from multi-part business forms to
single part and electronic documents. Outsourcing the printing of business
documents is another increasing trend. Standard Register meets these changing
needs by offering quality print on demand and commercial printing services,
business forms, document management solutions, labels, electronic documents,
direct mail marketing products, phone cards, fulfillment services, and
equipment.
The enclosed product solutions reflect Standard Register's excellence in print,
fulfillment and service. The design of this annual report provides a view of the
Company, its products and its services.
*Source: CAP Ventures, Inc. 1997
<TABLE>
<CAPTION>
<S> <C>
Operations Review GATEFOLD
Letter to Shareholders 2
Strategic Direction 3
Officers 20
Directors 22
Introduction to Financial Section 23
Safe Harbor Statement 23
Operating Locations 46
Shareholder Information 47
Company Contacts 48
</TABLE>
[STANDARD REGISTER/LISTED ON NEW YORK STOCK EXCHANGE LOGO]
<PAGE> 3
COMPANY AT A GLANCE
<TABLE>
<S> <C> <C>
1997 DIVISIONAL STRUCTURE
DOCUMENT MANAGEMENT
Year * BUSINESS FORMS
1995 1996 1997
($ in millions) * DISTRIBUTION SERVICES
<S> <C> <C> <C>
REVENUE 627 673 702 * PRINT PROCESSING AND FULFILLMENT
* STANFAST ON DEMAND PRINTING
DOCUMENT SYSTEMS
Year * INTELLIGENT PRINTING SYSTEMS AND SUPPLIES
1995 1996 1997
($ in millions) * PRESSURE SENSITIVE LABELS*
<S> <C> <C> <C>
REVENUE 155 165 163 * ELECTRONIC DOCUMENTS AND SERVICES*
Year COMMUNICOLOR
1995 1996 1997
($ in millions) * DIRECT MAIL PRINTING AND PERSONALIZATION
<S> <C> <C> <C>
REVENUE 115 102 97
1998 DIVISIONAL STRUCTURE
DOCUMENT MANAGEMENT & SYSTEMS
Year * BUSINESS FORMS
1995 1996 1997**
($ in millions) * DISTRIBUTION SERVICES
<S> <C> <C> <C>
REVENUE 657 679 1070 * PRESSURE SENSITIVE LABELS*
* ELECTRONIC SERVICES/ WORKFLOW
* DOCUMENT SYSTEMS
IMPRESSIONS
Year * COMMUNICOLOR
1995 1996 1997**
($ in millions) * IMAGING SERVICES
<S> <C> <C> <C>
REVENUE 240 261 362 * STANFAST
* COMMERCIAL PRINTING
</TABLE>
*Pressure Sensitive Labels and Electronic Documents and Services were reassigned
from Document Management to Document Systems during 1997. All amounts shown are
restated.
**Amounts for 1997 are pro forma and include estimated revenues for Uarco
Incorporated.
<PAGE> 4
BUSINESS STRATEGY
DOCUMENT MANAGEMENT PAGE 5
Business Forms
Document Security
SMARTworks
Label Management
Document Systems
PRINT ON DEMAND PAGE 13
Print On Demand
Stanfast
Phone Cards / Smart Cards
Statement Billing
DIRECT MAIL/COMMERCIAL PRINTING PAGE 17
High-Color Printing and Personalization
Brochure Capabilities
<PAGE> 5
FINANCIAL HIGHLIGHTS
(Dollars in thousands, except for per share amounts)
<TABLE>
<CAPTION>
1997 % change 1996 % change 1995 % change
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenue $ 965,674 2.3% $ 943,979 4.5% $ 903,240 17.7%
Net income $ 66,894 5.9% $ 63,157 32.2% $ 47,759 8.8%
Basic Per Share $ 2.35 $ 2.20 $ 1.67
Diluted Per Share $ 2.33 $ 2.19 $ 1.67
Dividends paid $ 22,792 4.5% $ 21,808 5.7% $ 20,634 5.7%
Per Share $ .80 $ .76 $ .72
Shareholders' equity $ 487,935 7.7% $ 453,246 10.2% $ 411,217 7.1%
Per Share $ 17.17 $ 15.80 $ 14.36
</TABLE>
<TABLE>
<CAPTION>
95 96 97
(%)
<S> <C> <C> <C>
RETURN ON INVESTED CAPITAL 12 14 14
</TABLE>
<TABLE>
<CAPTION>
95 96 97
($ in millions)
<S> <C> <C> <C>
OPERATING CASH FLOW 77 98 104
</TABLE>
<TABLE>
<CAPTION>
95 96 97
($ in millions)
<S> <C> <C> <C>
CASH AND S-T INVESTMENTS
TOTAL DEBT
Cash & S-T Investments 35 66 84
Total Debt 11 5 5
</TABLE>
SR 1 1997
<PAGE> 6
[PHOTO]
Left: Paul H. Granzow, Chairman of the Board of Directors
Right: Peter S. Redding, President and Chief Executive Officer
THE CHIEF LIMITATIONS OF HUMANITY ARE IN ITS VISIONS - NOT IN ITS POWERS OF
ACHIEVEMENT.
A. E. Morgan
SR 2 1997
<PAGE> 7
[STANDARD REGISTER LETTERHEAD]
Fellow Shareholders:
What a year!
Standard Register reported a new high in revenue and net income for 1997. And
on the last day of the calendar year, with a major acquisition, we increased the
size of our company by 50 percent - a dramatic expression of our strategic plan
approved by your Board in 1997.
The strategic planning process was the most comprehensive in our history, It was
a year-long effort to help position ourselves as the premier document management
company in North America. The acquisition of Uarco Incorporated, completed on
December 31, was a huge first step.
UARCO(R) Acquisition
Executing our strategic vision is possible because we have the balance sheet to
support it. Even after an acquisition of this size, we have a net debit to total
capital ratio of 25 percent, well within what your Board considers acceptable.
One of the key metrics we apply to our performance is return on the capital we
invest on your behalf. We expect the UARCO acquisition will fit within our
parameters. The integration of UARCO is progressing as we expected and several
former UARCO executives have joined our management team. The pairing of our
companies was a natural.
Internal Realignment
We now have approximately 15 percent of the business forms market in North
America, making us the largest, with more than 9,600 employees, 71 production
facilities and more than 200 sales offices nationwide. To manage that growth, we
restructures into two divisions. We concentrated our core businesses into the
Document Management and Systems Division. Communicolor(R), Imaging Services,
Stanfast(R), and Commercial Printing were combined to form the faster growing
Impressions(R) Division.
<PAGE> 8
Printed with Soy Ink on recycled paper, 20% Post-Consumer
600 Albany Street, Dayton, OH 45408
937.443.1000
fax 937.443.1239
www.strdreg.com
[Recycle Logo]
Advancing Technology
We made significant investments in technology during 1997 reflecting emerging
niches within the marketplace. Stanfast, our short run, print-on-demand group
continued its historic double-digit annual growth, up 26 percent in 1997. The
Imaging Services Group(SM), focusing on statement billing services, phone card
and emerging smart card technologies, also posted impressive growth at 21
percent for the year.
Branding Strategy
To visually package our strategic initiatives, the Company completed an
extensive branding strategy. The new corporate mark and branding system appear
on the cover. The stylized "S" logo coveys a reliable, forward-looking and
technology-based organization capable of rapid response.
In addition to the new corporate mark, this branding strategy includes a
targeted advertising campaign and ongoing market research. Perception is the
customer's reality no matter what we think of ourselves. We will continue to
take their pulse on an ongoing basis. Our goal is to understand the perception
of our customers and to provide them with the quality and services they desire.
Shareholder Value
Our acquisition strategy came about only after we tested the decision against
the interest of our shareholders. Senior management has a significant portion of
their remuneration tied to the Company's total return performance.
Employees
We want to thank all of our dedicated employees for their support in 1997 as we
established another record year in revenue and net income.
85 Years of Innovation
Standard register enjoys a long history of bringing innovative ideas to the
marketplace. We are quick to meet our customer's needs, working in the
marketplace. We are quick to meet our customer's needs, working in partnership
to enhance each one's overall document management cost effectiveness. Our
momentum, coupled with our new strategic plan, will help move us into the new
millenium.
/s/ Paul H. Granzow /s/ Peter S. Redding
Paul H. Granzow Peter S. Redding
Chairman of the President and
Board of Directors Chief Executive Officer
<PAGE> 9
DOCUMENT MANAGEMENT
OUR VISION IS TO BE THE RECOGNIZED LEADER IN OUR INDUSTRY BY IMPROVING THE
PERFORMANCE OF ORGANIZATIONS THROUGH OUR OPERATIONAL EXCELLENCE IN DOCUMENT
MANAGEMENT.
OUR STRATEGY IS TO CONCENTRATE ON TRANSACTION-INTENSIVE MARKET SEGMENTS AND
RESPOND WITH INNOVATIVE AND DIFFERENTIATED DOCUMENTS, SYSTEMS AND SERVICES.
Peter S. Redding,
President and C.E.O.
STRATEGIC DIRECTION
In early 1997, Standard Register launched a comprehensive strategic planning
effort, driven by 30 of our top managers, as well as internationally recognized
consulting and market research firms. We took a 360 degree look at our place in
the industry, what our shareholders had to say, what our customers had to say,
what our employees had to say. In fact, the year-long effort was one of the most
extensive strategic planning processes in our 85-year history.
We wanted to know the views of a wide variety of audiences. We asked what
Standard Register does best, what our future target markets should be, and what
our customers expect from us today and in the future.
Throughout the process, two key messages continued to rise to the top.
* Paper-based and electronic documents will coexist into the foreseeable
future.
* The printing of paper-based documents provides a significant market
opportunity.
We took those messages to build a vision for the future, one that not only
continues our growth, but explodes it into the millennium. Standard Register
established the following objectives for our future:
* Standard Register will be the recognized leader in our industry with a strong
financial portfolio of printing-related businesses.
* Operational excellence will be key to our success.
In 1997, the Company laid the groundwork for our 1998 strategic plan kick-off.
Tomorrow's growth depends on the solid foundation put into place in 1997. It
continues with the Company's strengthened focus on an aggressive growth
strategy.
* DOCUMENT MANAGEMENT
* PRINT ON DEMAND
* DIRECT MAIL/COMMERCIAL PRINTING
SR 3 1997
<PAGE> 10
DOCUMENT MANAGEMENT
FROM PAPER-BASED TO ELECTRONIC DOCUMENT MANAGEMENT, STANDARD REGISTER
UNDERSTANDS THE NEEDS OF TODAY'S BUSINESS CUSTOMER. OUR TRAINED PROFESSIONALS
CAN PROVIDE A COMPREHENSIVE, ON-SITE DOCUMENT AUDIT AND ONGOING DOCUMENT
MANAGEMENT SOLUTIONS DESIGNED TO ENHANCE EFFICIENCY AND COST-EFFECTIVENESS.
[PHOTO]
SR 4 1997
<PAGE> 11
STANDARD REGISTER COMES TO CORESTATES WITH A FINE REPUTATION IN THE FORMS
INDUSTRY. OUR CONTRACT WITH STANDARD REGISTER ENABLES CORESTATES TO FOCUS ON
PROVIDING OUR CUSTOMERS WITH HIGH QUALITY FORMS AT MANAGED COSTS. WE ARE PLEASED
TO HAVE THE OPPORTUNITY TO UTILIZE THE EXPERTISE STANDARD REGISTER OFFERS TO
CORESTATES THROUGH THIS PARTNERSHIP.
Bonnie Burns,
Vice President, Purchasing Services, CoreStates
DOCUMENT MANAGEMENT
Business Forms
At the very basis of what the Company does, and does well, is superior document
management. Standard Register is the recognized industry leader in document
security and document management solutions. From paper-based forms to electronic
documents, Standard Register provides the expertise and quality our customers
have come to expect. When combined with our best-in-class nationwide order,
inventory, service and distribution systems, Standard Register offers a total
information management solution.
At the core of our innovative product offering is an ongoing commitment to
research and development of the latest technology solutions that continue to
bring value-added systems to the marketplace.
Standard Register's commitment to technology is evident in the change of our
product mix and the growth of our own technological support areas. In 1997, the
Company invested more than $7 million to renovate 44,000 square feet of our
Dayton facility. This renovation made room for expanding Information Services
and other technology-based staff. The renovation included a significant
investment in the latest printing press technology. Between 1997 and 1998, the
Company will invest in excess of $40 million in technology for its operations
and services nationwide.
