STANDARD REGISTER CO, 10-Q, 2000-11-15

STANDARD REGISTER CO
10-Q, 2000-11-15
MANIFOLD BUSINESS FORMS

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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 the quarterly period ended October 1, 2000

[ ] 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 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	45408
(Address of principal executive offices)	(Zip Code)

(937) 221-1000

(Registrant's telephone number, including area code)

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 the number of shares outstanding of the each of the issuer's classes of common stock, as of the latest practicable date.

Class

------------------------------------------

Outstanding as of October 31, 2000

--------------------------------------------

Common stock, $1.00 par value

22,666,760 shares

Class A stock, $1.00 par value

4,725,000 shares

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THE STANDARD REGISTER COMPANY

FORM 10-Q

For the Quarter Ended October 1, 2000

INDEX

	Page
Part I - Financial Information


	Item 1. Financial Statements


a)	Statement of Income
	for the 13 Weeks Ended October 1, 2000 and October 3, 1999 and
	for the 39 Weeks Ended October 1, 2000 and October 3, 1999	4

b)	Balance Sheet
	as of October 1, 2000 and January 2, 2000	5-6

c)	Statement of Cash Flows
	for the 39 Weeks Ended October 1, 2000 and October 3, 1999	7

d)	Note to Financial Statements	8

Item 2. Management's Discussion and Analysis of Financial Condition

			and Results of Operations	8-11

Item 3. Quantitative and Qualitative Disclosure About Market Risk

Part II - Other Information

	Item 1. Legal Proceedings	11

	Item 2. Changes in Securities and Use of Proceeds	11

	Item 3. Defaults upon Senior Securities	11

	Item 4. Submission of Matters to a Vote of Security Holders	12

	Item 5. Other Information	12

	Item 6. Exhibits and Reports on Form 8-K	12

Signature

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THE STANDARD REGISTER COMPANY

FORM 10-Q

For the Quarter Ended October 1, 2000

PART I - FINANCIAL INFORMATION

ITEM 1. - FINANCIAL STATEMENTS

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 are 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 January 2, 2000.

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.

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THE STANDARD REGISTER COMPANY
STATEMENT OF INCOME
(Dollars in thousands, except per share amounts)
			Third Quarter		Nine Months
			13 Weeks Ended ----------------------------		39 Weeks Ended ----------------------------
			Oct. 1,	Oct. 3,	Oct. 1,	Oct. 3,
			2000 -----------	1999 -----------	2000 -----------	1999 -----------
TOTAL REVENUE			$303,895 -----------	$325,900 -----------	$939,217 -----------	$988,523 -----------
COSTS AND EXPENSES
	Cost of products sold		185,715	201,659	577,695	606,029
	Engineering and research		2,808	2,061	8,081	6,174
	Selling and administrative		84,264	84,355	256,365	258,626
	Depreciation and amortization		14,431	13,326	42,653	38,379
	Interest		3,147	3,413	9,506	10,419
	Restructuring		- -----------	- -----------	17,200 -----------	- -----------
		Total costs and expenses	290,365 -----------	304,814 -----------	911,500 -----------	919,627 -----------
INCOME BEFORE INCOME TAXES			13,530	21,086	27,717	68,896
Income taxes			5,174 -----------	6,147 -----------	10,873 -----------	25,474 -----------
Income from continuing operation			8,356 -----------	14,939 -----------	16,844 -----------	43,422 -----------
Discontinued operations:
Current year (loss), net of tax benefit			0	0	0	(509)
Gain on disposal, net of tax			0 -----------	0 -----------	0 -----------	14,875 -----------
NET INCOME			$8,356 =======	$14,939 =======	$16,844 =======	$57,788 =======
Average number of shares outstanding - basic			27,381	27,976	27,366	28,171
Average number of shares outstanding - diluted			27,381	28,110	27,366	28,325

