STANDARD REGISTER CO, 10-Q, 2000-08-15

STANDARD REGISTER CO
10-Q, 2000-08-15
MANIFOLD BUSINESS FORMS

Previous: SPRINGS INDUSTRIES INC, 10-Q, EX-27, 2000-08-15

Next: STANDARD REGISTER CO, 10-Q, EX-27, 2000-08-15

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 July 2, 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

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

Common stock, $1.00 par value

Class A stock, $1.00 par value

Outstanding as of July 31, 2000

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

22,653,054 shares

4,725,000 shares

THE STANDARD REGISTER COMPANY

FORM 10-Q

For the Quarter Ended July 2, 2000

INDEX

	Page
Part I - Financial Information


	Item 1. Financial Statements


a)	Statement of Income
	for the 13 Weeks Ended July 2, 2000 and July 4, 1999 and
	for the 26 Weeks Ended July 2, 2000 and July 4, 1999	4

b)	Balance Sheet
	as of July 2, 2000 and July 4, 1999	5-6

c)	Statement of Cash Flows
	for the 26 Weeks Ended July 2, 2000 and July 4, 1999	7

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	12

	Item 2. Changes in Securities and Use of Proceeds	12

	Item 3. Defaults upon Senior Securities	12

	Item 4. Submission of Matters to a Vote of Security Holders	12-13

	Item 5. Other Information	13

	Item 6. Exhibits and Reports on Form 8-K	13

Signature

THE STANDARD REGISTER COMPANY

STATEMENT OF INCOME
(Dollars in thousands, except per share amounts)
			Second Quarter 13 Weeks Ended		Six Months 26 Weeks Ended
			Second Quarter 13 Weeks Ended		Six Months 26 Weeks Ended
			July 2,	July 4,	July 2,	July 4,
			2000 -----------	1999 -----------	2000 -----------	1999 -----------
TOTAL REVENUE			$321,081 -----------	$335,637 -----------	$635,322 -----------	$662,623 -----------
COSTS AND EXPENSES
	Cost of products sold		197,897	205,479	391,980	404,370
	Engineering and research		2,834	2,153	5,273	4,113
	Selling and administrative		85,848	86,962	172,101	174,271
	Depreciation and amortization		13,890	12,841	28,222	25,053
	Interest		3,214	3,522	6,359	7,006
	Restructuring		- -----------	- -----------	17,200 -----------	- -----------
		Total costs and expenses	303,683 -----------	310,957 -----------	621,135 -----------	614,813 -----------
INCOME BEFORE INCOME TAXES			17,398	24,680	14,187	47,810
Income taxes			6,995 -----------	9,901 -----------	5,699 -----------	19,327 -----------
Income from continuing operations			10,403 -----------	14,779 -----------	8,488 -----------	28,483 -----------
Discontinued operations:
(Loss), net of tax benefit			0	0	0	(509)
Gain on disposal, net of tax			0 -----------	1,116 -----------	0 -----------	14,875 -----------
NET INCOME			$10,403 ======	$15,895 ======	$8,488 ======	$42,849 ======
Average number of shares outstanding - basic			27,366	28,140	27,358	28,266
Average number of shares outstanding - diluted			27,366	28,271	27,358	28,419

EARNINGS PER SHARE DATA - BASIC:
	Income from continuing operations		$0.38	$0.53	$0.31	$1.01
	Discontinued operations, current year (loss)/income		$0.00	$0.00	$0.00	($0.02)
	Gain on disposal		$0.00	$0.04	$0.00	$0.53
		Net income	$0.38	$0.57	$0.31	$1.52
EARNINGS PER SHARE DATA - DILUTED:
	Income from continuing operations		$0.38	$0.52	$0.31	$1.00
	Discontinued operations, current year (loss)/income		$0.00	$0.00	$0.00	($0.02)
	Gain on disposal		$0.00	$0.04	$0.00	$0.52
		Net income	$0.38	$0.56	$0.31	$1.50

Dividends paid per share			$0.23	$0.22	$0.46	$0.44

THE STANDARD REGISTER COMPANY

BALANCE SHEET
(Dollars in thousands)