Alliances and partnerships are another important way Standard Register continues
to grow our document management expertise and market share. In 1997, the Company
established alliances and/or marketing partnerships with some of the most
recognized experts in their respective markets including Danka, AFTECH, Kentek,
Lexmark, and Schlumberger Electronic Transaction, Inc.
SR 5 1997
<PAGE> 12
AT KAISER ALUMINUM, OUR USE OF STANDARD REGISTER'S CHECK PROTECTION TECHNOLOGY
WAS THE DECIDING FACTOR IN A COURT CASE THAT CHALLENGED OUR RESPONSIBILITY IN A
FORGED CHECK SUIT. BECAUSE WE COULD SHOW THAT WE TOOK EVERY POS-SIBLE PRECAUTION
AGAINST DOCUMENT FRAUD, THE COURT AGREED THAT WE WERE NOT LIABLE. WE HAVE TAKEN
EVEN STRICTER MEASURES TO PROTECT OURSELVES AND NOW ALSO USE STANDARD REGISTER'S
LASERLOCK(R) AND COPYBAN+ SOLUTIONS.
Tom Edwards,
Director of Treasury Operations, Kaiser Aluminum
Document Security
Standard Register owns a solid position as the leading document fraud prevention
authority in the nation, offering complete documents, equipment and services to
financial institutions and businesses.
According to Bank Automation News/National Association for Banking Securities,
more than 1 million bad checks enter the banking system every day. Document
fraud is an issue that Standard Register can help a customer manage. A study
conducted by Business Week magazine estimates an annual loss of $12.6 billion
due to check forgery.
To combat this forgery, Standard Register offers the latest, state-of-the-art
technology to aid in preventing document fraud. From our CopyBan, to batch
processing equipment, we offer solutions for the marketplace.
In 1997, Standard Register introduced the latest version of LinkUp(R), a
networked MICR check printing system that offers secure printing and tracking of
certificates, accounts payable and payroll checks, and other official documents.
We also introduced AuthentiCHEK(R) a first-of-its-kind system to quickly verify
the accuracy and authenticity of documents, including checks, currency, and
negotiable instruments such as event tickets.
Throughout the year, we continued our Executive Seminars on Document Fraud
Prevention. The goal of the program is to help businesses understand the growing
threat of document fraud, their liability, and the impact it could have on their
business. By sharing our expertise, Standard Register continues to step forward
as a valuable partner to businesses.
SR 6 1997
<PAGE> 13
[SAMPLE OF CHECK WITH SECURITY FEATURES]
VERIFY DOCUMENT AUTHENTICITY, COLORED AREA MUST CHANGE GRADUALLY AND EVENLY
FROM DARK TO LIGHT FROM TOP TO BOTTOM
(2)
(3) 00-5678 CHECK NO.
[LOGO] STANDARD REGISTER (1) -------
1234
123456
PAY
(4)
TO THE ORDER OF DATE CHECK AMOUNT
VOID SAMPLE
ANY BANK - ANYTOWN, U.S.A. NON-NEGOTIABLE
COPYBAN+ANTI-FRAUD PROTECTION - PATENTS4,227,720,4,310,180; 5,197,765;5340,159
123456 123456789 00000 12345 (6)(7)(8)
Safety Paper
[] THE ORIGINAL DOCUMENT HAS A REFLECTIVE WATERMARK ON THE BACK []
HOLD AT AN ANGLE TO VIEW WHEN CHECKING THE ENDORSEMENT. []
This document is protected by these Standard Register security features:
CHECK FACE PRINTING
(1) Custom pantograph Background for copy protection
(2) Warning Bands
(3) Microline
(4) Dual Component Numbering Ink
(5) MICR with MICR Consecutive Numbers
SAFETY PAPER
(6) Sensitive Inks- Face
(7) Variable Diagonol Laid Lines - Back
(8) Reflective Watermark - Back
DOCUMENT SECURITY
STANDARD REGISTER IS THE LEADING DOCUMENT FRAUD PREVENTION AUTHORITY IN THE
NATION. WHEN BUSINESSES WANT TO KNOW HOW TO PROTECT THEMSELVES AND THEIR
CUSTOMERS FROM DOCUMENT FRAUD, THEY TURN TO STANDARD REGISTER. THE ABOVE PAYROLL
CHECK SAMPLE DEPICTS SEVERAL OF STANDARD REGISTER'S UNIQUE SECURITY FEATURES.
SR 7 1997
<PAGE> 14
SMARTworks
STANDARD REGISTER PRESENTS A COMPLIMENTARY SMARTWORKS DEMO CD. THIS IS A
LIVE, INTERACTIVE DISC. YOU MAY PERUSE SMARTWORKS CAPABILITIES BY FOLLOWING
THE DETAILED INSERT INSTRUCTIONS.
[SMARTworks CD and Envelope]
INSTALLATION GUIDELINES
[SMARTworks logo(TM)]
TO INSTALL UNDER WINDOWS 95(R) OR WINDOWS NT(R) 4.0;
1. Before inserting the SMARTworks(TM) CD-ROM, close all running programs
including toolbars.
2. Insert the CD, SMARTworks(TM) will guide you through the setup process;
follow the instructions on the screen.
NOTE: If the instructions do not appear:
* Click Start Menu, point and click Run.
* Type d:\setup.exe (if "d" is the letter of your CD-ROM drive).
3. After the SMARTworks(TM) setup is complete, you will be asked to install
Adobe Acrobat(R) Reader.
NOTE: Adobe Acrobat(R) Reader is required to run parts of the demo
*If you have Adobe Acrobat Reader, select no to skip this installation.
*If Not, select yes and follow the instructions on the screen.
4. Congratulations, you're ready to run the demo by double-clicking on the
SMARTwork(TM) Demi cion located on the screen (your desktop).
NOTE: To run the SMARTworks(TM) Demo, it is necessary to have the CD in the
CD-ROM drive.
(more info on back)
[Standard Register logo]
SYSTEM REQUIREMENTS FOR THE SMARTWORKS(TM) DEMO:
* Windows(R) 95/NT(R) 4.0 or above
* Pentium-75 MHZ desktop computer or laptop
* High color display
* 16MB RAM
* Audio capability
* 4X CD-ROM drive
* 15MB available hard drive space
* Web browsers supported: Microsoft(R) Internet Explorer 3.0/
Netscape(R) 3.0 or above
UNINSTALL INSTRUCTIONS FOR THE SMARTWORKS(TM) DEMO:
1. Click the Start menu, point to settings, and then choose Control Panel.
2. Double Click Add-Remove Programs.
3. In the Add-Remove Programs properties dialog box, click the Install/
Uninstall tab.
4. In the list of software that can be removed by windows, click
SMARTworks(TM) Demo.
5. Click Add/Remove, and then follow the directions on your screen.
NOTE: If necessary, click NO to removing common files used by other
applications.
6. Click OK, the SMARTworks(TM) Demo has successfully been uninstalled.
NOTE: Use them instructions to uninstall Adobe Acrobat(R) Reader, except
click Adobe Acrobat(R) Reader 3.01 instead of SMARTworks(TM) Demo in step 4.
This material may not be copied in whole or in park, without the
express written permission of Standard Register. All brands and product
names are trademarks or registered trademarks of their respective companies.
Copyright (c) 1998 The Standard Register Company. All Rights Reserved.
SR 8 1997
<PAGE> 15
ONE OF THE MAJOR REASONS WE CHOSE STANDARD REGISTER AS OUR DOCUMENT MANAGEMENT
PARTNER WAS THEIR INTEGRATED ELECTRONIC COMMERCE AND DOCUMENT MANAGEMENT SYSTEM
- - SMARTWORKS.
Tariq Hassan,
Director, Strategic Sourcing,
Barnett Banks, Inc.
SMARTworks
In April 1997, Standard Register made a significant move forward in electronic
document management by using the Microsoft(R) suite of development tools with
SMARTworks. These tools provide a modular approach to managing printed and
electronic documents. Driven by the Company's role as a leading consultant in
document management, Standard Register offers continued tool enhancements to
this best-in-class desktop solution.
SMARTworks brings document managers, creators and consumers together on-line in
a real-time environment. Access is available via the Internet or Intranet.
Integration with Standard Register's warehousing and
distribution/requisition/order entry systems is another value-added benefit.
Standard Register SMARTworks offers flexible, up-to-date information, as well as
distributed access with centralized control.
SMARTworks is already impacting the marketplace for our largest customers. Our
research indicates that customer satisfaction continues to focus on the ability
to meet the needs of the large customer in one stop; that is, combining
document flow management, printing, fulfillment, requisitioning and warehousing.
This total solution is exactly what customers will expect in the future. Thanks
to SMARTworks, Standard Register is able to provide that scalable solution
today.
Whether the industry is healthcare, financial or general business, SMARTworks
enables businesses to reduce costs and paper while increasing efficiency.
Columbia HCA is implementing Standard Register's Less-Paper Strategy. In 1997,
our comprehensive team of document management experts worked with Columbia to
create 200 new standard forms, potentially eliminating up to 39,000 custom
SKU's.
SR 9 1997
<PAGE> 16
AT THOMASTON MILLS, WE NEEDED A COMPANY THAT COULD PROVIDE US WITH FLEXIBILITY
TO RESPOND TO OUR CUSTOMERS NEEDS. THAT'S WHY WE CHOSE STANDARD REGISTER. THEY
WERE ABLE TO PROVIDE US A COMPREHENSIVE LABELING SOLUTION THAT MET THE CRITERIA
OUR VENDORS REQUIRED. THE ABILITY TO LABEL CARTONS ON-LINE AND IMMEDIATELY
NOTIFY OUR MAINFRAME OF THEIR STATUS, WHILE VERIFYING VENDOR REQUIREMENTS WAS
THE ANSWER WE WERE LOOKING FOR. BEING ABLE TO CONTROL THE LABEL FORMATS AND
RESPOND TO OUR CUSTOMERS' REQUEST FOR SPECIAL COMPLIANCE LABELING WAS THE KEY.
STANDARD REGISTER'S LABELING SYSTEM SOLUTION ALLOWED US TO DO THAT.
Pete Key,
Assistant Manager of Data
Processing, Thomaston Mills
Label Management
High-performance labels can play an integral role in shortening production
cycles. Effective label management improves business processes and controls
costs. Today's business environment demands integrated label management to
complement a well-planned document management approach.
Standard Register's proactive approach to label management heightens cost and
production efficiency. We provide a full range of labeling services, from
automated label design and cataloging to inventory control, on-demand printing
of variable labels and just-in-time delivery of complete kits to the assembly
line.
Standard Register produces flexographic, screen and offset printed labels, bar
code/automatic ID systems, pressure sensitive labels, compliance labels and
variable image products that use the latest laser and thermal transfer
technology. Form/label combinations are also an important part of this growing
market segment.
Superior label management eliminates redundancy, maximizes design efficiency and
lowers total product inventory. It can also contribute to liability protection
by ensuring that all products are complete with the appropriate warnings,
instructions and approvals. The addition of the UARCO product line broadens and
complements the Standard Register line of label offerings.
SR 10 1997
<PAGE> 17
PRINT ON DEMAND
LABEL MANAGEMENT
STANDARD REGISTER PROVIDES LABELS TO CUSTOMERS IN MANY DIFFERENT INDUSTRIES. AS
A CONTRACTUAL SUPPLIER TO THE NATION'S THREE LARGEST HOSPITAL BUYING
ORGANIZATIONS, STANDARD REGISTER UNDERSTANDS THE UNIQUE NEEDS OF THE HEALTHCARE
INDUSTRY. THE DEPICTED LABEL/BAR CODE APPLICATION PROVIDES ACCURACY IN TRACKING
PATIENT AND ANCILLARY SERVICES. THIS IS ANOTHER INDICATION OF THE DEPTH OF OUR
LABEL MANAGEMENT OFFERINGS AND THE SUPERIOR QUALITY OUR CUSTOMERS DEMAND.
[PHOTO]
SR 11 1997
<PAGE> 18
STANFAST ON DEMAND PRINTING
STANDARD REGISTER NOW OPERATES 38 PRINT ON DEMAND CENTERS NATIONWIDE. THIS
GROWING NETWORK OFFERS SHORT-RUN, JUST-IN-TIME, QUALITY PRINTING SERVICES TO OUR
CUSTOMERS. OUR SMARTWORKS SOLUTION CAN ALSO BE USED TO DOWNLOAD FILES TO THE
NEAREST STANFAST CENTER FOR ENHANCED REQUISITIONING AND FULFILLMENT.