EARNINGS PER SHARE DATA - BASIC:
	Income from continuing operations		$0.31	$0.53	$0.62	$1.54
	Discontinued operations, current year (loss)		$0.00	$0.00	$0.00	($0.02)
	Gain on disposal		$0.00	$0.00	$0.00	$0.53
		Net income	$0.31	$0.53	$0.62	$2.05

EARNINGS PER SHARE DATA - DILUTED:
	Income from continuing operations		$0.31	$0.53	$0.62	$1.53
	Discontinued operations, current year (loss)		$0.00	$0.00	$0.00	($0.02)
	Gain on disposal		$0.00	$0.00	$0.00	$0.52
		Net income	$0.31	$0.53	$0.62	$2.03

Dividends paid per share			$0.23	$0.22	$0.69	$0.66

See note to financial statements.

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THE STANDARD REGISTER COMPANY
BALANCE SHEET
(Dollars in thousands)




				Oct. 1,	Jan. 2,
A S S E T S				2000 ------------	2000 ------------
CURRENT ASSETS
	Cash and cash equivalents			$60,721	$56,957
	Short-term investments			295	380
	Accounts receivable			239,158	265,482
		Allowance for losses		(11,362)	(3,477)
	Inventories
		Finished products		120,170	101,717
		Jobs in process		16,694	18,321
		Materials and supplies		9,121	11,716
	Prepaid income taxes			4,389	1,448
	Deferred income taxes			13,720	13,720
	Prepaid expense			10,861 ------------	11,316 ------------
			Total current assets	463,767 ------------	477,580 ------------
PLANT AND EQUIPMENT
	Buildings and improvements			100,100	89,528
	Machinery and equipment			354,463	242,641
	Office equipment			137,203 ------------	100,614 ------------
			Total	591,766	432,783
	Less accumulated depreciation			318,401 ------------	161,849 ------------
			Depreciated cost	273,365	270,934
	Construction in process			60,336	46,966
	Land			8,359 ------------	10,243 ------------
			Total plant and equipment	342,060 ------------	328,143 ------------
OTHER ASSETS
	Goodwill			49,131	52,140
	Prepaid pension expense			97,474	88,111
	Other			17,394 ------------	15,665 ------------
			Total other assets	163,999 ------------	155,916 ------------
			Total assets	$969,826 ========	$961,639 ========

See note to financial statements.

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THE STANDARD REGISTER COMPANY
BALANCE SHEET
(Dollars in thousands)

				Oct. 1,	Jan. 2
LIABILITIES AND SHAREHOLDERS' EQUITY				2000 ------------	2000 ------------
CURRENT LIABILITIES
	Current portion of long-term debt			$ 590	$ -
	Accounts payable			26,209	38,356
	Dividends payable			-	6,302
	Accrued compensation			44,538	38,672
	Accrued other expense			13,059	11,450
	Accrued taxes, except income			5,381	7,452
	Customer deposits			263	263
	Deferred service contract income			8,436	7,892
	Accrued restructuring			16,475 ------------	3,550 ------------
			Total current liabilities	114,951 ------------	113,937 ------------
LONG-TERM LIABILITIES
	Long-term debt			202,930	203,520
	Deferred compensation			10,472	7,709
	Retiree healthcare			54,164	54,164
	Deferred income taxes			40,578 ------------	40,578 ------------
			Total long-term liabilities	308,144 ------------	305,971 ------------
SHAREHOLDERS' EQUITY
	Common stock, $1.00 par value
		24,515,976 shares issued		24,516
		24,467,544 shares issued			24,468
	Class A stock, $1.00 par value
		4,725,00 shares issued		4,725	4,725
	Capital in excess of par value			35,987	35,669
	Accumulated other comprehensive losses			(417)	(417)
	Retained earnings			530,110	525,835
	Treasury stock
		1,748,082 shares		(45,364)
		1,793,395 shares			(46,540)
	Common stock held in grantor trust
		103,519 shares at cost		(2,826)
		59,697 shares at cost		------------	(2,009) ------------
			Total shareholders' equity	546,731 ------------	541,731 ------------
			Total liabilities and shareholders' equity	$969,826 ==========	$961,639 ==========

See note to financial statements.

