Standard Register Reports 3Q Results And Reaffirms Fourth-Quarter Target
Monday, October 22, 2001
DAYTON, Ohio--Oct. 19, 2001--Standard Register today reported results for the 2001 third quarter ended September 30, 2001. With the completion of its restructuring activities, the company also reaffirmed its earnings target for the fourth quarter. During 2001, the company proactively exited low-margin business in a portfolio-management effort, with the expectation of achieving an annualized revenue run rate of approximately $1 billion by the end of the year versus its fiscal 2000 revenues of $1.3 billion. "Our third-quarter revenues of $255.4 million were in line with the level we targeted for a 2001 fourth-quarter exit rate,'' said Dennis Rediker, chief executive officer, "but were weaker than expected for this quarter. The sales shortfall, along with productivity challenges associated with the restructuring and training activities in our plants, and unusual items such as responding to extraordinary customer needs in the wake of the September 11 crisis, negatively impacted our bottom line in the quarter.'' Net income in the fiscal 2001 third quarter, excluding restructuring charges, was $1.7 million or $0.06 per diluted share. Approximately $10.5 million in pre-tax expenses in the quarter are judged by management to be nonrecurring, as they relate to the completion of the major phase of the sales force automation project, expenses at operations now closed, and various other items. Excluding those would produce proforma quarterly earnings of $8.0 million or $0.29 per share, before restructuring charges. Restructuring charges in the quarter reduced net income by $3.1 million, producing a net loss for the quarter of $1.4 million. For the fiscal 2000 third quarter, the company reported net income of $8.4 million or $0.31 per diluted share. "As planned, in the first three quarters of fiscal 2001 we focused on restructuring and reorganizing in order to strengthen the company for the long term,'' Rediker said. "We did what we set out to do. "Over the past nine months we reduced headcount by about 2,400 and our manufacturing footprint by about 30 percent. This was part of our effort to exit certain business and focus the company on more profitable business and growth markets going forward. While this negatively impacted our earnings, we are confident it was the right thing to do for long-term shareholder-value creation. "We also began the performance and growth phases of our renewal plan to begin building for the future. We continued our investments in Six Sigma; by the end of October 2001, our dedicated Six Sigma team will have about 50 projects underway to drive major improvements in quality, productivity and service at Standard Register. We invested in Customer Relationship Management and target-account-selling tools and training to strengthen the productivity of our sales force. And we increased our investments in research and development by nearly 40 percent to help ensure we have a continuous stream of innovative solutions for our customers. We expect the payoff from these investments to be significant long term in strengthening our competitive advantage and our financial performance.'' The company's operations added $78 million to cash reserves since the beginning of the year despite the significant expenditures for investments and restructuring. The company had $135 million in cash at the end of September and a net debt to capital ratio of just 14 percent. "Standard Register is financially strong,'' Rediker said. "Our cash reserves and robust free cash flow will enable us to fund strategic acquisitions as well as additional initiatives for growth and operational excellence. "With our restructuring and reorganization phases now complete, we are energized and moving forward with initiatives for long-term growth and performance improvement.'' For the fiscal 2001 fourth quarter, Standard Register continues to target earnings of $0.45 per share, excluding restructuring charges. "While there could be some deterioration in business as a result of the weakening economy, we also are encouraged by the solid pipeline of business we have seen in recent weeks,'' Rediker said. "For example, we recently signed several multi-million-dollar contracts. With these indicators and the expected cost savings from restructuring, we continue to believe that we are well positioned to achieve our fourth-quarter target. However, with low visibility on how the economy will play out in 2002, we will wait until after the fourth quarter to provide guidance for fiscal 2002 performance.''