THE FINANCIAL PAGES CONTAINED IN THIS DOCUMENT, AND DEPICTED BELOW, WERE PRINTED
BY STANFAST, INDICATING THE HIGH-QUALITY OF OUR PRINT ON DEMAND NETWORK.
[PHOTO]
SR 12 1997
<PAGE> 19
OUR PARTNERSHIP WITH STANDARD REGISTER PROVIDES A WIN-WIN SITUATION FOR KEYCORP
AND ITS CUSTOMERS. BY OUTSOURCING OUR PRINTING, WAREHOUSING AND DISTRIBUTION
EFFORTS TO A SINGLE SOURCE PARTNER, WE NOT ONLY ELIMINATED OUR DUPLICATE
DOCUMENTS, BUT WE ALSO CENTRALIZED ALL PROCUREMENT ACTIVITIES. THIS REDUCES OUR
ADMINISTRATIVE COSTS AND MAKES OUR PERSONNEL AVAILABLE FOR CUSTOMER SERVICE AND
REVENUE-GENERATING ASSIGNMENTS.
Daniel Lesczynski,
Vice President, Strategic
Sourcing, KeyCorp
PRINT ON DEMAND
Print On Demand Market
One of the fastest growth areas of the Company continues to be the print on
demand market. This outsourcing network offers just-in-time, short-run cut
sheets, as well as short-run process and digital color. Customers recognize the
value of outsourcing print and distribution operations to Standard Register
through our nationwide Stanfast network. The customer receives the value-added
from accessing our technology, service and equipment, without further investing
their own capital.
Research indicates that the $22 billion print on demand market will continue to
grow by 22 percent annually. Standard Register is a recognized leader in this
market segment, and expects to continue to capitalize on it in the future.
Stanfast
The quantity you want, when you want it, where you want it. That is the idea
behind Standard Register's Demand Printing Strategy. Whether it is a brochure or
a business form, Stanfast provides just-in-time production of business
documents. Stanfast operates networked Digital Print Centers from Boston to
Honolulu serving corporate America. In fact, we believe our Stanfast Group is
one of the largest distributed print networks in the United States.
The continued demand of our Stanfast network reflects the growth in this market.
Between fourth quarter, 1996 and calendar year 1997 we added new Stanfast
facilities in Secaucus, New Jersey; Savannah, Georgia; Charlotte, North
Carolina; Memphis, Tennessee; Cleveland, Ohio; Portland, Oregon and Las Vegas,
Nevada. The addition of the former UARCO Impressions(R) group brings Standard
Register's print on demand network to 38 locations nationwide.
SR 13 1997
<PAGE> 20
STANDARD REGISTER WILL PLAY AN IMPORTANT ROLE IN OPENING NEW OPPORTUNITIES FOR
SMART CARDS IN BUSINESS AND CONSUMER MARKETS. WITH ITS DEPTH OF KNOWLEDGE AND
EXPERTISE IN CARD PERSONALIZATION AND DISTRIBUTION, AS WELL AS AN ESTABLISHED
RECORD OF SUCCESSFUL CARD-BASED PROGRAMS, STANDARD REGISTER FILLS AN IMPORTANT
NICHE IN OUR ASSOCIATES PROGRAM.
Lou Bisasky,
General Manager,
Schlumberger Smart Cards,
North America
Phone Cards/Smart Cards
Standard Register is a key player in driving the latest technology to
marketplace. Our Imaging Services Group packages plastic cards for ATMs, prepaid
phone usage, membership cards, frequent shopper databases, and numerous other
plastic card programs.
Phone cards are among the hottest technological advances to rapidly hit the
consumer market in recent years. Some of the industry's largest companies turned
to Standard Register in 1997 for their phone card and plastic card needs.
Standard Register prints and distributes plastic cards and other materials for
thousands of their customers across the country.
New on the horizon is the advent of smart cards. Standard Register has the
technology to personalize every card with a microprocessor chip that enables
significant tracking of individual user purchases. Many expect U.S. smart card
usage to rise, like its European counterparts. Smart cards offer the U.S.
consumer secure, customized tracking of numerous applications. Smart cards can
securely track banking transactions, frequent shopper database information, and
even medical information.
In September 1997, Standard Register announced an important partnership that
strengthens our place in this emerging market niche. We are now partnering with
Schlumberger Electronic Transactions, a unit of Schlumberger Ltd. of Europe and
the leading single-source supplier of transaction solutions. We expect to be the
leading resource for smart card technology as it continues its advent in the
American marketplace.
SR 14 1997
<PAGE> 21
DIRECT MAIL/COMMERCIAL PRINTING
[PHONE CARD ATTACHED]
PHONE CARDS /
SMART CARDS
THE ATTACHED PHONE CARD IS A LIVE, COMPLIMENTARY PHONE CARD WITH FREE AIR TIME
FOR YOUR USE. SOME OF THE INDUSTRY'S LARGEST COMPANIES TURN TO STANDARD REGISTER
TO PRINT AND DISTRIBUTE PHONE AND PLASTIC CARDS. WE ARE ALSO AN EMERGING LEADER
IN THE SMART CARD INDUSTRY.
SR 15 1997
<PAGE> 22
DIRECT MAIL PRINTING AND PERSONALIZATION
COMMUNICOLOR PROVIDES HIGH SPEED, QUALITY COLOR PRINTING, SEGMENTATION AND
PERSONALIZATION FOR THE DIRECT MAIL INDUSTRY. OUR DIRECT MAIL EXPERTS KNOW HOW
TO PRODUCE MATERIALS THAT CATCH THE EYE AND INCREASE RESPONSE. THIS
DEMONSTRATION PIECE REPRESENTS A VARIETY OF UNIQUE SERVICES COMMUNICOLOR CAN
PROVIDE ON ANY ONE PRODUCT.
[DIRECT MAIL DEMONSTRATION PIECE]
SR 16 1997
<PAGE> 23
WE RECENTLY TESTED THE NEW COMMUNICOLOR DONE-IN-ONE FORMAT AGAINST OUR DIRECT
MAIL CONTROL. WE WERE IMMEDIATELY IMPRESSED WITH THE HIGH QUALITY OF THE PIECE
AND PARTICULARLY THE ABILITY TO CONVEN-IENTLY MATCH SIX COMPONENTS IN ONE NESTED
SET. THIS LOWERED THE MATCHING COSTS OF CONVENTIONALLY PRODUCED PACKAGES
SIGNIFICANTLY. MORE IMPORTANTLY, THE RESPONSE WAS SO OVERWHELMING THAT WE
COULDN'T OPEN THE REPLY ENVELOPES FAST ENOUGH! THE DONE-IN-ONE RESULTED IN A
SUCCESSFUL, COST-EFFECTIVE TEST, SO WE ARE NOW USING IT AS OUR CONTROL PACKAGE.
STANDARD REGISTER, AND SPECIFICALLY COMMUNICOLOR, UNDERSTANDS THIS BUSINESS.
THEY KNOW HOW TO PRODUCE CREATIVE, HIGH-QUALITY PRODUCTS, AND QUALITY SERVICE.
Russell B. Mason,
Mail Fund Associates
DIRECT MAIL / COMMERCIAL PRINTING
High Color Printing and Personalization
Demand within the estimated $66 billion commercial print/direct mail market also
continues to grow. The Standard Register Communicolor group leads our expansion
in this area. Publisher's Clearing House and Reader's Digest are just two of the
many large volume customers that turn to Communicolor for their direct mail
printing options.
Communicolor is the direct mail partner for business marketing. They offer a
full range of state-of-the-art technology to enhance the targeted direct mail
message. From PopUps to PopOuts, from self-mailers to envelope packages, from
matched multi-piece components to standard letter formats - Communicolor offers
proven techniques that give direct mail its greatest impact. Special effects
like foil, labels, scratch off and die-cuts continue to add interest and
involvement resulting in higher response.
In 1997, Communicolor introduced a new patented format, Done-in-One. It
immediately gained customer recognition and use because of its many benefits.
This simplified production process saves customers time and money without
compromising quality or limiting creative options. It also eliminates
complications associated with multiple component coordination.
A Communicolor strength is its high-speed, sophisticated use of marketing data
to personalize pieces beyond addresses - incorporating maps, product images, or
other relevant and specialized offers with dramatic results. The financial,
retail, and automotive industries are just a few other examples of the high
volume, direct mail customers that utilize Communicolor's combined data
manipulation and eye-catching print expertise.
SR 17 1997
<PAGE> 24
OUTSOURCING TO STANFAST FOR FEDEX PRINTING PROVIDES SPEEDY AND ON-TIME SERVICE,
MEETING OUR LOGISTIC NEEDS.
Vinod Nathani,
Manager, Contract and
Supplier Management, FedEx
Brochure Capabilities
Standard Register's growing color capabilities run the gamut from the latest
digital color technologies to traditional commercial printing. Businesses
achieve higher response rates through the use of color and targeted messages.
Standard Register makes this possible.
We not only help customers reduce the costs associated with printing, we can
also help increase a company's revenue. For example, our digital printing
capabilities allow businesses to use their database of customer information to
accurately target marketing pieces to even an audience of one.
Growth can be seen in many of our customer segments, including travel and
tourism, manufacturing, health care, and finance, as they increase their use of
color as a tool in their competition for customers and market share.
Standard Register has the expertise to produce quality brochures, direct mail
pieces, and business documents for the large and small customer. Our value-added
services and processes continue to expand our reach in the marketplace and our
solid financial performance.
Standard Register continues to invest in digital printing technology through
partnering with such print technology leaders as Heidelberg, Xerox, IBM an
Xeikon. We have the equipment, technology and personnel to produce first-rate
print materials.
Coupled with our excellence in brochure quality and technology is a nationwide
network of print centers and sales offices, ready to meet any distribution and
fulfillment need. Our customers also appreciate the ease of downloading print
files to the nearest Stanfast center, using our SMARTworks electronic document
management solution.
SR 18 1997
<PAGE> 25
BROCHURE CAPABILITIES
THE HEIDELBERG QUICKMASTER/DI(TM), SEEN HERE AT OUR CHARLOTTE STANFAST CENTER,
IS CHANGING THE WAY CUSTOMERS THINK ABOUT SHORT-RUN COLOR. THANKS TO THIS AND
OTHER STATE-OF-THE-ART EQUIPMENT, STANDARD REGISTER OFFERS THE CUSTOMER
UNRIVALED QUALITY THROUGH OUR PRINT ON DEMAND CENTERS. WHEN LINKED WITH OTHER
INTELLIGENT PRINTING SOLUTIONS, STANDARD REGISTER OFFERS A POWERFUL COMBINATION
OF EXCELLENT PRINT QUALITY AND TOTAL DOCUMENT MANAGEMENT.
[PHOTO]
SR 19 1997
<PAGE> 26
<TABLE>
<S> <C>
OFFICERS
========================================================
| |
ALLAN F. SCOTT CRAIG J. BROWN
Mr. Scott, 50, is Mr. Brown, 48, has served
Corporate Vice President as Senior Vice President
- - Operational Excellence. - Administration,
He served as Vice Treasurer and Chief
President, Operations Financial Officer since
UARCO since 1996. 1995.
|
|
========================================
| |
J. DOUG PATTERSON JOHN E. SCARPELLI
Mr. Patterson, 43, is Mr. Scarpelli, 54, is
Corporate Vice President Corporate Vice President
- - Chief Information - Human Resources. He
Officer. He served as served as Vice President
Vice President - - Human Resources since
Information Systems UARCO 1995.
since 1997.
==============================================================================================================================
|
PETER A. DORSMAN
Mr. Dorsman, 43, is
Senior Vice President and
General Manager -
Document Management and
Systems Division. He
joined Standard Register
in 1996.
|
|
HARRY A. SEIFERT
Mr. Seifert, 60, is
Corporate Vice President
and General Manager -
Rotary Group. He served
as Vice President -
Manufacturing - Document
Management Division since
1987.
