DAYTON, Ohio--Oct. 22, 2004-- Standard Register today reported financial results for the 2004 third quarter ended September 26, 2004. Third Quarter Results of Operations Revenue for the third quarter was $218.7 million, compared to $222.1 million in 2003. Through nine months, revenue was $671.3 million, versus $691.2 million for the comparable period of 2003. "The quarter's revenue reflects a continuation of a relatively stable sales pattern established over the preceding four quarters that breaks markedly from the declining revenue trend of earlier periods," said Dennis Rediker, Standard Register's CEO. "Our third quarter revenue is traditionally the lowest of the year as a result of seasonal buying factors, while the fourth quarter is typically our strongest, and we expect that pattern to repeat this year. This view is reinforced by solid increases in our production backlogs during the third quarter." The Company also reported lower manufacturing and SG&A costs in the quarter and undertook new restructuring initiatives aimed at improving operating margins during the coming quarters. "Given our industry dynamics, we must continue to make productivity gains in order to remain competitive and improve our profitability and cash flow," said Rediker. During the quarter, the Company restructured its InSystems subsidiary, a provider of software applications for the automation of document intensive business processes. The subsidiary, acquired in July 2002, had experienced significant declines in its revenue and margins in recent periods and management elected to reduce costs and refocus attention on InSystems' key product lines. A pre-tax restructuring charge of $2.6 million was reported in the quarter and on-going cost savings are estimated at $4.0 million per year. In conjunction with the InSystems' restructuring, the Company recorded an asset impairment charge of $47.1 million to adjust the carrying value of the business. The non-cash charge, which eliminated InSystems' goodwill, was the product of a more modest growth forecast for the restructured business and a substantial reduction in prevailing market valuation multiples for software companies. The Company eliminated positions during the quarter at its headquarters and field operating units to reduce management layers and improve productivity. Pre-tax restructuring costs in the quarter were $3.8 million and on-going annual savings from these actions are estimated to be approximately $11 million. The $12.1 million in pre-tax restructuring costs incurred thus far in 2004 are estimated to produce annual savings of approximately $28 million. The net loss reported for the quarter was $34.5 million or $1.21 per share, compared to a loss of $1.6 million or $0.05 per share in the prior year. The year-to-date loss was $43.6 million or $1.53 per share, versus a loss of $14.7 million or $0.52 last year. The quarter and year-to-date results were significantly impacted by the restructuring and asset impairment charges. Higher pension costs have also adversely impacted the comparative results. Pension expense through nine months was approximately twice the level of the prior year. The significant increase relates primarily to weak stock market results in 2001 and 2002 that created actuarial losses being amortized over subsequent years. The effect of those items is illustrated in the table below. Operating margins were down slightly in the current quarter, as modestly higher unit sales and lower manufacturing and SG&A costs were overshadowed by lower average selling prices. Material costs were also higher in the quarter, reflecting paper price hikes in April and July of this year. A third increase is slated to go into effect in October, which reflects strengthened operating rates at paper mills. Despite the challenging price environment, the Company has raised its target selling prices in response to these cost increases. "Although we cannot guarantee success, the Company has generally been successful in the past in recovering industry-wide paper cost increases. Recovery ordinarily lags each increase by several quarters, however," said Rediker. Cash flow was positive in the quarter and the Company paid down debt. At quarter end, total debt was $85.0 million and cash was $17.4 million, representing a net debt position of $67.6 million. This compares to a net debt position at the end of June of $74.4 million, indicating positive cash flow in the quarter of $6.8 million. Over the past four quarters, excluding spending and asset sales related to the restructuring actions, the Company has generated $2.5 million of net positive cash flow after satisfying expenditures for pension funding, capital expenditures and dividends. Outlook At the end of the first half of 2004, the Company announced an objective to improve its cost and expense ratios over the next several quarters by a total of five percentage points in relation to revenue. "We have made good progress against this goal and if we are successful in recovering paper costs, we expect to achieve this objective by the second half 2005," said Rediker.