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THE STANDARD REGISTER COMPANY
STATEMENT OF CASH FLOWS
(Dollars in thousands)
				Nine Months
				39 Weeks Ended
				Oct. 1,	Oct. 3,
				2000	1999
CASH FLOWS FROM OPERATING ACTIVITIES
	Net income			$16,844 ---------------	$57,788 ---------------
	Add items not affecting cash:
		Depreciation and amortization		42,654	40,091
		Gain on sale of plant assets		(1,679)	(23,252)
		Net change to investments		85	6,050
		Net change to deferred income taxes		-	(9,413)
		Net change to deferred compensation		1,946	3,190

	Increase/(decrease) in cash arising from changes in assets and liabilities:
		Accounts receivable		34,209	13,387
		Deferred accounts receivable		-	631
		Inventories		(14,231)	(829)
		Other assets		(1,297)	(4,552)
		Prepaid pension		(9,363)	(7,410)
		Accounts payable and accrued expenses		(6,743)	(6,119)
		Accrued restructuring expenses		12,925	(2,885)
		Income taxes payable		(2,941)	14,240
		Customer deposits		-	(2,875)
		Deferred service income		544 ---------------	438 ---------------
			Net adjustments	56,109 ---------------	20,692 ---------------
			Net cash provided by operating activities	72,953 ---------------	78,480 ---------------
CASH FLOWS FROM INVESTING ACTIVITIES
	Proceeds from sale of plant assets			4,435	98,149
	Additions to plant and equipment			(56,295)	(50,072)
	Acquisition			-	(10,414)
	Investment in F3/Keyfile Corporation			- ---------------	(57) ---------------
			Net cash (used in) provided by investing activities	(51,860) ---------------	37,606 ---------------
CASH FLOWS FROM FINANCING ACTIVITIES
	Payments on long-term debt			-	(30,525)
	Proceeds from issuance of common stock			366	1,565
	Redemption of common stock			1,176	(15,132)
	Dividends paid			(18,871) ---------------	(18,617) ---------------
			Net cash used in financing activities	(17,329) ---------------	(62,709) ---------------
NET INCREASE IN CASH AND
	CASH EQUIVALENTS			3,764	53,377
	Cash and cash equivalents, beginning			56,957 ---------------	9,792 ---------------
CASH AND CASH EQUIVALENTS, ENDING See note to financial statements.				$60,721 =========	$63,169 =========

THE STANDARD REGISTER COMPANY

FORM 10-Q

For the Quarter Ended October 1, 2000

d) NOTE TO FINANCIAL STATEMENTS

New Accounting Standards

In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial Statements", which provides guidance on applying generally accepted accounting principles for recognizing revenue. SAB No. 101, as amended, will become effective for the Company in the fourth quarter of fiscal year 2000. The Company is reviewing the impact of SAB No. 101 and does not believe that its adoption will have a material effect on its financial statements.

Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities", requires companies to record derivatives on the balance sheet as assets and liabilities, measured at fair value. Gains or losses resulting from changes in fair value are required to be recognized in current earnings unless specific hedging criteria are met. SFAS No. 133, as amended, will become effective for the Company beginning in the first quarter of fiscal year 2001. Due to the Company's limited use of derivatives, the impact is not expected to be material.

ITEM 2.		MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS FROM OPERATIONS

Subsequent Significant Events

On October 6, 2000, the Company announced the closing of its Dayton, Ohio business forms printing plant as part of a broad effort to align production with shifting demand for traditional forms products. One-time cash closing costs are estimated at $4 million; savings are expected to be $3.7 million annually. An additional non-cash charge of $3 million for capital assets and inventory writedowns is also anticipated. These restructuring charges will be recorded in the fourth quarter 2000 results.

