Standard Register Reports 2Q, Prepares to Enter 2002 Smaller, But More Profitable
Press release from the issuing company
DAYTON, Ohio- July 19, 2001--Standard Register said today it is nearing the end of the restructuring phase of its Renewal Plan and that the Company has made significant investments for productivity improvements and future growth.
In addition, the Company announced second quarter 2001 revenue of $295 million and net income of $2 million, or $0.07 per share.
"We are beginning to draw the restructuring to a close,'' said Standard Register CEO Dennis Rediker, referring to the Renewal Plan announced by the Company on January 25. "By the end of the third quarter, we anticipate that we will have substantially completed the reductions in personnel and capacity.''
To date, 21 production facilities have been closed and the workforce has been reduced by more than 1600 people. In addition, 110 of the Company's 227 sales offices and 21 of 77 warehouses have been closed. Standard Register had previously announced that it would reduce its workforce by 2,400 people and reduce manufacturing capacity by 30 percent. According to Rediker, the Company believes these reductions, once complete, will result in the $125 million of annual cost savings targeted in the Renewal Plan.
Investments in Growth Initiatives and Performance Improvement
"While we've dedicated a tremendous amount of time and energy to restructuring the Company,'' says Rediker, "we have not lost sight of the big picture. We're now entering the phase where we will focus on the performance improvements and growth initiatives that will move the Company forward.''
During the year, more than $41 million will be spent on investments that will position the Company for growth and improved performance:
* In April the Company announced the formation of Document Consulting Services to help customers optimize how they design workflow and deploy documents as the strategic enablers of information throughout their organizations. According to CapVentures, customers typically spend between 8 percent and 15 percent of their revenues on documents and associated expenditures. Despite the critical role of documents throughout organizations, they are often a highly mismanaged asset, resulting in excessive costs and ineffective business processes. Document Consulting Services, which is housed within the newly created Document Management SBU, aims to eliminate the excess cost and improve productivity.
Labels and Label Systems
* Standard Register will become a larger player in the rapidly expanding distribution label market through an alliance with software integrator Vericode. The solution combines software from Vericode with Standard Register labels, laser/thermal printers, applicators, conveyors and other hardware to automate and control the flow of shipments from distribution centers.
* The Fulfillment Services SBU will be the first to implement Six Sigma, a proven set of analytical tools, project management techniques and management methods that allows companies to dramatically improve profitability by designing and improving business processes while increasing customer satisfaction.
* The Fulfillment Services SBU is building a nationwide digital color network to meet the demands of a market that the Printing Industries of America (PIA) estimates to be $3 billion with a 20 percent growth rate.
* June marked the end of the first year of operations for SMARTworks.com as a wholly owned subsidiary of Standard Register. The Company has made significant investments in the subsidiary since its inception, resulting in several new accounts signing on to use the SMARTworks® service and the addition of two new channel partners. In addition to channel partners, SMARTworks.com has instituted alliances with Ariba, Consolidated Graphics, Peregrine and others to strengthen SMARTworks' position in the marketplace. Usage of the system has surpassed 55,000 users at 800 companies.
* The Company began implementing Sales Force Automation (SFA) across the organization to increase customer service and satisfaction as well as improve sales force productivity. The SFA project will provide a single view of customers throughout the organization, enabling better coordination across sales, customer service and production.
In addition to investments in products, services, technology and equipment, Standard Register is also building the necessary leadership, skills and capabilities within the organization to fully implement the Renewal Plan:
* In June, SMARTworks.com announced the appointment of Joseph P. Morgan, Jr., as president and chief executive officer. Morgan will implement SMARTworks.com's strategic plan for accelerated growth, customer acceptance and competitive differentiation.
* Ronald L. Alcorn was named vice president of engineering at SMARTworks.com. Alcorn most recently was director of engineering at Eclipse Networks, Inc., where he managed the company's e-business applications for the telecom and financial markets. He has held a series of increasingly responsible information technology management positions in areas such as development, business analysis, project management and production support.
* Also in June, Felipe "Daniel'' Barajas joined Standard Register as Director, Six Sigma for the Fulfillment Services SBU. In this newly created role, Barajas is responsible for implementation of Six Sigma within the SBU. Prior to coming to Standard Register, Barajas served as Champion- Process Improvement Leader at COMPAQ Computer Corporation and spent more than 15 years at GE, where he ultimately held the position of Director, Six Sigma for GE-Capital.
* The Fulfillment Services and Labels & Label Systems SBUs hired and trained 56 specialized sales associates during the quarter. These associates, who will focus solely on the solutions offered by their respective SBUs, will drive further market penetration and expand Standard Register's presence into markets beyond the Company's traditional revenue stream.
2nd Quarter Results
The Company expects to emerge from 2001 as a smaller, but more profitable, enterprise organized into strategic business units and focused on improving shareholder value. The Renewal Plan anticipated lower operating earnings in the first and second quarters of the year, followed by an improved picture in the third quarter. A fourth quarter operating earnings target of $0.45 per share was established, excluding restructuring implementation costs, which would represent a 35 percent increase over the average quarterly operating result of 2000.
The results of the first and second quarters are shown below, with significant non-recurring items isolated from on-going operations:
1Q 2001 2Q 2001
Net Profit E.P.S. Net Profit E.P.S.
$ Mil $ $ Mil $
---------- ---------- ----------- ----------
Operations 5.9 0.22 6.0 0.22
Restructuring -67.0 -2.44 -1.4 -0.05
Inventory and other
adjustments -2.7 -0.10
---------- ---------- ----------- ----------
Total -61.1 -2.22 1.9 0.07
The second quarter Net Profit from operations was $6.0 million, or $0.22 per share, which was in line with the Company's first quarter operating result and management's expectations.
Restructuring expenses for the quarter were $1.4 million after tax, or $0.05 per share, which included expenditures for the relocation of production equipment and other costs related to the implementation of the restructuring plan. An additional $3 million of after tax restructuring expenses is expected over the balance of the year.
During the quarter the Company began to lay the groundwork for future financial reporting for each of the newly formed business units. In the course of this preparation, the Company recognized the need to reduce the value of inventory and record other adjustments having a net after tax cost of $2.7 million, or $0.10 per share.
"The operating results of the first two quarters were within the range of our expectations,'' says Rediker. "With the progress we've made so far with the Renewal Plan, coupled with the development of a new leadership team and strategic investments, we believe the Company remains on the right track to earn $0.45 per share in the fourth quarter.''
On July 19, 2001 Standard Register's Board of Directors declared a quarterly dividend of $0.23 per share to be paid on September 7, 2001 to shareholders of record as of August 24, 2001.
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