</TABLE>
SR 20 1997
<PAGE> 27
<TABLE>
<S> <C> <C>
PAUL H. GRANZOW
Mr. Granzow, 70, has
served as Chairman of the =============
Standard Register Board |
of Directors since 1984. |
|
PETER S. REDDING |
Mr. Redding, 59, has |
served as President and |
Chief Executive Officer ================-|
since 1994. He is a |
member of the Board of |
Directors and the former |
Executive Vice President |
and Chief Operating |
Officer. |
|
============================================
|
JOSEPH V. SCHWAN
Mr. Schwan, 61, is
Executive Vice President
- - Chief Operating
Officer. He joined
Standard Register as Vice
President, Sales and
Marketing in 1991.
|
========================== ========================== ======================== ========================
| | | |
TIMOTHY J. WEBB BRIAN W. CALABRO H. FRANK COFFMAN JAMES H. DEYOUNG
Mr. Webb, 48, is Senior Mr. Calabro, 41, is Mr. Coffman, 59, is Mr. DeYoung, 59, has
Vice President and Corporate Vice President Corporate Vice President served as Corporate Vice
General Manager - - Sales. He served as - Marketing and President -
Impressions Division. He Vice President Sales in Communications, and International Operations
served UARCO for 26 1997. Secretary. since 1995.
years, most recently as
President and CEO since
early 1997.
|
|
MICHAEL SPAUL
Mr. Spaul, 50, is
Corporate Vice President
and General Manager -
Communicolor. He served
as the General Manager of
Communicolor since 1995.
</TABLE>
SR 21 1997
<PAGE> 28
DIRECTORS
ROY W. BEGLEY, JR. PETER S. REDDING
Assistant Vice President and President and Chief Executive
Investment Officer, Key Trust Officer of the Company.
Corporation of Ohio, N.A.- a - Ex-officio member of all
trust company based in committees of the Board of
Cleveland, Ohio. Directors except for the Audit
- - Member, Pension Advisory Committee
Committee
DENNIS L. REDIKER
F. DAVID CLARKE, III Chief Executive Officer of
Chairman of the Board of English China Clays plc - a
Directors as well as Vice worldwide speciality minerals
President and General Counsel and chemicals company.
of Clarke-Hook Corporation - a - Member, Audit and
real estate development, Compensation Committees
construction, and management
corporation. ANN SCAVULLO
- - Chairman, Compensation Committee Vice President, Strategic
- - Member, Audit and Executive Alliances and Joint Ventures,
Committees Avon Products, Inc.- a global
direct seller of beauty and
PAUL H. GRANZOW related products.
Senior Vice President and a - Member, Compensation
director of The Weston Paper Committee
and Manufacturing Co. He is
co-trustee of the John Q. JOHN J. SCHIFF, JR.
Sherman Trust. Chairman of the Board of
- - Chairman of the Board of Directors of John J. & Thomas
Directors of the Company R. Schiff & Co., Inc.- an
- - Member, Executive Committee insurance agency.
- Chairman, Audit and Pension
GRAEME G. KEEPING Advisory Committees
President of Information
Resources Management CHARLES F. SHERMAN
Associates - a consulting Personal Investments.
firm. - Member, Pension Advisory and
- - Member, Pension Advisory Executive Committees
Committee
JOHN Q. SHERMAN, II
Manufacturers Representative,
A. Rifkin Company - a
manufacturer of specialty
security packaging.
- Member, Compensation
Committee
SR 22 1997
<PAGE> 29
SAFE HARBOR STATEMENT:
THIS REPORT INCLUDES FORWARD-LOOKING STATEMENTS COVERED BY THE SAFE HARBOR
PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. THESE
STATEMENTS INVOLVE IMPORTANT ASSUMPTIONS, RISKS, UNCERTAINTIES AND OTHER FACTORS
WHICH COULD CAUSE THE COMPANY'S ACTUAL RESULTS FOR FISCAL YEAR 1998 AND BEYOND
TO DIFFER MATERIALLY FROM THOSE EXPRESSED IN SUCH FORWARD-LOOKING STATEMENTS.
FACTORS WHICH COULD CAUSE MATERIALLY DIFFERENT RESULTS INCLUDE PRODUCT DEMAND
AND MARKET ACCEPTANCE, THE FREQUENCY AND MAGNITUDE OF RAW MATERIAL PRICE
CHANGES, THE EFFECT OF ECONOMIC CONDITIONS, COMPETITIVE ACTIVITIES, AND OTHER
RISKS DESCRIBED IN THE COMPANY'S FILINGS WITH THE SECURITIES AND EXCHANGE
COMMISSION.
FINANCIAL SECTION
THE FINANCIAL SECTION OF THIS REPORT WAS PRINTED AT A STANDARD REGISTER STANFAST
ON DEMAND PRINTING CENTER. THIS SECTION OF OUR ANNUAL REPORT DOCUMENT IS A GOOD
EXAMPLE OF THE TYPE OF PROJECT THAT IS IDEAL FOR THE SERVICES OF STANDARD
REGISTER'S STANFAST ON DEMAND PRINTING CENTERS, LOCATED THROUGHOUT THE UNITED
STATES.
<TABLE>
<S> <C>
Eleven Year Financial Summary 24
Management Discussion and Analysis 26
Independent Auditors' Report 30
Statement of Income 31
Balance Sheet 32
Statement of Cash Flows 34
Statement of Shareholders' Equity 35
Notes to Financial Statements 36
Operating Locations 46
</TABLE>
SR 23 1997
<PAGE> 30
<TABLE>
<CAPTION>
ELEVEN YEAR FINANCIAL SUMMARY
(Dollars in thousands, except per share amounts) 1997 1996 1995 1994
===============================================================================================================
<S> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Revenue $ 965,674 $ 943,979 $ 903,240 $ 767,415
Cost of products sold 576,292 575,316 584,088 485,738
- ---------------------------------------------------------------------------------------------------------------
Gross margin 389,382 368,663 319,152 281,677
Engineering and research 9,100 7,842 7,813 7,475
Selling and administrative 232,418 217,671 200,812 174,435
Depreciation and amortization 36,646 34,814 29,326 25,755
Interest 288 532 974 1,090
Restructuring costs -- -- -- --
- ---------------------------------------------------------------------------------------------------------------
Income before taxes 110,930 107,804 80,227 72,922
Income taxes 44,036 44,647 32,468 29,046
- ---------------------------------------------------------------------------------------------------------------
Net income before cumulative
effect of accounting changes 66,894 63,157 47,759 43,876
Cumulative effect of accounting changes -- -- -- --
- ---------------------------------------------------------------------------------------------------------------
Net income $ 66,894 $ 63,157 $ 47,759 $ 43,876
===============================================================================================================
BASIC PER SHARE DATA
Income before cumulative effect
of accounting change $ 2.35 $ 2.20 $ 1.67 $ 1.53
Cumulative effect of accounting change -- -- -- --
- ---------------------------------------------------------------------------------------------------------------
Net income $ 2.35 $ 2.20 $ 1.67 $ 1.53
Dividends paid 0.80 0.76 0.72 0.68
Shareholders' equity 17.17 15.80 14.36 13.42
DILUTED PER SHARE DATA
Income before cumulative effect of
accounting change $ 2.33 $ 2.19 $ 1.67 $ 1.53
Cumulative effect of accounting change -- -- -- --
- ---------------------------------------------------------------------------------------------------------------
Net income $ 2.33 $ 2.19 $ 1.67 $ 1.53
YEAR-END FINANCIAL DATA
Current ratio 3.5 to 1 4.0 to 1 3.4 to 1 3.6 to 1
Working capital $ 271,799 $ 259,148 $ 231,958 $ 231,811
Plant and equipment 260,035 235,958 215,974 198,805
Total assets 647,018 588,113 555,503 525,659
Long-term debt 4,600 4,600 4,600 11,071 17,546
Shareholders' equity 487,935 453,246 411,217 383,966
OTHER DATA
Number of shares outstanding
at year-end 28,418,364 28,689,906 28,639,312 28,607,891
Number of employees 6,440 6,445 6,439 6,201
Capital expenditures $ 61,287 $ 57,783 $ 48,332 $ 52,128
</TABLE>
SR 24 1997
<PAGE> 31
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989 1988 1987
=========================================================================================================
<C> <C> <C> <C> <C> <C> <C>
$ 722,120 $ 705,215 $ 693,712 $ 716,410 $ 708,876 $ 675,197 $ 666,661
452,163 446,772 447,452 464,514 451,133 429,205 403,801
---------------------------------------------------------------------------------------------------------
269,957 258,443 246,260 251,896 257,743 245,992 262,860
7,754 7,803 7,854 9,647 9,222 8,624 8,267
166,267 163,711 162,350 169,462 161,720 154,122 162,877
24,553 22,955 22,028 21,368 19,269 16,620 16,380
1,142 2,124 3,012 4,462 5,571 5,316 5,700
-- -- -- 13,998 -- -- --
---------------------------------------------------------------------------------------------------------
70,241 61,850 51,016 32,959 61,961 61,310 69,636
28,056 22,478 18,309 11,165 21,601 23,210 29,099
---------------------------------------------------------------------------------------------------------
42,185 39,372 32,707 21,794 40,360 38,100 40,537
-- (13,362) -- -- -- -- --
---------------------------------------------------------------------------------------------------------
$ 42,185 $ 26,010 $ 32,707 $ 21,794 $ 40,360 $ 38,100 $ 40,537
=========================================================================================================
$ 1.47 $ 1.37 $ 1.14 $ 0.74 $ 1.35 $ 1.28 $ 1.36
-- (0.47) -- -- -- -- --
---------------------------------------------------------------------------------------------------------
$ 1.47 $ 0.90 $ 1.14 $ 0.74 $ 1.35 $ 1.28 $ 1.36
0.64 0.60 0.56 0.56 0.52 0.47 0.43
12.59 11.78 11.49 10.92 10.71 9.88 9.11
$ 1.47 $ 1.37 $ 1.14 $ 0.74 $ 1.35 $ 1.28 $ 1.36
-- (0.47) -- -- -- -- --
---------------------------------------------------------------------------------------------------------
$ 1.47 $ 0.90 $ 1.14 $ 0.74 $ 1.35 $ 1.28 $ 1.36
3.9 to 1 3.9 to 1 3.9 to 1 3.9 to 1 4.4 to 1 4.1 to 1 4.1 to 1
$ 243,573 $ 231,295 $ 217,697 $ 215,197 $ 232,725 $ 227,008 $ 219,646
174,252 169,122 169,026 161,856 155,281 141,096 132,339
502,333 482,463 463,560 453,725 459,196 443,784 425,217
24,454 35,189 41,940 48,736 55,282 61,990
360,983 338,317 329,333 312,626 319,070 294,269 271,456
28,671,710 28,711,317 28,673,397 28,635,124 29,797,608 29,779,613 29,812,644
5,769 5,724 5,852 6,168 6,321 6,355 6,284
$ 31,076 $ 22,697 $ 28,039 $ 29,822 $ 33,655 $ 31,240 $ 18,436
</TABLE>
SR 25 1997
<PAGE> 32
MANAGEMENT DISCUSSION AND ANALYSIS
Significant Events
In September 1994 the Company entered into a joint venture with Russian and
Dutch partners to produce and market business forms in Russia. The investment
was primarily in the form of refurbished equipment no longer required by the
Company in its U.S. operations. As a result of the difficult business
environment in Russia, the Company has written off its investment, taking pretax
charges of $4.9 million and $1.0 million in years 1996 and 1997, respectively.
In March 1995 the Company paid $7.7 million for the assets of FCA, a division of
Capital Graphics, Inc. FCA was a producer of custom business forms located in
Spring Grove, Illinois.
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 disbursing
equipment. Compensation and related legal fees totaling $3.7 million were
accrued in 1995. Equipment modifications were completed in 1997 at a cost of
approximately $1.0 million.
In September 1995 the Company invested $3.5 million in F3 Software Corporation,
a provider of forms design and electronic forms application software. F3's
software is a key component of the Company's document management software,
SMARTworks. The Company's investment in F3 through year-end 1997 was $7.5
million, representing a 44 percent ownership share.
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.
In August 1996 the Company purchased the assets of Piedmont Printing Company,
Inc. in Charlotte, North Carolina for $2.5 million, providing needed capacity to
support the growth in the Imaging Services and Stanfast Groups.
In October 1996 the Company sold its Advanced Medical Systems Division (AMS).
AMS developed and marketed materials management application software for
hospitals. The decision to sell the division, which had 1996 revenue of $1.9
million, was based on continuing operating losses and a strategic decision to
channel increased software development effort to electronic forms and related
software tools offered under the Company's SMARTworks system. The sale did not
have a material effect on 1996 earnings.