Results of Operations

Net income for the third quarter ended October 1, 2000 was $8.4 million or $.31 per diluted share, compared to net income of $14.9 million and $.53 per diluted share for the third quarter 1999.

Net income through nine months ended October 1, 2000 was $16.8 million or $.62 per diluted share, compared to net income of $57.8 million and $2.03 per diluted share for the same period in 1999.

Excluding the restructuring charge taken in the first quarter of this year, net income from continuing operations for the nine months ended October 1, 2000 was $27.3 million, or $1.00 per diluted share. This result is compared to $43.4 million, or $1.53 per diluted share for the same period last year, which excludes the discontinued Communicolor operations.

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THE STANDARD REGISTER COMPANY FORM 10-Q For the Quarter Ended October 1, 2000
$ Millions - Net Income		Third Quarter --------------------------------			Nine months Y-T-D -----------------------------------
		2000	1999	Chg.	2000	1999	Chg.
Continuing Operations
	Before Restructuring	$ 8.4	$14.9	<$6.5>	$27.3	$43.4	<$16.1>
Restructuring (net of tax)					<10.5>		< 10.5>
Continuing Operations		$ 8.4	$14.9	<$6.5>	$16.8	$43.4	<$26.6>
Discontinued Operations
	(Communicolor)					14.4	< 14.4>
Total Reported		$ 8.4	$14.9	<$6.5>	$16.8	$57.8	<$41.0>

The primary factor responsible for the $6.5 million reduction in net income from continuing operations for the quarter was lower revenue in traditional business forms and related services. The effect of the lower revenue was mitigated by growth in nontraditional product categories, such as Imaging Services, lower LIFO charges than in the third quarter 1999, and lower selling, administrative and R&D expense as outlined later.

Revenue from continuing operations for the third quarter was $303.9 million, 6.8% below the $325.9 million reported for the third quarter 1999. Revenue by product is summarized below with a comparison to the prior year.

$ Millions
		Third Quarter ---------------------------------			Nine Months Y-T-D -----------------------------------
		2000 ---------	1999 ---------	% Chg. ---------	2000 ---------	1999 ---------	% Chg. ---------
Traditional business
	forms & services	$148.8	$172.8	<14%>	$464.5	$523.2	<11%>
Stanfast		45.9	48.0	< 4%>	142.6	144.6	< 1%>
Labels		42.3	42.8	< 1%>	132.7	128.2	4%
Equipment and supplies		29.2	31.3	< 7%>	87.7	103.7	<15%>
Imaging services		28.3	24.0	18%	85.4	71.2	20%
Commercial printing		8.6	6.6	30%	24.2	16.3	48%
Interest income & other		0.8 ---------	0.4 ---------	---------	2.1 ---------	1.3 ---------	---------
	Total company	303.9	$325.9	< 7%>	$939.2	$988.5	<5%>

-9-

THE STANDARD REGISTER COMPANY

FORM 10-Q

For the Quarter Ended October 1, 2000

Sales of traditional business forms and related services, representing about 50% of total revenue, were down 14% and 11% for the quarter and year-to-date periods, respectively. The factors that underlie the decline of traditional forms include the residual effect of sales attrition related to the Uarco acquisition, the impact of technology on selected product segments, and a reduction in volume from Novation as outlined in the third quarter 1999 report.

Non-traditional printed products and services, which now account for approximately 41% of Standard Register revenue, include [Stanfast] print on demand, pressure sensitive labels, [Imaging Services] print outsourcing and fulfillment, and commercial printing. Revenue from these non-traditional print product categories, taken as a whole, was up 4% and 7% for the quarter and year-to-date, respectively. Sales of equipment and supplies were lower in both the quarter and year-to-date periods, reflecting a shifting product mix with longer sales cycles and a prior year aided by Y2K related sales.

The reported gross margin from continuing operations increased from 38.1% of revenue in the third quarter 1999 to 38.9% in the current quarter. The increase in gross margin percentage is primarily attributed to a lower LIFO charge and the effects of plant closings initiated in the first quarter of the year. These favorable factors more than offset the unfavorable margin effect of lower revenue.

