Standard Register (NYSE: SR) reported first quarter revenues of $226.1 million down 4% from $236.1 million for the same period last year. Earnings per share in the first quarter represented a net loss of $0.23 per share and an overall net loss of $6.5 million. The company reported earnings in the quarter were negatively affected by pricing pressure, high pension expenses and restructuring charges.

Topics of the summary:

  • Overall Performance
  • Guidance
  • Q & A
  • Observations

Overall Performance

Some of the financial highlights discussed on the call included:

  • Net loss of $0.23 per share, reflecting $6.5 million in quarterly losses
  • Restructuring expenses in quarter accounted for $3.4 million in pretax expense, equivalent to $0.07 per share
  • Pension expense represented $0.13 in the quarter
  • Cost of Sales declined to $142.5 million from $147.6 in same period last year
  • Gross margin declined from $88.5 million to $83.5; a 6% decline between 2003 and 2004
  • Working capital was $124 million, and debt was $125 million


The company has accelerated efforts to improve traditional business segment revenues. They are also looking for new opportunities in print on demand. They are targeting a revenue increase for all of 2004 while driving costs down via lean manufacturing. They hope to maintain control over pension contributions.

Recent actions taken to accelerate revenue are the creation of an inside sales group, establishing new channel partners like Seibel and Accenture; and their new digital pen and paper offering. They also are migrating many existing accounts to digital processes. They believe they are on the right track to improve 2004 results.

Q & A

  1. It is expected that the pension contribution of $6.2 million for quarter will be taxed at normal rates. SR should continue a contribution rate of $6million per quarter.
  2. Cash flow operations in Q1 $8.7 million.
  3. Working capital has experienced extreme pressure due to inventory increases in healthcare products and a natural increase in receivables. It is hoped that the company can improve collections.
  4. New technology initiatives like print on demand and digital pen and paper are starting to show real promise and should positively impact future results.
  5. The pricing pressure today versus 12-16 months ago is about the same. There has been no significant change. The company is focusing on cost reductions to offset weak pricing. Oversupply and aggressive competition is not abating.
  6. SR is starting to see paper pricing go up. Hopefully company will be able to recover these costs going forward.
  7. Restructuring charges in Q1 was under $1 million. These were mostly from old leases and other misc. items.

Editor's Note: Standard Register remains bullish on its future. Management believes their prospects in traditional label and document management segments are where they can play best. SR has been successful in securing many new contracts in the healthcare, insurance and banking markets in the latter part of 2003 that will positively impact growth in 2004. They are confident they are well positioned to take advantage of increased sales for Print on Demand work. SR continues to monitor the lean manufacturing initiative to insure higher productivity. The caveat is that they are doing the same thing the competition is doing. We're concerned that they do not have enough differentiation to produce the margins necessary to sustain the company in the long term.