<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 29, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For The Transition Period From to
Commission File Number 01-1097
THE STANDARD REGISTER COMPANY
OHIO CORPORATION 31-0455440
600 ALBANY STREET, DAYTON, OHIO 45401
TELEPHONE NUMBER 937-443-1000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No. .
CLASS OUTSTANDING AS OF March 29, 1998
Common Stock - $1.00 Par Value 23,701,305
Class A Stock - $1.00 Par Value 4,725,000
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<PAGE> 2
THE STANDARD REGISTER COMPANY AND SUBSIDIARY
INDEX
Page
No.
PART I - FINANCIAL STATEMENTS
Balance Sheet
March 29, 1998, December 28, 1997 3
Statement of Income
13 Weeks Ended March 29, 1998 and March 30, 1997 4
Statement of Cash Flows
13 Weeks Ended March 29, 1998 and March 30, 1997 5
Notes to Consolidated Financial Statements 6
The financial statements of the Registrant included herein have been prepared,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. Although certain information normally included in
financial statements prepared in accordance with generally accepted
accounting principles has been condensed or omitted, the Registrant believes
that the disclosures are adequate to make the information presented not
misleading. It is suggested that these financial statements be read in
conjunction with the financial statements and notes thereto included in the
Annual Report on Form 10-K of the Registrant for the year ended December 28,
1997.
The financial statements included herein reflect all adjustments (consisting
only of normal recurring accruals) which, in the opinion of management, are
necessary to present a fair statement of the results for the interim periods.
The results for interim periods are not necessarily indicative of trends or of
results to be expected for a full year.
Management's Discussion and Analysis of the Interim
Financial Statements 7-9
PART II - OTHER INFORMATION AND SIGNATURE 10-12
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<PAGE>
<PAGE> 3
THE STANDARD REGISTER COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
ASSETS March 29, December 28,
1998 1997
<S> <C> <C>
CURRENT ASSETS
Cash and Cash Equivalents $ 45,442 $ 67,556
Short Term Investments 15,902 16,055
Accounts Receivable, less Allowance
for Losses 261,010 191,031
Deferred Accounts Receivable, less
Allowance for Losses 24,733
Inventories
Finished Products 91,075 58,675
Jobs in Process 30,797 16,500
Materials and Supplies 14,683
10,371
Deferred Income Tax 6,168 6,168
Prepaid Expense 10,368 12,462
Total Current Assets 500,178 378,818
PLANT AND EQUIPMENT
Buildings and Improvements 93,355 67,874
Machinery and Equipment 315,745 237,320
Office Equipment 57,199 67,324
Total 466,299 372,518
Less Accumulated Depreciation 168,140 155,634
Depreciated Cost 298,159 216,884
Construction in Process 49,924 39,070
Land 9,457 4,081
Total Plant and Equipment 357,540 260,035
OTHER ASSETS
Goodwill, Patents, and Other 37,477 3,099
Prepaid Pension Expense 73,889
Investment in F3 4,785 5,066
Total Other Assets 116,151 8,165
TOTAL ASSETS 973,869 647,018
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable 50,804 25,296
Dividends Payable - 5,968
Accrued Compensation 35,634 34,817
Accrued Other Expense 5,397 4,581
Accrued Taxes, except Income 12,803 6,977
Income Taxes Payable 6,089 1,155
Customer Deposits 26,225 21,003
Deferred Service Contract Income 9,062 7,222
Total Current Liabilities 146,014 107,019
LONG-TERM LIABILITIES
Long-Term Debt 234,670 4,600
Deferred Compensation 2,525
Retiree Healthcare 55,253 28,779
Accrued Restructuring 37,030
Deferred Income Taxes 652 18,685
Total Long-Term Liabilities 330,130 52,064
SHAREHOLDERS' EQUITY
Common Stock, $1.00 Par Value
24,333,378 Shares Issued in 1998 24,333
24,308,437 Shares Issued in 1997 24,308
Class A Stock, $1.00 Par Value
4,725,000 Shares Outstanding 4,725 4,725
Capital in Excess of Par Value 32,231 31,599
Retained Earnings 453,948 444,259
Treasury Stock, 632,073 Shares at Cost (17,512)
615,073 Shares at Cost (16,956)
Total Shareholders' Equity 497,725 487,935
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $973,869 $647,018
See notes to consolidated financial statements.