During 1997 the Company entered into acquisition agreements totaling $7.0
million, establishing five new Stanfast Print Centers and an additional Imaging
Services facility.
On December 31, 1997 the Company acquired the stock of Uarco Incorporated for
$245 million in cash. UARCO's 1997 sales of custom business forms, pressure
sensitive labels, and related equipment and services were estimated at $470
million. The acquisition occurred after the December 28, 1997 closing date for
the Company's fiscal year and is therefore not included in the 1997 financial
statements.
SR 26 1997
<PAGE> 33
The Standard Register Company
Results of Operations: 1997 Compared to 1996
Net Income for 1997 was a record $66.9 million, 5.9 percent above the $63.2
million reported for the prior year; Basic Earnings Per Share were $2.35
compared to 1996's $2.20 result.
Total Revenue for 1997 was $965.7 million, up 2.3 percent from $944.0 million in
fiscal 1996. The largest of the Company's three divisions, The Document
Management Division, recorded a 4.3 percent increase in revenue to $702.2
million, reflecting estimated gains of 2.1 percent in units and 2.2 percent in
average selling prices. Within this Division, traditional business forms and
related services were down 1.9 percent, which compares favorably to an estimated
4.0 percent decline in industry demand for these products. Revenues for the
Imaging Services and Stanfast Groups were up 21.0 percent and 26.2 percent,
respectively, as the Company continued to exploit the significant growth
opportunities in these markets. The Company believes it continues to pick up
market share.
The Communicolor Division reported revenue of $97.3 million, down 4.2 percent
from the prior year. The decline was attributed in part to the mailing of fewer
pieces by many of the Division's customers and competitive pressures from
commercial printers equipped with high resolution imaging equipment. The
Division took actions in 1997 to bolster its sales force and product offering
and saw consistent progress during the year; after seven consecutive quarters of
sales declines, fourth quarter revenue increased 5.0 percent.
Revenue for the Document Systems Division was $163.1 million, down 0.9 percent
from 1996's result. New equipment installations were off 7.7 percent reflecting
the continuing transition from traditional forms handling equipment to newer
generation intelligent printing systems. Equipment maintenance was also lower,
off 2.9 percent, which resulted in part from an effort to trim unprofitable
business; parenthetically, dollar gross margins in the service segment increased
$3.5 million despite a $1.1 million drop in revenue. In other product segments,
supplies revenue rose 4.2 percent, Pressure Sensitive label business grew 1.9
percent, and Electronic Services increased 19.4 percent.
The gross margin improved from 39.1 percent of revenue in 1996 to 40.3 percent
in the year just ended and was the major contributing factor to the Company's
increased profitability. This improvement is attributed primarily to modestly
improved pricing, lower average paper prices, and other manufacturing cost
improvements. After peaking at year-end 1995, paper prices generally fell off
until June 1997, when the first of the year's three price increases was
recorded. The Company raised the prices of its forms in December 1997 in
response to the rising costs of paper and other operating items. Notwithstanding
a competitive marketplace, the Company has historically been able to recover
higher paper costs over time by providing high value added products and services
to its customers.
Selling, administrative, and engineering costs increased 7.0 percent from $225.6
million in 1996 to $241.5 million in 1997. The Company has increased its
investment in information services as part of a plan to implement integrated
systems to improve order management and management reporting. In addition, the
Company increased its level of sales support resource in the field as part of
its program to improve overall sales productivity.
A program to ensure that the Company's systems are Year 2000 compliant by
mid-year 1999 has been undertaken; $.8 million was incurred in 1997 and an
estimated $9.2 million will be spent during 1998 and 1999.
Depreciation and amortization rose 5.3 percent in response to higher capital
spending during the last two years. The income tax rate was 39.7 percent
compared to 41.4 percent in 1996. The lower tax rate is primarily attributed to
Russian joint venture capital losses incurred in 1996 and for which current or
future tax benefits were not provided.
SR 27 1997
<PAGE> 34
Results of Operations: 1996 Compared to 1995
Net Income for 1996 was $63.2 million, 32.2 percent above 1995's $47.8 million
result. Basic Earnings Per Share were $2.20 versus $1.67 in the prior year.
There were two significant adjustments in 1996 that essentially offset one
another: the write-down of the Company's investment in the Russian joint
venture, equivalent to approximately $0.13 per share after tax, and a favorable
LIFO inventory adjustment related to lower paper prices, also $0.13 per share.
There was an unfavorable LIFO inventory adjustment in 1995 equivalent to $10.0
million after tax, or $0.34 per share. Excluding the LIFO adjustments in both
years and the Russian joint venture adjustment, Net Income was 9.7 percent
higher.
Paper prices played significant roles in both years' results. The most recent
paper cycle began in June 1994 as the strengthening worldwide demand for all
paper products and relatively high utilization rates at paper mills supported
the first of many closely spaced price increases. By June 1995 the weighted
average of all papers purchased by the Company had risen nearly 45 percent.
Paper prices remained stable for the balance of 1995 and fell during the first
four months of 1996, remaining at that level for the balance of the year despite
several attempts at increases by the paper companies. Average paper prices in
1996 were 13 percent lower than in 1995.
Revenue in 1996 was $944.0 million, 4.5 percent above the $903.2 million
reported for 1995. The Document Management Division reported $673.5 million in
revenue, a 7.4 percent increase over 1995. Traditional business forms revenue
rose 0.9 percent while, the Imaging Services, Stanfast, and Distribution
Services Groups produced a 23.7 percent overall increase.
The Communicolor Division, a producer of promotional direct mail, reported
revenue of $101.6 million, 11.5 percent below the 1995 result. This reduction
reflected fewer mailings, lower paper prices, and new competition from
commercial printers. Printing and imaging capacity added during 1996 was not
fully utilized, producing lower operating margins.
The Document Systems Division generated revenue of $164.7 million, up 6.0
percent compared to 1995's $155.3 million. Note that these results were restated
for the reclassification of pressure sensitive labels and electronic services to
this Division from the Document Management Division. Revenue from supplies was
up 11.4 percent, but new equipment installations declined 2.3 percent and
maintenance revenue was 5.5 percent below the prior year. The reduction in
equipment revenue reflected a product rationalization as part of the Division's
plan to focus primarily on intelligent printing applications. The drop in
maintenance revenue reflected the pruning of unprofitable accounts, which
produced a 4.0 percent increase in gross margin dollars despite the lower
revenue.
The Company's profit improvement was most evident at the gross margin line. The
gross margin for all products and services was 39.1 percent of revenue in 1996,
compared to 35.3 percent for 1995. Excluding the effects of LIFO inventory
adjustments in each of the years, the operating gross margin improved from 37.2
percent to 38.4 percent, reflecting a favorable product mix, lower paper costs,
and the retention of some of the forms pricing gains made during 1995.
SR 28 1997
<PAGE> 35
Selling, administrative, and engineering expenses totaled $225.5 million in
1996, 8.1 percent above the 1995 level. 1996's operating expenses included the
$4.9 million charge related to the Russian joint venture, approximately $2.8
million in Electronic Services Group start-up costs, $2.7 million in roll-out
costs for the Company's new order entry system, and $2.5 million for added sales
support. Depreciation and amortization increased from $29.3 million in 1995 to
$34.8 million in 1996, primarily as a result of higher capital spending in the
last two years.
The increase in the income tax rate from 40.5 percent in 1995 to 41.4 percent in
1996 can be attributed to the Russian charge. The majority of this charge was
recorded as a capital loss which, in the absence of an offsetting capital gain,
did not permit a corresponding reduction in the tax provision.
Environmental Matters
The Company has been named as one of a number of potential 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 are
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 remained very strong. The total balance of
cash and short-term investments was $83.6 million at year end, compared to $4.6
million in total debt. Shareholders' equity ended the year at $487.9 million.
Cash flow from operations was sufficient to fund a record $61.3 million of
capital expenditures, $3.0 million of additional investment in the F3
Corporation, $22.8 million of dividends, $12.2 million of stock repurchases, and
an increase in cash reserves of $17.8 million.
Capital expenditures in 1997 went in major part for manufacturing capacity
additions, automation of field sales offices, and internal application software
development. The Company expects 1998 capital spending to be in the $65 million
to $75 million range.
On December 15, the Company entered into a $300 million unsecured five-year
revolving credit agreement underwritten by KeyBank, N.A. to provide financing
for the acquisition of Uarco Incorporated and other general corporate purposes.
The Company closed on the $245 million acquisition on December 31, 1997,
applying $15 million of corporate cash and borrowing $230 million under the
revolver. Under the terms of the agreement, the interest rate is set
periodically at a spread over the London Interbank Offered Rate (LIBOR); the
spread is based upon the Company's ratio of net debt (debt less cash and
short-term investments) to total capital. On a pro-forma basis, the Company's
net debt to total capital ratio following the December 31 acquisition was 25.4
percent. The Company subsequently entered into a five-year swap agreement that
effectively fixes the interest rate on $200 million of the debt at an all-in
cost of 6.0 percent.
In management's opinion, the combination of the revolving credit agreement and
internally generated cash flow will be sufficient to provide for the Company's
near-term financing needs.
SR 29 1997
<PAGE> 36
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 28, 1997 and December 29, 1996, and the related statements of
income, shareholders' equity, and cash flows for each of the three years in the
period ended December 28, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements 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 28, 1997 and December 29, 1996, and the results of its operations
and its cash flows for each of the three years in the period ended December 28,
1997, in conformity with generally accepted accounting principles.
/s/ Batell & Batell LLP
Certified Public Accountants
Dayton, Ohio
January 23, 1998
SR 30 1997
<PAGE> 37
The Standard Register Company
STATEMENT OF INCOME
<TABLE>
<CAPTION>
52 WEEKS ENDED 52 Weeks Ended 52 Weeks Ended
DECEMBER 28 December 29 December 31
(Dollars in thousands, except per share amounts) 1997 1996 1995
===========================================================================================================
<S> <C> <C> <C>
REVENUE $965,674 $943,979 $903,240
COST AND EXPENSE
Cost of products sold 576,292 575,316 584,088
Engineering and research 9,100 7,842 7,813
Selling and administrative 232,418 217,671 200,812
Depreciation and amortization 36,646 34,814 29,326
Interest 288 532 974
- ------------------------------------------------------------------------------------------------------------
Total cost and expense 854,744 836,175 823,013
- ------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 110,930 107,804 80,227
- ------------------------------------------------------------------------------------------------------------
INCOME TAXES
Current 40,098 42,009 32,752
Deferred 3,938 2,638 (284)
- ------------------------------------------------------------------------------------------------------------
Total income taxes 44,036 44,647 32,468
- ------------------------------------------------------------------------------------------------------------
NET INCOME $ 66,894 $ 63,157 $ 47,759
============================================================================================================
EARNINGS PER SHARE
Basic $2.35 $2.20 $1.67
============================================================================================================
Diluted $2.33 $2.19 $1.67
============================================================================================================
</TABLE>
See accompanying notes.
SR 31 1997
<PAGE> 38
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 28 December 29
(Dollars in thousands) 1997 1996
===========================================================================================================
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 67,556 $ 64,550
Short-term investments 16,055 1,215
Accounts receivable, less allowance for losses
of $2,864 and $3,638, respectively 191,031 178,711
Inventories 85,546 86,152
Deferred income taxes 6,168 8,206
Prepaid pension expense 5,371 952
Prepaid other expense 7,091 5,201
- -----------------------------------------------------------------------------------------------------------
Total current assets 378,818 344,987
- -----------------------------------------------------------------------------------------------------------
PLANT AND EQUIPMENT
Buildings and improvements 67,874 61,711
Machinery and equipment 237,320 224,702
Office equipment 67,324 60,894
- -----------------------------------------------------------------------------------------------------------
Total 372,518 347,307
Less accumulated depreciation 155,634 141,021
- -----------------------------------------------------------------------------------------------------------
Depreciated cost 216,884 206,286
Plant and equipment under construction 39,070 26,160
Land 4,081 3,512
- -----------------------------------------------------------------------------------------------------------
Total plant and equipment 260,035 235,958
- -----------------------------------------------------------------------------------------------------------
OTHER ASSETS 8,165 7,168
- -----------------------------------------------------------------------------------------------------------
Total assets $647,018 $588,113
===========================================================================================================
</TABLE>
See accompanying notes.
