Standard Register Reports Q2 Loss: Digital & Print On Demand Trends Show in Earnings
Press release from the issuing company
DAYTON, Ohio---July 25, 2003--Standard Register today reported results for the 2003 second quarter and first half ended June 29, 2003.
Revenue in the 2003 second quarter was $233.0 million, down approximately 8 percent from the $253.8 million in the 2002 quarter. Revenue in the first half was $469.1 million, down from $517.6 million in the period last year.
"Soft business conditions have resulted in lower unit demand, delayed customer expenditures and pricing pressure," said Dennis Rediker, president and chief executive officer. "This has affected Standard Register in everything from documents to software.
"In addition, the pace at which organizations are migrating from paper-based to digital communications and workflow is increasing, further weakening demand for traditional business forms. As expected, we're seeing a gradual shift of printed forms and business communications to documents that are either printed on demand or are developed and distributed digitally, such as account statements presented on the Internet. This reflects our customers' desire to increase efficiency while providing information in the ways their clients prefer, whether print or digital.
"Our strategy is to provide a full spectrum of solutions -- from printed documents to consulting to digital solutions -- to help companies more effectively capture, organize, manage and move information. This requires that the company move on two fronts simultaneously -- improving market share and profitability in the traditional document business while investing to exploit emerging growth opportunities."
As part of the company's program to improve utilization and profitability, Standard Register undertook a restructuring in the second quarter. Actions included closing its rotary printing plant in Kirksville, Mo., consolidating several warehouses, and consolidating four printing and fulfillment services operations to form a new state-of-the-art regional print-on-demand and fulfillment center in Dallas. The company also eliminated management positions at its headquarters.
In connection with these actions, the company took pretax restructuring and impairment charges totaling $22.5 million in the second quarter, equivalent to $0.46 per share after tax. Additional restructuring charges totaling approximately $3 million are expected in the third and fourth quarters. The cost reductions are expected to generate annualized pretax savings of approximately $28 million, with about $13 million of savings realized over the balance of 2003. The estimated cost savings should recover the cash restructuring costs within six months.
With restructuring and impairment charges, the net loss for the 2003 second quarter was $12.0 million, or $0.42 per share, compared to net income of $10.9 million, or $0.38 per share, for the second quarter of 2002. The profit decline was primarily the result of restructuring and asset impairment charges totaling $0.46 per share. The balance of the decline is attributable to lower revenue and higher pension expenses.
In the first half of 2003, the company reported a net loss of $13.1 million or $0.46 per share. This compares to net income of $21.9 million or $0.77 per diluted share in the 2002 first half. The profit decline is attributed to the restructuring and asset impairment charges totaling $0.46 per share and also the impact of lower revenue and higher pension expenses.
Cash flow was positive in the period, with net debt (total debt less cash and short-term investments) declining from $79.7 million at the outset of the year to $57.1 million as of June 29, primarily as a result of improved asset turnover. Net debt to total capital was 16 percent, reflecting a continued strong financial condition.
"With the benefits of our restructuring and other initiatives, we expect second-half revenue and margins to be higher than in the first half, with the most progress occurring in the fourth quarter," Rediker said. "We continue to position the company for long-term growth."
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