			July 2,	Jan. 2,
A S S E T S			2000 ------------	2000 ------------
CURRENT ASSETS
	Cash and cash equivalents		$52,254	$56,957
	Short-term investments		295	380
	Accounts receivable		250,450	265,482
		Allowance for losses	(11,094)	(3,477)
	Inventories
		Finished products	112,755	101,717
		Jobs in process	12,962	18,321
		Materials and supplies	10,773	11,716
	Prepaid income taxes		6,177	1,448
	Deferred income taxes		13,720	13,720
	Prepaid expense		13,902 ------------	11,316 ------------
		Total current assets	462,194 ------------	477,580 ------------
PLANT AND EQUIPMENT
	Buildings and improvements		102,296	89,528
	Machinery and equipment		341,569	242,641
	Office equipment		140,581 ------------	100,614 ------------
		Total	584,446	432,783
	Less accumulated depreciation		299,106 ------------	161,849 ------------
		Depreciated cost	285,340	270,934
	Construction in process		50,277	46,966
	Land		10,243 ------------	10,243 ------------
		Total plant and equipment	345,860 ------------	328,143 ------------
OTHER ASSETS
	Goodwill		50,134	52,140
	Prepaid pension expense		94,435	88,111
	Other		17,977 ------------	15,665 ------------
		Total other assets	162,546 ------------	155,916 ------------
		Total assets	$970,600 =======	$961,639 =======

THE STANDARD REGISTER COMPANY

BALANCE SHEET
(Dollars in thousands)
						July 2, 2000 -----------		Jan. 2, 2000 -----------
				LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
	Current portion of long-term debt				$	590	$	-
	Accounts payable					32,080		38,356
	Dividends payable					-		6,302
	Accrued compensation					41,246		38,672
	Accrued other expense					8,536		11,450
	Accrued taxes, except income					8,497		7,452
	Customer deposits					263		263
	Deferred service contract income					7,615		7,892
	Accrued restructuring					20,030 -----------		3,550 -----------
		Total current liabilities				118,857		113,937

LONG-TERM LIABILITIES
	Long-term debt					202,930		203,520
	Deferred compensation					9,602		7,709
	Retiree healthcare					54,164		54,164
	Deferred income taxes					40,578 -----------		40,578 -----------
		Total long-term liabilities				307,274		305,971

SHAREHOLDERS' EQUITY
	Common stock, $1.00 par value
		24,498,935 shares issued				24,499
		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					35,782		35,669
	Accumulated other comprehensive losses					(417)		(417)
	Retained earnings					528,047		525,835
	Treasury stock, at cost
		1,748,082 shares				(45,364)
		1,793,395 shares						(46,540)
	Common stock held in grantor trust, at cost
		101,680 shares at cost				(2,803)
		59,697 shares at cost				-----------		(2,009) -----------
			Total shareholders' equity			544,469 -----------		541,731 -----------
			Total liabilities and shareholders' equity			$970,600 =======		$961,639 =======

THE STANDARD REGISTER COMPANY
STATEMENT OF CASH FLOWS
(Dollars in thousands)
				Six Months 26 Weeks Ended

				July 2, 2000 -------------	July 4, 1999 -------------

CASH FLOWS FROM OPERATING ACTIVITIES
	Net income			$ 8,488 -------------	$ 42,849 -------------
	Add items not affecting cash:
		Depreciation and amortization		28,222	26,794
		Gain on sale of plant assets		(896)	(23,087)
		Net change to investments		85	6,050
		Net change to deferred income taxes		-	(9,413)
		Net change to deferred compensation		1,893	2,380

	Increase/(decrease) in cash arising from changes in assets and liabilities:
		Accounts receivable		22,649	6,088
		Deferred accounts receivable		-	631
		Inventories		(4,736)	617
		Other assets		(4,897)	(6,848)
		Prepaid pension		(6,324)	(2,888)
		Accounts payable and accrued expenses		(5,571)	(19,644)
		Accrued restructuring expenses		16,480	(1,683)
		Income taxes payable		(4,729)	19,186
		Customer deposits		-	(2,875)
		Deferred service income		(277) -------------	331 -------------
			Net adjustments	41,899 -------------	(4,361) -------------
			Net cash provided by operating activities	50,387 -------------	38,488 -------------
CASH FLOWS FROM INVESTING ACTIVITIES
	Proceeds from sale of plant assets			230	98,029
	Additions to plant and equipment			(43,268)	(36,527)
	Acquisition			-	(10,413)
	Investment in F3/Keyfile Corporation			- -------------	(59) -------------
			Net cash provided by (used in) investing activities	(43,038) -------------	51,030 -------------
CASH FLOWS FROM FINANCING ACTIVITIES
	Payments on long-term debt			-	(30,525)
	Proceeds from issuance of common stock			144	1,279
	Redemption of common stock			382	(9,617)
	Dividends paid			(12,578) -------------	(12,454) -------------
		Net cash used in financing activities		(12,052) -------------	(51,317) -------------

NET (DECREASE) INCREASE IN CASH AND
	CASH EQUIVALENTS			(4,703)	38,201
	Cash and cash equivalents, beginning			56,957 -------------	9,792 -------------
CASH AND CASH EQUIVALENTS, ENDING				$ 52,254 ========	$ 47,993 =======

THE STANDARD REGISTER COMPANY

FORM 10-Q

For the Quarter Ended July 2, 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.