SR 32 1997
<PAGE> 39
The Standard Register Company
<TABLE>
<CAPTION>
DECEMBER 28 December 29
(Dollars in thousands) 1997 1996
===========================================================================================================
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 25,296 $ 20,225
Dividends payable 5,968 5,738
Accrued compensation 34,817 34,355
Accrued other expense 4,581 5,536
Accrued taxes, except income 6,977 5,902
Income taxes payable 1,155 2,624
Customer deposits 21,003 4,185
Deferred service contract income 7,222 7,274
- -----------------------------------------------------------------------------------------------------------
Total current liabilities 107,019 85,839
- -----------------------------------------------------------------------------------------------------------
LONG-TERM LIABILITIES
Long-term debt 4,600 4,600
Retiree health care obligation 28,779 27,643
Deferred income taxes 18,685 16,785
- -----------------------------------------------------------------------------------------------------------
Total long-term liabilities 52,064 49,028
- -----------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Common stock, $1.00 par value:
Authorized 50,500,000 shares
Issued 1997 - 24,308,437; 1996 - 24,204,392 24,308 24,204
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 31,599 28,705
Retained earnings 444,259 400,387
Cost of common shares in treasury:
1997 - 615,073 shares; 1996 - 239,486 shares (16,956) (4,775)
- -----------------------------------------------------------------------------------------------------------
Total shareholders' equity 487,935 453,246
- -----------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $647,018 $588,113
===========================================================================================================
</TABLE>
SR 33 1997
<PAGE> 40
The Standard Register Company
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
52 WEEKS ENDED 52 Weeks Ended 52 Weeks Ended
DECEMBER 28 December 29 December 31
(Dollars in thousands) 1997 1996 1995
============================================================================================================
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 66,894 $ 63,157 $ 47,759
Add (deduct) items not affecting cash:
Depreciation and amortization 36,646 34,814 29,326
Loss (gain) on sale of assets 346 1,508 (1,309)
Unrealized gain on investments (294) -- --
Loss on other investments 1,852 4,383 830
Provision for deferred income taxes 3,938 2,638 (284)
Increase (decrease) in cash arising from
changes in assets and liabilities:
Accounts receivable (12,320) 2,998 (29,757)
Inventories 606 11,665 2,856
Other assets (6,309) (2,494) 202
Accounts payable and accrued expenses 6,789 1,762 8,159
Income taxes payable (1,469) 90 256
Customer deposits 16,818 (4,149) (1,473)
Deferred income (52) (1,181) 1,095
- ------------------------------------------------------------------------------------------------------------
Net adjustments 46,551 52,034 9,901
- ------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 113,445 115,191 57,660
- ------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to plant and equipment (61,287) (57,783) (48,332)
Proceeds from sale of plant and equipment 432 1,692 3,330
Purchase of short-term investments (15,000) -- (1,330)
Sales of short-term investments 455 115 --
Additions to other investments (3,028) (1,008) (5,555)
Other investing activities (36) -- (675)
- ------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (78,464) (56,984) (52,562)
- ------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on long-term debt -- (6,471) (6,471)
Proceeds from issuance of common stock 2,998 1,317 1,000
Purchase of treasury stock (12,181) (341) (582)
Dividends paid (22,792) (21,808) (20,634)
- ------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (31,975) (27,303) (26,687)
- ------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3,006 30,904 (21,589)
Cash and cash equivalents at beginning of year 64,550 33,646 55,235
- ------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 67,556 $ 64,550 $ 33,646
============================================================================================================
SUPPLEMENTAL CASH FLOW DISCLOSURES
Cash paid during the year for:
Interest $ 141 $ 565 $ 999
Income taxes $ 41,317 $ 42,115 $ 32,496
Non-cash investing activities:
Note receivable from sale of assets $ -- $ 650 $ --
</TABLE>
See accompanying notes.
SR 34 1997
<PAGE> 41
The Standard Register Company
STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
52 WEEKS ENDED 52 Weeks Ended 52 Weeks Ended
DECEMBER 28 December 29 December 31
(Dollars in thousands) 1997 1996 1995
============================================================================================================
<S> <C> <C> <C>
COMMON STOCK
Beginning balance $ 24,204 $ 24,142 $ 24,085
Add shares issued under:
Stock Incentive Plan 50 55 57
Dividend Reinvestment Plan 22 7 --
Stock Option Plan 32 -- --
- ------------------------------------------------------------------------------------------------------------
Ending balance 24,308 24,204 24,142
- ------------------------------------------------------------------------------------------------------------
CLASS A STOCK 4,725 4,725 4,725
- ------------------------------------------------------------------------------------------------------------
CAPITAL IN EXCESS OF PAR VALUE
Beginning balance 28,705 27,450 26,507
Add excess of market over par
value of shares issued under:
Stock Incentive Plan 1,562 1,062 943
Dividend Reinvestment Plan 709 193 --
Stock Option Plan 623 -- --
- ------------------------------------------------------------------------------------------------------------
Ending balance 31,599 28,705 27,450
- ------------------------------------------------------------------------------------------------------------
RETAINED EARNINGS
Beginning balance 400,387 359,334 332,501
Add net income for year 66,894 63,157 47,759
Less cash dividends declared (23,022) (22,104) (20,926)
- ------------------------------------------------------------------------------------------------------------
Ending balance 444,259 400,387 359,334
- ------------------------------------------------------------------------------------------------------------
TREASURY SHARES
Beginning balance (4,775) (4,434) (3,852)
Cost of common shares purchased (12,181) (341) (582)
- ------------------------------------------------------------------------------------------------------------
Ending balance (16,956) (4,775) (4,434)
- ------------------------------------------------------------------------------------------------------------
Total shareholders' equity $487,935 $453,246 $411,217
- ------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
SR 35 1997
<PAGE> 42
The Standard Register Company
NOTES TO FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
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 document management services. 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 and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
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 28, 1997, December 29, 1996, and December 31, 1995
had 52 weeks.
Cash Equivalents
The Company classifies as cash equivalents all highly liquid investments with
original maturities 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.
Short-term Investments
Debt securities for which the Company has the intent and ability to hold to
maturity are classified as held-to-maturity and are stated at amortized cost.
Securities are classified as trading when held for short-term periods in
anticipation of market gains and are reported at fair market value, with
unrealized gains and losses included in income.
Inventories
Inventories are valued at the lower of cost or market. Substantially all
inventory costs are determined by the last-in, first-out (LIFO) method. Finished
products include printed forms stored for future shipment and invoicing to
customers.
Plant and Equipment
These assets are stated at cost less accumulated depreciation. Costs of normal
maintenance and repairs are charged to expense when incurred. When the assets
are retired or otherwise disposed of, their cost and related depreciation are
removed from the respective accounts and the resulting gain or loss is included
in current income. Impairment of asset value is recognized whenever events or
circumstances indicate that carrying amounts are not recoverable.
SR 36 1997
<PAGE> 43
Depreciation
For financial statement purposes, depreciation is computed by the straight-line
method over the expected useful lives of the depreciable assets. Depreciation
expense was $36,431 in 1997, $34,601 in 1996, and $29,143 in 1995. Estimated
asset lives are:
<TABLE>
Classification Years
================================================================================
<S> <C>
Buildings and improvements 10-40
Machinery and equipment 5-15
Office equipment 5-15
</TABLE>
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.
Revenue Recognition
The Company generally recognizes product and related services revenue at the
time of shipment to the customer. 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.
Earnings Per Share
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share"
is effective for the Company's 1997 fiscal year. This new standard changes the
manner in which earnings per share (EPS) amounts are calculated and presented.
Basic EPS is the per share allocation of net income available to shareholders
based on the weighted average number of shares outstanding during the period.
Diluted EPS represents the per share allocation of net income based on the
weighted average number of shares outstanding plus all common shares that
potentially could have been issued under the Company's stock option program.
Accounting for Stock Options
The Company follows Accounting Principles Board (APB) Opinion No. 25 "Accounting
for Stock Issued to Employees" in accounting for its employee stock options.
Under APB 25, no compensation expense is recognized in the financial statements
because the exercise price of employee stock options equals the market price of
the underlying stock on the date of the grant. The Company has adopted the
disclosure-only provisions of Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation."
New Accounting Pronouncement
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 131, "Disclosures about Segments of an
Enterprise and Related Information". This Statement significantly changes the
way public business enterprises report information about operating segments in
annual financial statements. SFAS 131 uses a "management approach" to disclose
financial and descriptive information about an enterprise's reportable operating
segments which is based on reporting information the way management organizes
the segments for making operating decisions and assessing performance. SFAS 131
will be effective for the Company's 1998 fiscal year and the reported business
segments will reflect the organizational structure of the Company at that time.
SR 37 1997
<PAGE> 44
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 (FIFO) method had been used,
these inventories would have been $35,601 higher at December 28, 1997 and
$34,885 higher at December 29, 1996.
Inventories at the respective year-ends are as follows:
<TABLE>
<CAPTION>
DECEMBER 28 December 29
(Dollars in thousands) 1997 1996
================================================================================================
<S> <C> <C>
Finished products $58,675 $55,449
Jobs in process 16,500 18,573
Materials and supplies 10,371 12,130
- ------------------------------------------------------------------------------------------------
Total $85,546 $86,152
================================================================================================
</TABLE>
NOTE 3 - Long-term Debt
Long-term debt consists of industrial development revenue bonds issued by
Rutherford County, Tennessee. Interest is payable semi-annually at 6.125%.
Required annual principal payments subsequent to December 28, 1997 are as
follows: 1998 - None; 1999 - $525; 2000 - $555; 2001 - $590; and 2002 - $630.
NOTE 4 - Income Taxes
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
(Dollars in thousands) 1997 1996 1995
===============================================================================================================
<S> <C> <C> <C>
Current
Federal $32,933 $33,285 $26,386
State and local 7,165 8,724 6,366
Deferred 3,938 2,638 (284)
- ---------------------------------------------------------------------------------------------------------------
Total $44,036 $44,647 $32,468
===============================================================================================================
</TABLE>
The significant components of the deferred tax expense (benefit) are as follows:
<TABLE>
<CAPTION>
(Dollars in thousands) 1997 1996 1995
===============================================================================================================
<S> <C> <C> <C>
Depreciation $2,357 $0,853 $(1,128
Pension 2,039 1,712 391
Inventories 110 267 976
Compensation and benefits (431) (33) (1,331)
Allowance for doubtful accounts 312 111 (690)
Retiree health care benefits (457) (620) (393)
Other 8 348 (365)
- ----------------------------------------------------------------------------------------------------------------
Total $3,938 $2,638 $ (284)
================================================================================================================
</TABLE>
SR 38 1997
<PAGE> 45
The components of the net deferred tax asset and liability as of December 28,
1997 and December 29, 1996 are as follows:
<TABLE>
<CAPTION>
DECEMBER 28 December 29
(Dollars in thousands) 1997 1996
===============================================================================================================
<S> <C> <C>
Deferred tax asset:
Allowance for doubtful accounts $ 1,153 $ 1,465
Inventories 2,524 2,634
Compensation and benefits 5,127 4,696
Pension (2,739) (700)
Other 103 111
- ---------------------------------------------------------------------------------------------------------------
$ 6,168 $ 8,206
- ---------------------------------------------------------------------------------------------------------------
Deferred tax liability:
Depreciation $ 30,272 $ 27,915
Retiree health care benefits (11,587) (11,130)
- ---------------------------------------------------------------------------------------------------------------
$ 18,685 $ 16,785
===============================================================================================================
</TABLE>
The reconciliation of the statutory federal income tax rate and the effective
tax rate follows:
<TABLE>
<CAPTION>
1997 1996 1995
=================================================================================================================
<S> <C> <C> <C>
Statutory federal income tax rate 35.0% 35.0% 35.0%
State and local income taxes 5.3 5.3 5.3
Other (.6) 1.1 .2
- ------------------------------------------------------------------------------------------------------------------
Effective tax rate 39.7% 41.4% 40.5%
==================================================================================================================
</TABLE>
NOTE 5 - Capital Structure
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 23,693,364 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.