</TABLE>
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<PAGE>
<PAGE> 4
THE STANDARD REGISTER COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME
(In Thousands except Data Per Share)
(Unaudited)
<TABLE>
<CAPTION>
First Quarter
13 Weeks Ended
March 29, March 30,
1998 1997
<S> <C> <C>
TOTAL REVENUE $344,057 $230,114
COSTS AND EXPENSES
Cost of Products Sold 222,473 136,525
Engineering & Research 2,782 2,481
Selling and Administrative 85,813 56,634
Depreciation and Amortization 13,521 9,156
Interest 3,430 77
Total Costs and Expenses 328,019 204,603
INCOME BEFORE INCOME TAXES 16,038 25,511
Income Taxes 6,347 10,563
NET INCOME $ 9,691 $ 14,948
Average Number of Shares
Outstanding (000):
Basic 28,424 28,616
Diluted 28,613 28,824
DATA PER SHARE:
Earning Per Share:
Basic $ 0.34 $ 0.52
Diluted 0.34 0.52
Dividends Paid 0.21 0.20
</TABLE>
See notes to consolidated financial statements.
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<PAGE> 5
THE STANDARD REGISTER COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
First Quarter
13 Wks Ended
March 29, March 30,
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net Income $ 9,691 $ 14,948
Add Items not Affecting Cash:
Depreciation and Amortization 13,521 9,156
Loss on Sale of Facilities 63 56
Net Change to Investments 138 750
Change to Retiree Healthcare 523 455
Net change to Deferred Compensation 2,525
Increase (Decrease) in Cash Arising from
Changes in Asset and Liabilities:
Accounts Receivable 12,181 14,275
Deferred Accounts Receivable 26,036
Inventories (35,010) (430)
Other Assets (1,113) 983
Accounts Payable and Accrued Expenses (20,721) (11,907)
Income Taxes Payable 2,834 8,177
Customer Deposits 5,222 2,974
Deferred Service Income 1,840 2,120
Net Adjustments 8,039 26,609
Net Cash Provided by Operating Activities 17,730 41,556
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from Sale of Facilities 50 120
Additions to Plant and Equipment (14,665) (13,326)
Acquisition (245,000) -
Maturity of Short Term Investments 15,295 -
Purchase of Short Term Investments (15,000) -
Investment in F3 Corporation (1,000) (3,028)
Purchase of Key Man Life Insurance Policies (2,400) -
Net Cash (Used in) Investing Activities (262,720) (16,233)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Long Term Debt 230,000 -
Payments of Long Term Debt (1,254) -
Proceeds from Issuance of Common Stock 657 2,204
Redemption of Common Stock (557) (5,275)
Dividends Paid (5,970) (5,750)
Net Cash Provided by (Used in)
Financing Activities 222,876 (8,821)
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (22,114) 16,502
Cash and Cash Equivalents, Beginning 67,556 64,550
CASH AND CASH EQUIVALENTS, ENDING $ 45,442 $ 81,052
</TABLE>
See notes to consolidated financial statements.
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<PAGE> 6
THE STANDARD REGISTER COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - BASIS OF PRESENTATION
The accompanying consolidated financial statements include the
accounts of The Standard Register Company and its wholly-owned subsidiary,
Uarco Incorporated, which was acquired on December 31, 1997. Significant
intercompany balances and transactions have been eliminated in the
consolidation process. Uarco Incorporated was merged into The Standard
Register Company on March 31, 1998.
NOTE B - ACQUISITION OF UARCO INCORPORATED
On December 31, 1997, the Company acquired all outstanding shares of
Uarco Incorporated. The purchase price was $245 million in cash, of which $230
million was financed under a new five-year bank revolving credit agreement.
The acquisition has been accounted for under the purchase method.
The purchase price will be allocated to the assets acquired and liabilities
assumed based upon their estimated fair market values. This allocation has
been completed on a preliminary basis, and as a result, adjustments to the
carrying values of assets and liabilities may occur during 1998 as additional
information becomes available.
The unaudited pro forma information for the periods set forth below give effect
to the acquisition and related financing as if they had occurred on December
29, 1997 and December 30, 1996. The pro forma information is presented for
informational purposes only and is not necessarily indicative of the results of
operations that actually would have been achieved had these transactions been
consummated at the beginning of the periods presented.