THE STANDARD REGISTER COMPANY

FORM 10-Q

For the Quarter Ended July 2, 2000

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

AND RESULTS FROM OPERATIONS

Significant Events

On April 28, 2000, the Company announced the closing of its Toccoa, Georgia forms printing plant. The plant's adjacent supply chain service center will remain in operation as Standard Register increases utilization of the center's customer order entry and document design services. Closing costs, other than severance, were included in the first quarter 2000 restructuring charge.

On May 1, 2000, Dennis L. Rediker, former chief executive officer of English China Clays plc and a Standard Register Board member for five years was named chief executive officer, effective June 2, 2000. Mr. Rediker replaced Peter S. Redding who retired from the Company and the Board of Directors.

On June 6, 2000, Standard Register launched SMARTworks.com, Inc. SMARTworks.com, Inc. provides the printing industry's first supplier-independent open platform for e-procurement and integrated document management. SMARTworks.com operates as an Application Service Provider (ASP) of SMARTworks®, which it markets through its network of channel partners. SMARTworks.com Inc. is a wholly-owned subsidiary of Standard Register.

Results of Operations

Net income for the second quarter ended July 2, 2000 was $10.4 million or $.38 per diluted share, compared to net income of $15.9 million and $.56 per diluted share for the second quarter 1999. On a continuing operations basis, excluding the Communicolor direct mail division that was sold in the first quarter of 1999, the $.38 per diluted share result for the current quarter compared to $.52 for the same quarter of 1999.

Net income through six months ended July 2, 2000 was $8.5 million or $.31 per diluted share, compared to net income of $42.8 million and $1.50 per diluted share for the same period in 1999.

Excluding the restructuring charge taken in the first quarter of this year and discontinued Communicolor operations, net income from continuing operations for the six months ended July 2, 2000 was $18.7 million, or $.68 per diluted share compared to $28.5 million, or $1.00 per diluted share for the same period last year.

$ Millions - Net Income	Second Quarter			Six Months Y-T-D
	2000 -------	1999 -------	Chg. --------	2000 --------	1999 --------	Chg. ---------
Continuing Operations
Before Restructuring	$10.4	$14.8	<$4.4>	$18.7	$28.5	<$9.8>
Restructuring (net of tax)	-------	-------	---------	<10.2> ---------	--------	<10.2> ---------
Continuing Operations	$10.4	$14.8	<$4.4>	$ 8.5	$28.5	<20.0>
Discontinued Operations
(Communicolor)	-------	1.1 -------	<1.1> --------	---------	14.3 --------	<14.3> ---------
Total Reported	$10.4	$15.9	<5.5>	$ 8.5	$42.8	<34.3>

Two factors were primarily responsible for the $4.4 million reduction in net income from continuing operations for the quarter: lower revenue in business forms and related services and the new software initiative described in the third quarter 1999 report. These unfavorable factors were mitigated by growth in nontraditional product categories, such as pressure sensitive labels and Imaging Services, and lower selling, administrative and R&D expense.

Revenue from continuing operations for the second quarter was $321.1 million, 4.3% below the $335.6 million reported for the second quarter 1999. Revenue by product is summarized below with a comparison to the prior year.

$ Millions		Second Quarter			Six Months Y-T-D
		2000 --------	1999 --------	%Chg. ---------	2000 --------	1999 --------	% Chg. --------
Business forms & services		$156.9	$178.8	<12.2%>	$315.7	$350.4	<9.9%>
Stanfast		50.6	48.8	3.7%	96.7	96.6	0.1%
Labels		45.9	44.4	3.4%	90.4	85.4	5.9%
Equipment and Supplies		29.6	33.0	<10.3%>	58.5	72.4	<19.2%>
Imaging Services		29.8	23.8	25.2%	57.1	47.2	21.0%
Commercial Printing		7.6	6.2	22.6%	15.6	9.7	60.8%
Interest Income & Other		0.7 --------	0.6 --------	----------	1.3 ----------	0.9 ----------	----------
	Total Company	$321.1	$335.6	<4.3%>	$635.3	$662.6	<4.1%>

Sales of traditional business forms and related services were down 12.2% and 9.9% for the quarter and year-to-date periods, respectively. The factors that underlie the decline of traditional forms include residual sales attrition related to the Uarco acquisition, impact of technology on selected product segments, and cost reductions initiatives in the healthcare market.