NOTE 6 - Earnings Per Share Data
The following per share data show the amounts used in computing earnings per
share (EPS) and the dilutive effects of stock options:
<TABLE>
<CAPTION>
52 WEEKS ENDED DECEMBER 28, 1997
NET SHARES INCOME
(Dollars in thousands, except per share amounts) INCOME (000'S) PER SHARE
==============================================================================================================
<S> <C> <C> <C>
Basic $66,894 28,498 $2.35
Dilutive effect of stock options -- 203
Diluted $66,894 28,701 $2.33
52 Weeks Ended December 29, 1996
Net Shares Income
(Dollars in thousands, except per share amounts) Income (000's) Per Share
==============================================================================================================
<S> <C> <C> <C>
Basic $63,157 28,687 $2.20
Dilutive effect of stock options -- 118
Diluted $63,157 28,805 $2.19
52 Weeks Ended December 29, 1995
Net Shares Income
(Dollars in thousands, except per share amounts) Income (000's) Per Share
==============================================================================================================
<S> <C> <C> <C>
Basic $47,759 28,653 $1.67
Dilutive effect of stock options -- --
Diluted $47,759 28,653 $1.67
</TABLE>
SR 39 1997
<PAGE> 46
The effects of stock options on diluted EPS are reflected through the
application of the treasury stock method. Under this method, proceeds received
by the Company, based on assumed exercise, are hypothetically used to repurchase
the Company's shares at the average market price for the period.
NOTE 7 - 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 options
have a term of ten years. The exercise price per share, determined by a
committee of the Board of Directors, may not be less than the fair market value
on the grant date. The options are exercisable over periods determined when
granted.
In April 1996, the Company's shareholders ratified the initial grant on December
30, 1995 of 550,000 options with an exercise price of $20.125 per share. Options
to purchase 231,000 shares were granted on December 28, 1996 with an exercise
price of $32.375 per share. Options to purchase 214,000 shares were granted on
December 27, 1997 with an exercise price of $35.3125 per share.
The Company applies APB Opinion No. 25 "Accounting for Stock Issued to
Employees" and related interpretations in accounting for its stock option plan.
Accordingly, no compensation cost has been recognized in the Company's financial
statements. Had compensation cost for the Company's stock option plan been
determined based on the fair value of such awards at the grant dates, consistent
with the methods of Financial Accounting Standards Board Statement No. 123
"Accounting for Stock-Based Compensation", the Company's total and per share net
income would have been reduced as follows:
<TABLE>
<CAPTION>
(Dollars in thousands except per share amounts) 1997 1996 1995
===============================================================================================================
<S> <C> <C> <C> <C>
Net income As reported $66,894 $63,157 $47,759
Pro forma 65,101 62,512 47,759
Basic earnings per share As reported $002.35 $002.20 $001.67
Pro forma 2.28 2.18 1.67
Diluted earnings per share As reported $002.33 $002.19 $001.67
Pro forma 2.27 2.17 1.67
</TABLE>
The fair values of options granted in fiscal years 1997, 1996, and 1995 were
estimated at $10.58, $10.37, and $6.12 per share, respectively, using the
Black-Scholes option-pricing model based on the following assumptions:
<TABLE>
<CAPTION>
1997 1996 1995
===============================================================================================================
<S> <C> <C> <C>
Risk-free interest rate 5.7% 6.2% 5.4%
Dividend yield 2.0% 2.0% 2.0%
Expected life 5 years 5 years 5 years
Expected volatility 29.7% 31.5% 31.2%
</TABLE>
SR 40 1997
<PAGE> 47
Following is a summary of the status of the Company's stock option plan during
fiscal years 1997, 1996, and 1995:
<TABLE>
<CAPTION>
1997 1996 1995
WEIGHTED Weighted Weighted
AVERAGE Average Average
SHARES EXERCISE PRICE Shares Exercise Price Shares Exercise Price
====================================================================================================================
<S> <C> <C> <C> <C>
Outstanding, beginning of year 776,000 $23.772 550,000 $20.125 -- --
Granted 227,000 35.313 231,000 32.375 550,000 $20.125
Exercised (32,580) 20.125 -- -- -- --
Canceled (46,000) 21.728 (5,000) 20.125 -- --
- --------------------------------------------------------------------------------------------------------------------
Outstanding, end of year 924,420 776,000 550,000
====================================================================================================================
</TABLE>
Following is a summary of the status of stock options outstanding at December
28, 1997:
<TABLE>
<CAPTION>
Number Number Exercise Remaining
Outstanding Exercisable Price Term
================================================================================================================
<S> <C> <C> <C> <C>
472,420 169,420 $20.125 8 years
225,000 123,600 32.375 9 years
227,000 -- 35.313 10 years
- ----------------------------------------------------------------------------------------------------------------
924,420 293,020
================================================================================================================
</TABLE>
NOTE 8 - 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. The Company has non-qualified plans which provide benefits
in addition to those provided in the qualified plans.
Pension fund assets are invested in a broadly diversified portfolio consisting
primarily of publicly-traded common stocks and fixed income securities.
Assumptions used in the respective accounting years to determine pension costs
are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
==================================================================================================================
<S> <C> <C> <C>
Discount rate 8.5% 8.5% 8.5%
Rate of increase in compensation levels 5.0% 5.0% 4.0%
Expected long-term rate of return on assets 10.5% 10.5% 9.5%
</TABLE>
Pension costs consist of the following components:
<TABLE>
<CAPTION>
(Dollars in thousands) 1997 1996 1995
===============================================================================================================
<S> <C> <C> <C>
Service cost of benefits earned $ 6,476 $ 5,734 $ 4,776
Interest cost on projected benefit obligation 13,265 12,431 10,573
Actual gain on plan assets (51,987) (22,507) (24,657)
Asset gain deferred 36,856 10,074 14,691
Amortization of transition asset (120) (605) (722)
Amortization of prior service costs 1,950 1,950 1,898
Amortization of net loss from prior periods 117 62 --
Cost of early retirement window 1,118 -- --
- ---------------------------------------------------------------------------------------------------------------
Net pension cost $ 7,675 $ 7,139 $ 6,559
===============================================================================================================
</TABLE>
SR 41 1997
<PAGE> 48
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 28, 1997 December 29, 1996
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 $127,611 $ 5,172 $115,115 $ 3,050
Non-vested 8,685 -- 8,724 390
- ---------------------------------------------------------------------------------------------------------------
Total $136,296 $ 5,172 $123,839 $ 3,440
===============================================================================================================
Projected benefit obligation $169,206 $ 9,470 $155,513 $ 6,421
===============================================================================================================
Plan assets at fair value $204,935 $ -- $150,857 $ --
Plan assets greater (less) than projected
benefit obligation $ 35,729 $ 9,470) $ (4,656) $(6,421)
Unrecognized net (gain) loss (32,575) 4,290 61 1,806
Unrecognized prior service cost 7,509 1,439 9,227 1,670
Minimum liability adjustment -- (1,431) -- (495)
Unrecognized transition asset (120) -- (240) --
- ---------------------------------------------------------------------------------------------------------------
Prepaid (accrued) pension expense $ 10,543 $(5,172) $ 4,392 $(3,440)
===============================================================================================================
Net asset recognized in balance sheet $5,371 $952
===============================================================================================================
</TABLE>
NOTE 9 - Postretirement Benefits Other Than Pensions
In addition to providing pension benefits, the Company provides certain 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) 1997 1996 1995
===============================================================================================================
<S> <C> <C> <C>
Service cost -- -- ---
Interest cost $2,401 $2,728 $2,495
Amortization of net loss from prior periods -- 266 143
- ---------------------------------------------------------------------------------------------------------------
Postretirement benefit cost $2,401 $2,994 $2,638
===============================================================================================================
</TABLE>
The funding policy is to pay claims as they occur. Payments for postretirement
health benefits, net of retiree contributions, amounted to $1,265, $1,452 and
$1,662 in 1997, 1996, and 1995, respectively.
SR 42 1997
<PAGE> 49
The funded status of the plan at December 28, 1997 and December 29, 1996 is as
follows:
<TABLE>
<CAPTION>
DECEMBER 28 December 29
(Dollars in thousands) 1997 1996
===============================================================================================================
<S> <C> <C>
Accumulated postretirement benefit obligation for retirees $25,597 $29,182
Plan assets -- --
- ---------------------------------------------------------------------------------------------------------------
Accumulated postretirement benefit obligation in excess of plan assets 25,597 29,182
Unrecognized net gain (loss) 3,182 (1,539)
- ---------------------------------------------------------------------------------------------------------------
Retiree health care obligation shown in balance sheet $28,779 $27,643
===============================================================================================================
</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 10.5% in 1997 and gradually decreases to 6.5% in the year 2014.
A one percent increase in the health care cost trend rates used would result in
a $298 increase in the service and interest components of expense for 1997 ($341
for 1996) and a $3,048 increase in the postretirement benefit obligation at
December 28, 1997 ($3,503 increase at December 29, 1996).
NOTE 10 - Concentration of Credit Risk
Financial instruments which potentially subject the Company to a concentration
of credit risk principally consist of cash and equivalents, short-term
investments, and trade receivables. The Company's credit risk with respect to
trade receivables are, in management's opinion, limited due to industry and
geographic diversification. As disclosed on the balance sheet, the Company
maintains an allowance for doubtful accounts to cover estimated credit losses.
NOTE 11 - Fair Value of Financial Instruments
<TABLE>
<CAPTION>
DECEMBER 28, 1997 December 29, 1996
FAIR CARRYING Fair Carrying
(Dollars in thousands) VALUE AMOUNT Value Amount
===============================================================================================================
<S> <C> <C> <C> <C>
Assets
Cash and equivalents $67,556 $67,556 $64,550 $64,550
Securities held to maturity 760 760 1,215 1,215
Trading securities 15,295 15,295 -- --
Liabilities
Long-term debt $ 4,695 $ 4,600 $ 4,654 $ 4,600
</TABLE>
The carrying amounts of cash equivalents and securities held to maturity
approximate fair value because of the short maturities of those instruments. The
fair value of trading securities is based on quoted market prices. The fair
value of long-term debt is estimated based on quoted market prices for similar
issues of the same remaining maturities.
SR 43 1997
<PAGE> 50
NOTE 12 - Commitments and Contingencies
Purchase commitments for capital improvements aggregated $8,972 at December 28,
1997. Also, the Company has purchase commitments for equipment for resale of
$483 at December 28, 1997. The Company has no purchase agreements with suppliers
extending beyond normal quantity requirements.
The Company is obligated under several leases expiring at various dates. Annual
expense under these leases was $25,450 in 1997, $23,320 in 1996, and $21,692 in
1995.
Rental commitments under existing leases at December 28, 1997, are:
<TABLE>
<CAPTION>
Computer and
Real Sales Transportation Other
(Dollars in thousands) Estate Offices Equipment Equipment Total
========================================================================================================
<S> <C> <C> <C> <C> <C>
1998 $7,703 $7,672 $308 $2,856 $18,539
1999 6,517 6,092 287 2,290 15,186
2000 5,302 4,366 161 1,844 11,673
2001 3,496 3,053 141 1,135 7,825
2002 1,895 1,535 99 999 4,528
Later years -- 172 230 54 456
</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 13 - Subsequent Events
On December 31, 1997, the Company acquired all outstanding shares of Uarco
Incorporated (Uarco), a subsidiary of Settsu Corporation of Osaka, Japan,
pursuant to a definitive purchase agreement dated November 27, 1997. Uarco
produces and markets business forms, pressure sensitive labels, business
equipment, supplies, and workflow systems to the U.S. market. At December 31,
1997, Uarco had approximately 3,200 employees located in 18 production
facilities and 125 sales offices. The unaudited sales of Uarco during 1997 were
approximately $470 million, excluding operations divested prior to the
acquisition date.
The purchase price was $245 million in cash, of which $230 million was financed
under a new five-year, unsecured bank revolving credit agreement. The credit
line provides for borrowings up to $300 million and bears interest at a floating
rate of LIBOR plus a spread dependent upon the debt to equity ratio. On January
23, 1998, $200 million of the outstanding debt was swapped to an effective fixed
interest rate of 6.09%.
The acquisition will be accounted for as a purchase in fiscal 1998. The purchase
price will be allocated to the assets acquired and liabilities assumed based
upon their estimated fair market values. The purchase price allocation will be
determined during 1998 when additional information becomes available. Results of
operations for Uarco will be included with those of the Company beginning in
fiscal 1998.