<TABLE>
<CAPTION>
(in thousands of dollars)
First Quarter
13 Weeks Ended
March 29, March 30,
1998 1997
(Unaudited)
<S> <C> <C>
Total Revenue $344,057 $339,948
Net Income (Loss) 9,691 (872)
Earnings Per Share
Basic $ 0.34 $ (0.03)
Diluted 0.34 (0.03)
</TABLE>
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<PAGE>
<PAGE> 7
THE STANDARD REGISTER COMPANY AND SUBSIDIARY
MANAGEMENT DISCUSSION AND ANALYSIS
OF THE INTERIM FINANCIAL STATEMENTS
Revenue for the first quarter ended March 29, 1998 was $344.1 million, 49.5%
above the $230.1 million reported for the first quarter 1997. Net Income was
$9.7 million or $0.34 per share versus $14.9 million and $0.52 per share for
the comparable period of 1997. The acquisition of Uarco, Incorporated on
December 31, 1997 figured prominently in the results of operations for the
quarter.
The table below isolates the effects that the acquisition and the Year 2000
initiative had on Standard Register's first quarter operating results. Dollars
are in millions except for per share results.
<TABLE>
<CAPTION>
REVENUE NET PROFIT E.P.S.
<S> <C> <C> <C>
Standard Register Operations $ 249.2 $16.2 $ 0.57
Former Uarco Operations 123.2 -1.0 -0.04
Revenue Recognition Policy -28.3 -2.1 -0.07
Interest Expense -2.0 -0.07
Integration Expenses -0.5 -0.02
Year 2000 Expenses -0.9 -0.03
Reported Results $ 344.1 $ 9.7 $ 0.34
</TABLE>
Revenue growth for both Standard Register and the former Uarco operations, shown
above, was relatively strong in the first quarter, up 8.3% and 12.0% over their
respective first-quarter 1997 reported levels.
The Company has moved rapidly to consolidate Standard Register and Uarco
operations into two new divisions. The Document Management and Systems
Division reported revenue of $277.7 million representing an 8.2% increase over
the comparable (Standard Register plus Uarco) results for the prior year.
Within this division, traditional business forms and related distribution
services rose 6.9%, pressure-sensitive labels were up 6.7%, and document
systems increased 20.2%. The Impressions Division recorded revenue of $94.4
million, a 10% increase over the comparable prior year operating results.
Among Impressions' operating groups, Stanfast continued its pattern of strong
growth with a 20.5% increase and Communicolor's promotional direct-mail
business was up 5.3%; the Imaging Services Group revenue was off 4.1%,
reflecting the absence of large repeat orders now expected later in the
year.
The Company incurred a $28.3 million adjustment to revenue to conform Uarco to
Standard Register's revenue recognition policy for custom business forms stored
in warehouses. Uarco recognized revenue when the finished product went into the
warehouse; Standard's more conservative policy is to recognize revenue when it
is delivered from the warehouse to the customer and is invoiced. These
adjustments will continue, but at a declining value, over the balance of this
year as Uarco product that was stored in warehouses on the date of the
acquisition is replaced by new additions to storage.
Standard Register operations, excluding the effect of the acquisition and the
Year 2000 initiative, produced a contribution to Net Profit of $16.2 million,
compared to the Company's $14.9 million result reported for the first quarter
1997; earnings per share on this basis would have been $0.57 versus $0.52 a
year ago. Standard's (excluding Uarco) gross margin narrowed by 1.2
percentage points as a result of higher paper costs mitigated somewhat by modest
forms pricing gains. This unfavorable effect was offset, however, by improved
expense ratios and a lower effective tax rate that produced an 8.7% increase in
Net Profit on the 8.3% increase on Revenue.
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The former Uarco operations produced a $1.0 million Net Loss for the quarter,
which was substantially improved in comparison to Uarco's reported result in the
prior year and was in line with management's expectations. Cost savings from
consolidations with Standard Register operations, actions taken to increase
account profitability, efforts to bring outsourced production in-house, the re-
negotiation of Uarco operating leases, and other purchasing economies of scale
are expected to result in a positive and improving contribution to earnings as
the year progresses.
The change in revenue recognition policy, discussed earlier, produced a
reduction in Net Profit of $2.0 million or $0.07 per share. Interest expense,
almost entirely related to the purchase of Uarco, also reduced Net Profit by
$2.0 million. Expenses related to the acquisition not chargeable to the
restructuring accrual, primarily travel and relocation of equipment and
personnel, were $0.5 million or $0.02 per share.