Management expects paper costs to rise modestly during the fourth quarter of 2000 based on announced increases. Historically, the Company has been able to recover most, if not all, of increases in paper costs and expects to continue to do so over the foreseeable future. An increase in paper prices would likely produce a modest fourth quarter LIFO charge.

Total selling, administrative, and R&D expenses were $.7 million higher than the third quarter of 1999. Two expense items were noteworthy in the quarterly comparison: a $1.8 million increase in spending on the new Smartworks.com venture and $1.3 million in consulting expense related to the strategy work that is underway. Excluding these two items, total expense was down $2.4 million, reflecting cost containment initiatives and lower revenue.

During the quarter, the Company decided to cease work on emPOWER, an enterprise wide application software initiative, The Company has successfully deployed human resources and financial modules and has significantly upgraded its technical infrastructure. Work on accounts receivable and data warehouse applications currently underway will be completed. The Company will tailor any future system investments to specific operating unit needs justified by future business plans. To date, approximately $24 million has been spent on the initiative and the remaining expenditures will bring the total to significantly less than the preliminary $52 million budget.

A strategic planning process is underway consisting of an extensive effort involving five teams that are analyzing the Company's markets, competitors, and strengths in the new economy era. The Company's board is involved in the process and is scheduled to conclude its review of management's recommendations in January 2001. Management expects to communicate an approved plan to employees, shareholders, customers and suppliers early in 2001. This process is expected to result in two separate nonrecurring charges to income which may be material, but which cannot be estimated at this time. The first charge will occur in the fourth quarter 2000 as a result of an extensive review currently underway of goodwill and other asset accounts. The second will be a restructuring charge in the first quarter of 2001 related to the implementation of the new business strategy.

-10-

THE STANDARD REGISTER COMPANY

FORM 10-Q

For the Quarter Ended October 1, 2000

Outlook

The Company anticipated its second-half 2000 operating earnings performance before restructuring and other non-operating charges to be similar to the first half of the year and below the prior year result. That continues to be the expectation as we enter the fourth quarter.

Liquidity and Capital Resources

The balance of Cash, Cash Equivalents, and Short-term Investments increased $8 million during the quarter to $61 million. Long-term debt remained at $203 million. Netting the $61 million of cash against total long-term debt of $203 million produces a "net debt" to "total net capital" ratio of 20.6%.

Capital expenditures were $ 13.0 million for the quarter. The current outlook for the year calls for capital spending in the $70 million to $75 million range.

The Company believes that its financial condition continues to be very strong and that the combination of internally generated funds, existing cash reserves, and $100 million of available credit under the revolving credit agreement will be sufficient to finance its operations over the next year.

Forward-Looking Statements

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 that could cause the Company's actual results for fiscal year 2000 and beyond to differ materially from those expressed in such forward-looking statements. Factors that 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.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

There have been no material changes in market risk since the year ended January 2, 2000.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

There have been no material legal proceedings within the reporting period that the Company has been involved with beyond those conducted in a normal course of business.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

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THE STANDARD REGISTER COMPANY

FORM 10-Q

For the Quarter Ended October 1, 2000

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

ITEM 5. OTHER INFORMATION

None.

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8K

a)	Exhibits pursuant to Item 601 of Regulation S-K
	Exhibit 27	Financial Data Schedule (filed only electronically with the SEC)
b)	Reports on Form 8K
	Form 8K was not filed within the reporting period.

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THE STANDARD REGISTER COMPANY

FORM 10-Q

For the Quarter Ended October 1, 2000

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on behalf by the undersigned thereunto duly authorized.

November 13, 2000

/S/ C. J. Brown	By C. J. Brown, Sr. Vice President-Administration, Treasurer
	and Chief Financial Officer (Chief Accounting Officer and Duly Authorized Officer of the Registrant)

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