Standard Register Increased Profits in Third Quarter
Monday, November 01, 2010
Press release from the issuing company
Read Cary Sherburne's Commentary regarding this announcement
DAYTON, Ohio - Standard Register today announced its financial results for the third quarter, which ended October 3, 2010. For the quarter, the Company reported revenue of $163.6 million and a net profit of $1.4 million, or $0.05 per share. The third quarter results compare to last year's revenue of $163.5 million and a net loss of $5.5 million, or $0.19 per share, which included $10.6 million, or $0.22 per share after tax, of restructuring expense primarily related to the MyC3 strategic earnings improvement initiative announced during the quarter. Through the first nine months, the Company reported revenue of $495.7 million and a net profit of $0.5 million, or $0.02 per share. The first nine-month results compare to last year's revenue of $509.2 million and a net loss of $13.3 million, or $0.46 per share, which in addition to the MyC3 restructuring incurred during the quarter, included pension settlement charges of $20.4 million, or $0.43 per share after tax.
Results from Operations
The Company posted its sixth consecutive quarter of stabilizing revenue trends resulting in growth for the quarter of $0.1 million, net income of $1.4 million, and positive cash flow of $7.7 million when measured from a non-GAAP net debt basis.
"Returning the Company to growth has been a principal objective of our turnaround," stated Joseph Morgan, president and chief executive officer. "Revenue, profits and cash flow are the key metrics that we use internally to measure our progress. To see all three metrics move in a positive direction during the quarter provides validation that our strategy is working."
Healthcare rebounded from the prior quarter posting one percent revenue growth over the prior year third quarter with solid growth in patient communications, wristbands and labels, and workflow solutions. The Industrial market segment continues to show steady growth of twelve percent over the prior year, primarily due to continued but moderating economic recovery within its manufacturing customer base, growth from new customers in both our Mexico and domestic operations and new revenues from in-mold labeling solutions. Within our Commercial business unit, Financial Services continued to reduce their revenue declines by bringing on new customers, although not overcoming continued challenges in technology automation and other printed product unit declines. Only the Emerging market segment showed signs of weakening revenue trends as the Company intentionally began balancing the pursuit of unit growth in a highly commoditized and aggressively priced product categories against improving overall profitability within the segment. Across all business units, we experienced double-digit growth within our marketing solutions.
Gross margin as a percent of revenue was 31.7 for the quarter versus 32.5 in the prior year. LIFO inventory adjustments continue to be the major difference between the two periods as a favorable $0.7 million was recorded for the current period versus a favorable $2.3 million for the same period last year. Through nine months, gross margin was identical between the two years at 31.7 percent of revenue with LIFO at $2.6 million favorable for the current year, versus $3.0 million favorable for the prior year. The cost containment portions of the MyC3 initiative, announced last year, allowed the Company to maintain the gross margin from operations despite lower revenue units.
Selling, general and administrative (SG&A) expenses were reduced $1.6 million during the quarter as MyC3 savings begin to offset planned investments in technology, materials science, and key expertise to support our market development. On a year-to-date basis, SG&A expenses are up $2.9 million relative to the prior year.
Net income for the quarter was $1.4 million, or $0.05 per share, compared with a loss of $5.5 million, or $0.19 per share for the prior year quarter. Adjusting for pension loss amortization, pension settlement losses and restructuring and impairment charges, non-GAAP adjusted net income was $4.2 million, or $0.15 per share for the third quarter of 2010, compared with non-GAAP adjusted net income of $3.4 million, or $0.11 per share for the prior year quarter. On a year-to-date basis, net income of $0.5 million, or $0.02 per share compared with a net loss of $13.3 million, or $0.46 per share for the prior year. Adjusting for pension loss amortization, pension settlement losses and restructuring and impairment charges, non-GAAP adjusted net income was $9.8 million, or $0.34 per share compared with non-GAAP adjusted net income of $13.1 million, or $0.46 per share for the prior year.
Capital expenditures were $12.8 million through the first nine months using a combination of $6.5 million in cash and $6.3 million through operating and capital lease agreements. In addition, the Company purchased the assets of Fusion Graphics, Inc. for $2.5 million during the second quarter. Capital expenditures are expected to end the year in the $15-17 million range. Pension funding was $17.7 million through the first nine months with an additional $7.6 million planned for the fourth quarter. Although positive during the quarter, non-GAAP cash on a net debt basis was $3.2 million negative for the first nine months.
On Thursday, October 28, 2010, Standard Register's board of directors declared a quarterly dividend of $0.05 per share payable on December 10, 2010, to shareholders of record as of November 26, 2010. The board will consider future dividend payments on a quarter-by-quarter basis in accordance with its normal practice.
Standard Register's President and Chief Executive Officer Joe Morgan and Chief Financial Officer Bob Ginnan will host a conference call at 10:00 a.m. EDT on October 29, 2010, to review the third quarter results. The call can be accessed via an audio web cast accessible at: http://www.standardregister.com/investorcenter.
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