Expenditures to ensure that the Company's systems and products are Year 2000
compliant totaled $1.5 million for the quarter on a pretax basis ($0.9 million
or $0.03 per share after tax). This was in line with the estimated $6.0 million
total year expenditure planned for 1998; an additional $3.0 million in spending
is expected in 1999 prior to the project's completion.
The balance sheet as of March 29, 1998 differs substantially from the December
29, 1997 balance sheet as a result of the purchase of Uarco. The table below
identifies, on a summary level, the effect of the December 31, 1997 acquisition
and provides a comparison to the subsequent first quarter ending balance
sheet.
<TABLE>
<CAPTION>
YEAR-END 1997 ADJUSTED FOR ACQUISITION
12/28/97 12/31/97 ACQUISITION ADJUSTED 3/29/98
SRC UARCO FINANCING SRC SRC
<S> <C> <C> <C> <C> <C>
Cash & Short-term Investments $ 83.6 $ (9.4) $(15.0) $ 59.2 $ 61.3
Accounts Receivable 191.0 82.2 273.2 261.0
Deferred Accounts Receivable -- 50.8 50.8 24.7
Inventory 85.6 16.0 101.6 136.6
Prepaid Expense 12.5 -- 12.5 10.4
Other Current Assets 6.1 2.9 9.0 6.1
Total Current Assets 378.8 142.5 (15.0) 506.3 500.1
Property, Plant, & Equipment
at NBV 260.0 96.1 356.1 357.5
Goodwill at NBV 1.9 24.7 26.6 26.2
Prepaid Pension Expense -- 67.0 67.0 73.9
Other Long-term Assets 6.3 7.3 13.6 16.2
Total Assets $647.0 $337.6 $(15.0) $969.6 $973.9
Current Liabilities $107.0 $ 43.6 $150.6 $146.0
Retiree Health Care Liability 28.8 26.0 54.8 55.3
Deferred Tax Liability 18.7 (18.0) 0.7 0.7
Deferred Compensation -- -- -- 2.5
Restructuring Liability -- 39.7 39.7 37.0
Long-term Debt 4.6 1.3 230.0 235.9 234.7
Shareholders' Equity 487.9 245.0 (245.0) 487.9 497.7
Total Liabilities & Equity $647.0 $337.6 $ (15.0) $969.6 $973.9
</TABLE>
A few items are noteworthy:
The $245-million purchase price was financed with $15 million in cash and $230
million in borrowing under a $300-million five-year revolving credit agreement
with several banks. For $200 million of the borrowing, the interest rate is
fixed for five years at an all-in rate of 6.09% as a result of an interest rate
swap. The balance of the debt floats at LIBOR plus a spread.
- 8 of 12 -<PAGE>
<PAGE> 9
Uarco's revenue recognition policy for custom forms storage produced revenue and
a deferred accounts receivable when product went into the warehouse. When
product was delivered to the customer, the receivable transferred to current
status. The drop in this balance during the quarter and the increase in
inventory reflects the shift to Standard Register's policy.
Uarco's pension plan was over-funded by $67.0 million. This plan was merged
with Standard Register's plan, also over-funded, on March 31, 1998.
The Company established a $39.7-million restructuring liability to cover
anticipated costs associated with the acquisition. One-half of this liability
reflects severance and other cash costs; the balance reflects expected asset
value reductions from discontinued operations. The Company announced several
restructuring actions during the first quarter, including the following:
The closure of 130 sales offices throughout the U.S. as sales regions
of the two companies are merged.
The closure and sale of the former Uarco headquarters in Barrington,
Illinois.
The closure of the Bedford, Illinois, equipment operation and the
discontinuation of Uarco's equipment line, which was duplicative to
Standard's.
The closure of forms manufacturing plants in Roseburg, Oregon, and Deep
River, Connecticut. Most production equipment is being relocated to
other Standard Register forms plants.
The conversion of the Radcliff, Kentucky, forms plant to pressure-
sensitive label production.
The closure of four former Uarco Impression Print Centers; here again,
most equipment will be relocated to nearby Stanfast Print Centers.
