By Trevor Shackelford May 16, 2006 -- Standard Register, (NYSE: SR) announced their first quarter results recently. Standard Register reported first quarter revenue of $231.7 million, which was essentially flat compared to $232 million reported for the same period last year. Pre-tax income, excluding restructuring and impairment costs was $5.9 million compared to $5 million during the first quarter last year. Excluding special charges, earnings per share improved to $0.11 per share, compared to $0.09 per share reported last year. Gross margin was $84 million (or 36.3% of revenue), up $2.2 million, compared to $81.8 (or 35.3% of revenue) last year. Gross margin has now steadily increased for seven consecutive quarters. Net profit was $1.4 million compared to $2.2 million in the same period last year. Contents of this Summary * Quarter Highlights * Segment Performance * Guidance * Raine Radar * Q & A Quarter Highlights • Operating profit fell to $3.0 million from $3.9 million last year. • SG&A expenses for the quarter was $69.3 million, compared to $66.6 million reported for the same period in 2005. • Depreciation was $8.8 million, down $1.4 million, compared to $10.2 million reported for the same period in 2005. • The company had a debt ratio of 17%, compared to 15.4% at the beginning of Q1 2005, and 16.2% two years ago. • Net debt outstanding at the end of fourth quarter was $31.9 million. • During the year, the company funded $1.5 million in pension contributions and $2.9 million in restructuring costs. • The company’s debt to total capital ratio was 15.3%. Segment Performance Document and Label Solutions The company reported Q1 revenues for the segment of $148.4 million, down 2.0%. The company has announced plans to open up a new label facility in Monterrey, Mexico to better service their customers and take advantage of the growth opportunities in the label printing industry. Print-On-Demand Services (POD) The company reported revenues of $65.2 million for the quarter, up 5.1%. The company is expecting for this to turn around in the Q2 due to new contract with Hewlett Packard. The deal is mainly for services and technology, which should mean a low start up cost for Standard Register. The company will also be acting as Hewlett Packard’s supply chain manager. InSystems The segment reported Q1 revenues of $3.0 million, up 16.6%. This increase is largely due to the strength of a larger number of software licenses. Digital Solutions The company reported revenues for the segment of only $100,000 compared to $0.5 million the prior quarter. Other Revenue for this segment, which is primarily commercial printing, was up 15% to $8.8 million in the first quarter this year. Guidance The company did not post any specific earnings per share guidance, but expects modest revenue growth for the full fiscal year 2006 on the strength of its enterprise document management and print supply chain services initiatives. The company projected total capital expenditures of $25-27 million and depreciation of $30 million for the year 2006. Raine Radar Typically relying very heavily on highly seasonal label and document work, Standard Register is struggling to become a major player in POD and supply chain services to compete with companies like Banta. The HP account may end up being a major test for the company, and if the company is successful in mastering the complexities of this account, the business could see some substantial future growth. President and CEO Dennis Rediker says that their strategic direction is gaining traction and paving the way to make Standard Register an industry leader once again. That may come to pass, but the company still has many challenges ahead. Q & A 1. The rollout of New York State’s prescription program was successful. 2. The company successfully renewed a $110 million agreement with Med Assets for the next three years. 3. The company announced plans to open a new label printing facility in Monterrey, Mexico. 4. Rediker sees many growth opportunities in the label printing industry and digital print on demand (POD). 5. Total Net Earnings were dampened because of restructuring and impairment costs totaling $2.9 million, primarily from the closing of their Terre Haute, IN facility. 6. Standard Register’s board of directors declared a quarterly dividend of $.023 per share to be paid on June 9, 2006, to shareholders of record as of May 26, 2006. 7. Rediker stated, “We are encouraged by the good start to the year. In addition, recent new contract signings are expected to help our top-line in 2006 and offset the continuing pressure on the price of traditional products. Our guidance for 2006 remains unchanged – modest revenue growth for the whole of the year.”