SR 44 1997
<PAGE> 51
NOTE 14 - Quarterly Financial Data (Unaudited)
Summarized quarterly financial data follow:
<TABLE>
<CAPTION>
QUARTERS ENDED
MARCH 30 JUNE 29 SEPTEMBER 28 DECEMBER 28
(Dollars in thousands except per share amounts) 1997 1997 1997 1997
========================================================================================================================
<S> <C> <C> <C> <C>
Revenue $230,114 $236,467 $237,243 $261,850
Gross margin* 93,589 96,537 97,454 101,802
Net income 14,948 16,999 16,250 18,697
Basic earnings per share .52 .60 .57 .66
Diluted earnings per share .52 .59 .57 .65
Quarters Ended
March 31 June 30 September 29 December 29
1996 1996 1996 1996
========================================================================================================================
Revenue $229,673 $239,352 $230,853 $244,101
Gross margin* 85,290 91,644 91,435 100,294
Net income 13,563 16,086 16,065 17,443
Basic earnings per share .47 .56 .56 .61
Diluted earnings per share .47 .56 .56 .60
Quarters Ended
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
Basic earnings per share .38 .42 .41 .46
Diluted earnings per share .38 .42 .41 .46
</TABLE>
* Revenue less cost of products sold.
SR 45 1997
<PAGE> 52
OPERATING LOCATIONS
CORPORATE
HEADQUARTERS
600 Albany St.
Dayton, Ohio 45408
DOCUMENT MANAGEMENT
SALES
Dayton, Ohio
Corporate Vice President, Sales
B.W.Calabro
General Sales Manager,
National Accounts
Dayton, Ohio
M.T. Jacoutot
FIELD OPERATIONS
Area Vice President - East
Boundbrook, New Jersey
A.T. Batten
General Sales Managers
New England
Boston, Massachusetts
C.W. Copley
New York
Philadelphia, Pennsylvania
R.E. Assini
Mideast
Columbus, Ohio
G.L. Cherson
Southeast
Jacksonville, Florida
R.R.Launey
Area Vice President - West
Chicago, Illinois
K.J. Petrie
General Sales Managers
Central
Chicago, Illinois
G.M. West
Midwest
St. Louis, Missouri
T.P. Lawrence
Southwest
Dallas, Texas
J.B. Morey
West
Phoenix, Arizona
R.W. Campbell
DOCUMENT MANAGEMENT
AND SYSTEMS DIVISION
Dayton, Ohio
Senior Vice President and
General Manager
P.A. Dorsman
MANUFACTURING
Corporate Vice President
and General Manager,
Rotary Group
H.A. Seifert
General Manager
Pressure Sensitive Group
R.W. Stone
PLANTS
Cincinnati, Ohio
Manager
D.E. Haemmerle
Corning, Iowa
Manager
R.L. Barger
Dayton, Ohio
Manager
R.A. Cousino
Dayton, Ohio
Manager, Manufacturing
E.F. Ponikwia
Deep River, Connecticut
Manager
R.B. Merritt
Fayetteville, Arkansas
Manager
W.H. Bequette
Fulton, Kentucky
Manager
M.S. Fenwick
Kirksville, Missouri
Manager
R.B. Herrick
Middlebury, Vermont
Manager
G.A. Wendel
Murfreesboro, Tennessee
Manager
H.J. Troyer
Porterville, California
Manager
P.L.Jones
Radcliff, Kentucky
Manager
R.A. Mead
Rocky Mount, Virginia
Manager
H.J. Pechie
Roseburg, Oregon
Manager
J.W. Miller
Salisbury, Maryland
Manager
S.G. Miller
Shelbyville, Indiana
Manager
E.C. Hlava
Spring Grove, Illinois
Manager
D.R. Petersen
Tampa, Florida
Manager
L.D. McConnell
Terre Haute, Indiana
Manager
G.W. Stubbs
Toccoa, Georgia
Manager
D.E. Ayers
Watseka, Illinois
Manager
L.E. Mattern
York, Pennsylvania
Manager
J.L. Galbraith
General Manager
Electronic Services/
Workflow Group
M.D. Pratt
General Manager
Document Systems Group
T.S. Spencer
DOCUMENT SYSTEMS
SALES
Dayton, Ohio
Director, Sales
T.M. Marcellino
Regional Sales Managers
Eastern
Marlton, New Jersey
E.M. Mamrak
Southern
Raleigh, North Carolina
D.F. Donovan
Midwest
Oakbrook Terrace, Illinois
L.A. Noethlich
Western
Irvine, California
S.T. Svehlak
Automatic Identification
Systems Group
Barrington, Illinois
L. DiDomenico
IMPRESSIONS DIVISION
Dayton, Ohio
Senior Vice President and
General Manager
T.J. Webb
General Manager
Stanfast
D.E. Olson
General Manager
Imaging Services Group
R.D. Fehrman
MANUFACTURING
Stanfast Print Centers (38)
Imaging Services Centers (7)
Corporate Vice President and
General Manager, Communicolor
M. Spaul
COMMUNICOLOR SALES
General Sales Manager
Reston, Virginia
D.DiLucente
MANUFACTURING
Eudora, Kansas
S.J. Thorton
Newark, Ohio
Director of Manufacturing
J.S. Hardy
INTERNATIONAL
OPERATIONS
Dayton, Ohio
Corporate Vice President,
International Operations
J.H. DeYoung
INTERNATIONAL
ASSOCIATES
Argentina, Ramon Chozas,
S.A.
Australia, Print Media
Group
Belgium, Proforms B.V.
Canada, Data Business
Forms, Ltd.
Columbia, FESA S.A.
Ecuador, Offsetec S.A.
England, Adare Printing
Group Plc.
France, Ruwa-Bell S.A.
Germany, Proforms B.V.
India, Hitech Print Systems,
Ltd.
Indonesia, Pt.Jasuindo Tiga
Perkasa
Ireland, Adare Printing
Group Plc.
Israel, Be'eri Printers
Italy, STEP S.p.A.
Japan, Dai Nippon Printing
Co., Ltd.
Jordon, Nashashibi & Ebbini
Forms
Luxembourg, Proforms B.V.
Mexico, Calidata S.A. de
C.V.
Netherlands, Proforms B.V.
New Zealand, Wickliffe
Press Ltd.
Norway, Nassjo-Tryckeriet
AB
Panama, FESA S.A.
Portugal, Roberto Zubiri,
S.A.
South Africa, Lithosaver
Systems Ltd.
Spain, Roberto Zubiri, S.A.
Sweden, Nassjo-Tryckeriet
AB
Switzerland, Baumer AG
United Kingdom, WBF
(Adare Printing Group Plc.)
Venezuela FESA S.A.
SR 46 1997
<PAGE> 53
SHAREHOLDER INFORMATION
There are approximately 3,300 shareholders of record of the Company's Common
stock and 16 shareholders of record of the Company's Class A stock. Management
estimates the number of beneficial owners of the Company's securities to be
approximately 7,500. The shares of The Standard Register Company are traded on
the New York Stock Exchange under the symbol SR. The range of prices and
dividends paid per share for each quarterly period during the two most recent
fiscal years are presented below:
<TABLE>
<CAPTION>
Market Price Per Share
(in $)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
35.50 35.75 35.25 35.56
32.50
28.87 27.87 31.75 32.00
High 24.37 25.37 30.50 30.50
23.37 22.87
Low 19.00
Close 23.62 24.62 27.62 32.50 32.75 30.63 33.13 35.31
1Q96 2Q96 3Q96 4Q96 1Q97 2Q97 3Q97 4Q97
</TABLE>
<TABLE>
<CAPTION>
Dividend Paid Per Share
(in $)
<S> <C> <C> <C> <C> <C> <C> <C>
1Q96 2Q96 3Q96 4Q96 1Q97 2Q97 3Q97 4Q97
.19 .19 .19 .19 .20 .20 .20 .20
</TABLE>
Annual Meeting
The Annual Meeting of Shareholders will be held Wednesday, April 15, 1998, at
11:00 a.m. Eastern Daylight Savings Time at The Mandalay Banquet Center, 2700
East River Road, Dayton, Ohio. A formal notice will be mailed to each
shareholder of record prior to the meeting.
Form 10-K Report
Upon request, the Company will provide a copy of its Annual Report on Form 10-K.
Requests should be addressed to Secretary, The Standard Register Company, P.O.
Box 1167, Dayton, Ohio 45401. Phone 937-443-1506.
Transfer Agent and Registrar
For assistance on stock transfers or the replacement of lost or stolen
certificates, contact the Company's Transfer Agent and Registrar, Wachovia
Shareholder Services, P.O. Box 8218, Boston, Massachusetts 02266-8218. Phone
800-633-4236.
SR 47 1997
<PAGE> 54
INVESTOR CONTACT
Robert J. Cestelli
Associate Vice President - Investor Relations
The Standard Register Company
P.O. Box 1167
Dayton, Ohio 45401
937-443-1304
Fax 937-443-1205
SHAREHOLDER CONTACT
Kathryn A. Lamme
Corporate Vice President - Secretary
and Deputy General Counsel (effective 4/1/98)
The Standard Register Company
P.O. Box 1167
Dayton, Ohio 45401
937-443-1506
Fax 937-443-3431
GENERAL COUNSEL
Nicholas C. Hollenkamp
Senior Partner
Turner, Granzow & Hollenkamp
50 East Third Street
Dayton, Ohio 45402
TRANSFER AGENT AND REGISTRAR
Wachovia Bank of North Carolina, N.A.
P.O. Box 3001
Winston-Salem, North Carolina 27102
800-633-4236
AUDITORS
Battelle & Battelle LLP
Certified Public Accountants
2000 West Dorothy Lane
Dayton, Ohio 45439
PRODUCT AND SERVICE INFORMATION
800-755-6405
INTERNET
http://www.stdreg.com
[STANDARD REGISTER/LISTED ON THE NEW YORK STCOK EXCHANGE LOGO]
All trademarks are the property of their respective owners.
SR 48 1997
<PAGE> 55
[LOGO Standard Register(R)]
The Standard Register Company
600 Albany Street
Dayton, Ohio 45408
1-800-755-6405
NYSE:SR
http://www.stdreg.com
Printed in the U.S.A.
(C) 1998 The Standard Register Company
<PAGE> 1
EX-23
CONSENT OF INDEPENDENT AUDITORS
As independent auditors, we hereby consent
to the incorporation of our reports included in and
incorporated by reference in this Form 10-K, into the
Company's previously filed Registration Statements File No.'s
333-02683, 333-05231, 333-15851 and 333-43055.
/S/ BATTELLE & BATTELLE LLP
BATTELLE & BATTELLE LLP
Dayton, Ohio
March 27, 1998
-32-
<PAGE> 1
EX-24
POWER OF ATTORNEY
-----------------
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 11, 1997.
/S/ R.W. Begley, Jr. /S/ A. Scavullo
- -------------------------- ---------------------------------
R.W. Begley, Jr. A. Scavullo
/S/ F.D. Clark, III /S/ J.J. Schiff, Jr.
- -------------------------- ---------------------------------
F. D. Clark, III J.J. Schiff, Jr.
/S/ G.G. Keeping /S/ C.F. Sherman
- -------------------------- ---------------------------------
G.G. Keeping C.F. Sherman
/S/ P.S. Redding /S/ J.Q. Sherman, II
- -------------------------- ---------------------------------
P.S. Redding J.Q. Sherman, II
/S/ D.L. Rediker
- -------------------------
D.L. Rediker
Signed and acknowledged in the presence of:
/S/ P.H. Granzow /S/ A.L. BAUGHN
- -------------------------- ---------------------------------
P. H. Granzow, Chairman of A. L. Baughn,
the Board of Directors of Vice President & Secretary of
The Standard Register Company The Standard Register Company
[Corporate Seal]
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 11,
1997.
/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 28, 1997 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-28-1997
<PERIOD-END> DEC-28-1997
<CASH> 67,556
<SECURITIES> 16,055
<RECEIVABLES> 193,895
<ALLOWANCES> 2,864
<INVENTORY> 85,546
<CURRENT-ASSETS> 378,818
<PP&E> 415,669
<DEPRECIATION> 155,634
<TOTAL-ASSETS> 647,018
<CURRENT-LIABILITIES> 107,019
<BONDS> 4,600
0
0
<COMMON> 29,033
<OTHER-SE> 458,902
<TOTAL-LIABILITY-AND-EQUITY> 647,018
<SALES> 962,447
<TOTAL-REVENUES> 965,674
<CGS> 576,292
<TOTAL-COSTS> 854,744
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,051
<INTEREST-EXPENSE> 288
<INCOME-PRETAX> 110,930
<INCOME-TAX> 44,036
<INCOME-CONTINUING> 66,894
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 66,894
<EPS-PRIMARY> 2.35
<EPS-DILUTED> 2.35
</TABLE>
