By WTT Contributing Columnist Gail Kailing October 23, 2002 -- Standard Register (NYSE: SR) released their third quarter earnings Friday, October 18. For the quarter ending September 30, revenue was $253 million, down 9% from the same period last year. Excluding revenue from acquisitions made this year, revenue was down 12%. The gross margin improved from 33.3% last year to 39.1% this year – an increase of more than 17%. Net income for the year to date is $28.3 million compared to a net loss of $60.6 million for the same 9 month period last year. Topics in this summary of the Q3 call include: - Six Sigma initiatives - Paper price outlook - The large deals - Acquisitions - Capital expenditures, MIS systems 1. The change in margins reflected the effect of fixed costs on reduced sales volume and on pricing pressure from related economic conditions and industry oversupply. Standard Register has been able to focus on delivering their value proposition and their ability to meet the customers’ needs. While the company has not had to reduce prices aggressively, by reducing costs through more than 200 Six Sigma initiatives, Standard Register has some latitude in pricing. 2. Standard Register will continue to focus on cost reduction. Restructuring merely set a new base from which continual cost reduction and operational efficiencies will be measured. 3. There have been some paper price increases, in the small single-digit range, and these are expected to stay. While the company can pass some increases through in their contracts, it will require more "selling." Standard Register is mindful of the marketplace and the customers’ insistent drive for lower cost. 4. While sales to new customers are not what they need to be, the company is looking to both increase sales to new customers and ongoing sales to existing customers. 5. Standard Register is finding that while each customer in each industry is different, larger sales opportunities are in phases, rather than extremely large contracts. 6. The company is taking steps to better balance the pension portfolio, and move to more fixed income investments from equity investments. They still have a high percentage of equities compared to other companies. 7. Standard Register didn’t break out revenues in their report by business unit, each business unit showed some decline. That decline was a little larger in the document management group. 8. The company will continue to look at acquisitions as one technique to implement the corporate strategy as a full service solutions provider. Any opportunity to add talent, technology or capabilities that can be achieved more quickly by an acquisition will be considered. 9. The company has few capital expenditures planned for the near future, other than possibly investing in MIS systems and customer-facing capabilities. Standard Register is also looking to "verticalize" the InSystems solutions to move into banking and financial services from insurance. However, such development will be an expense rather than capital investment.