Based on the valuation of assets and liabilities acquired under purchase
accounting, including the restructuring accrual, goodwill was established at
$24.7 million. The goodwill will be amortized over 15 years.
The Company produced net positive cash flow of $3.3 million in the quarter, as
indicated in the table above as an increase in Cash and Short-term Investments
of $2.1 million and a decrease in Long-term debt of $1.2 million. Capital
expenditures during the first quarter were $14.7 million. The Company re-
negotiated the buyout of several of Uarco's operating leases, most of which will
be purchased during the second quarter of this year. Total capital spending for
1998, including the lease buyouts, will be approximately $80 million.
The Company's financial condition remains very strong. Net Debt (Debt less
Cash, Cash Equivalents, and Short-term Investments) to total capital (Net Debt
plus Equity) was 25.8% at quarter-end and the current ratio was 3.4 times. The
Company believes that the combination of existing cash reserves, internally
generated funds, and credit available under the revolving credit agreement will
be sufficient to complete the integration of Uarco and finance its normal
operations over the next year.
9 of 12
<PAGE> 10
PART II - OTHER INFORMATION
ITEMS 1 THRU 3
None
ITEM 4 Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting of Shareholders was held April 15, 1998.
Following is the result of voting by the Shareholders regarding fixing and
determining the number of Directors to be ten.
IN FAVOR OPPOSED ABSTAINED
44,803,879 22,534 50,382
As a result of voting of the Shareholders, the following were elected to the
Company's Board of Directors to hold office for the ensuing year.
NOMINEE IN FAVOR WITHHELD
Roy W. Begley, Jr. 44,825,561 51,547
F. David Clarke, III 44,835,700 41,408
Paul H. Granzow 44,828,830 48,277
Graeme G. Keeping 44,826,088 51,020
Peter S. Redding 44,824,372 52,735
Dennis L. Rediker 44,826,917 50,190
Ann Scavullo 44,834,259 42,848
John J. Schiff, Jr. 44,837,134 39,973
Charles F. Sherman 44,826,465 50,642
John Q. Sherman, II 44,826,406 50,702
An amendment to the 1995 Stock Option Plan to increase the number of shares of
Common Stock available for option grants from 2,000,000 to 3,000,000 was
approved as a result of the following vote:
IN FAVOR OPPOSED ABSTAINED
40,241,574 4,563,795 71,426
Following is the result of voting by the Shareholders regarding selection of
Battelle & Battelle LLP as the Company's Auditors for the year 1998.
IN FAVOR OPPOSED ABSTAINED
44,833,995 13,527 29,273
ITEM 5
None
ITEM 6 (a) Exhibits
Exhibit No. Description
27 Financial Data Schedule
(b) Forms 8-K and amended 8-K/A were filed on January 15, 1998 and
March 13, 1998, respectively. These filings presented
financial statements, pro forma financial information, and
exhibits related to the December 31, 1997 acquisition of
Uarco Incorporated.
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<PAGE> 11
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
May 13, 1998
THE STANDARD REGISTER COMPANY AND SUBSIDIARY
/s/ C. J. Brown
By C. J. Brown, Sr. Vice President, Administration,
Treasurer & Chief Financial Officer
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<PAGE> 12
EXHIBIT INDEX
Number Description
27 Financial Data Schedule
- 12 of 12 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Standard
Register Company financial statements for the three months ended March 29 1998, and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-03-1999
<PERIOD-END> MAR-29-1998
<CASH> $ 45,442
<SECURITIES> 15,902
<RECEIVABLES> 306,883
<ALLOWANCES> 21,140
<INVENTORY> 136,555
<CURRENT-ASSETS> 500,178
<PP&E> 525,680
<DEPRECIATION> 168,140
<TOTAL-ASSETS> 973,869
<CURRENT-LIABILITIES> 146,014
<BONDS> 234,670
<COMMON> 29,058
0
0
<OTHER-SE> 468,667
<TOTAL-LIABILITY-AND-EQUITY> 973,869
<SALES> 343,562
<TOTAL-REVENUES> 344,057
<CGS> 222,473
<TOTAL-COSTS> 328,019
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 753
<INTEREST-EXPENSE> 3,430
<INCOME-PRETAX> 16,038
<INCOME-TAX> 6,347
<INCOME-CONTINUING> 9,691
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,691
<EPS-PRIMARY> 0.34
<EPS-DILUTED> 0.34