Non-traditional products and services, which now account for approximately 50% of Standard Register revenue, include pressure sensitive labels, [Stanfast] print on demand, document systems, commercial printing, and [Imaging Services] print outsourcing and fulfillment. Revenue from these non-traditional product categories, taken as a whole, was up 4.7% and 2.4% for the quarter and year-to-date, respectively. Equipment and Supplies revenue, although well below 1999 levels which were fueled by Y2K replacement demand, showed an 8.4% increase over the first quarter of this year. Excluding Equipment and Supplies, non-traditional revenue grew 8.7% for both the quarter and year-to-date.

Total revenue in the second half of the year is expected to approximate that for the first half.

The reported gross margin from continuing operations decreased from 38.8% of revenue in the second quarter 1999 to 38.4% in the current quarter. The slight decrease in gross margin percentage is primarily attributed to the $14.5 million reduction in revenue identified above. For the first six months ended in 2000, gross margin from continuing operations decreased from 39.0% in 1999 to 38.3% in the current year. As a result of rising paper prices, there was an unfavorable LIFO inventory charge in the first quarter, 2000 of $2.1 million pretax. By comparison, there was no adjustment in the prior year. Adjusting for the non-operating LIFO

adjustment results in a year-to-year gross margin decrease of forty basis points in relation to revenue.

Management expects paper costs to rise modestly during the second half of 2000 based on relatively high mill operating rates. 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. The current year LIFO charge may increase in the fourth quarter based on the anticipated paper price increase discussed above.

Total selling, administrative, and R&D expenses were $.4 million lower than the second quarter of 1999. Spending for the new software initiative that was outlined in the third quarter 1999 report in the amount of $3.8 million and increased investment in SMARTworks.com, Inc. of $.6 million was partially offset by a decrease of $1.9 million for Year 2000 (Y2K) spending in the second quarter of 1999. After adjusting for the new software initiative in 2000, investment in SMARTworks(R), and Y2K expenses in 1999, total selling, administrative, and R&D expenses were under the same period in 1999 by $2.9 million. This reduction is primarily attributable to cost reduction activities, lower Information Management cost as resources are dedicated to the new software initiative, and lower revenue.

A Corporate Strategy Review, scheduled for completion by year-end 2000, has been undertaken. The process will add $2 - $3 million of expense in the second half of 2000.

Total Selling, Administrative and R&D expenses are expected to be slightly higher in the second half of the year due to increased spending for the launch of SMARTworks.com, Inc. and the strategy project discussed above. These additional expenses should be partially offset by decreased spending in the software project versus the first half of the year.

Management plans to evaluate the Company's capacity utilization during the second half of the year. This, coupled with the outcome of the strategy review, may result in additional restructuring actions.

Liquidity and Capital Resources

The balance of Cash, Cash Equivalents, and Short-term Investments decreased $9 million during the quarter to $53 million. Long-term debt remained at $203 million. Netting the $53 million of cash against total long-term debt of $203 million produces a "net debt" to "total net capital" ratio of 21.6%.

Capital expenditures were $ 21.6 million for the quarter. The current outlook for the year calls for capital spending in the $75 million to $80 million range.

THE STANDARD REGISTER COMPANY

FORM 10-Q

For the Quarter Ended July 2, 2000

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.

THE STANDARD REGISTER COMPANY

FORM 10-Q

For the Quarter Ended July 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

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

The Company's Annual Meeting of Shareholders was held April 19, 2000.

Following is the result of voting by the Shareholders regarding fixing and determining the number of Directors to be nine:

IN FAVOR

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

44,705,154

OPPOSED

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

67,960

ABSTAINED

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

43,153

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.	44,693,502	122,765
F. David Clarke, III	44,649,754	166,513
Paul H. Granzow	44,702,226	114,041
Graeme G. Keeping	44,700,291	115,976
Peter S. Redding	44,648,493	167,774
Dennis L. Rediker	44,698,298	117,969
Ann Scavullo	44,700,565	115,702
John J. Schiff, Jr.	42,766,913	2,049,354
John Q. Sherman, II	44,539,303	276,964

THE STANDARD REGISTER COMPANY

FORM 10-Q

For the Quarter Ended July 2, 2000

An amendment to the Code of Regulations to permit alternative methods of proxy voting and shareholder communications and to allow such communication to be by mail, electronic, facsimile or telephone means, or by such other means deemed necessary by the Board of Directors to be sufficiently secure and reliable, was approved as a result of the following vote:

IN FAVOR

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

44,650,014

OPPOSED

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

50,066

ABSTAINED

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

116,187

Following is the result of voting by the Shareholders regarding selection of Battelle & Battelle LLP as the Company's Auditors for the year 2000:

IN FAVOR

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

44,707,976

OPPOSED

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

74,461

ABSTAINED

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

33,830

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.

THE STANDARD REGISTER COMPANY

FORM 10-Q

For the Quarter Ended July 2, 2000

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.

August 15, 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)