DAYTON, Ohio, July 27 -- Standard Register today reported its financial results for the second quarter ended July 2, 2006. Results of Operations The results for the quarter reflected the impact of several major strategic elements that are reshaping the Company. - The Print-on-Demand (POD) Services segment reported a jump in operating margin, fueled by a 9.4 percent revenue increase and improved production costs. - Gross margins in the Document and Label Solutions (DLS) segment remained steady despite the competitive pricing climate and reduced unit sales that pushed the quarter's revenue 4.0 percent lower, as the Company continued its program of cost reductions and productivity improvements. - All other segments, including Commercial Print Services and Document Systems, that emphasize software and service offerings showed 6.3 percent revenue growth overall. - The Digital Solutions segment, which offers cost effective data capture solutions based on innovative digital writing technology, continued to report positive new developments and a growing pipeline of opportunities. Revenue in this emerging market has been modest thus far, however, and this segment reported an operating loss of $1.4 million in the quarter. - As previously reported, the Company sold its unprofitable InSystems business unit during the second quarter. This business did not fit with the Company's strategy. Proceeds were $8.5 million plus the return of certain cash balances. The Company reported a loss on the sale of $9.2 million after tax. InSystems results and its sale are reported as discontinued operations. - The Company continued to maintain a strong balance sheet with net debt just 9.3 percent of total capital. Total revenue for the quarter was $222.8 million, up slightly from last year's $222.5 million, reflecting the lower DLS revenue offset by the growth in POD Services and other segments. Revenue for the first half was $451.5 million versus $451.9 million in the prior year. The gross margin improved by 1.7 and 1.3 percentage points in relation to revenue for the quarter and year-to-date periods, respectively. The Company has made good progress in recovering recent paper cost increases and benefited from lower production costs and higher POD Services volume. Operating expenses were higher in both the quarter and year-to-date periods, impacted by higher restructuring, asset impairment, and the amortization of past pension losses. The table below isolates these effects on the Company's earnings. Continuing operations before restructuring, impairment, and amortization of past pension losses was $10.9 million and $23.8 million for the quarter and year-to-date periods, up 30 percent and 20 percent, respectively. Current year earnings were helped by an accrual adjustment for unclaimed funds, but were penalized by unusually high health care claims; the net positive effect on earnings from these two items was approximately $0.7 million. Including the loss on the sale of InSystems, the Company reported a second quarter net loss of $8.5 million or $0.29 per share, compared to a loss of $2.3 million and $0.08 per share last year. For the first six months, the net loss was $7.0 million or $0.24 per share versus a breakeven result for the comparable period of 2005. Net debt was $16.3 million at the end of June, down $15.6 million during the quarter. Setting aside $8.5 million from the sale of InSystems, cash flow for the quarter was a positive $7.1 million -- after satisfying the operating needs plus capital spending of $4.5 million, pension funding of $6.0 million and dividends of $6.7 million. Outlook "We continue to expect modest revenue growth for the whole of 2006 with the fourth quarter seasonally stronger," said Dennis Rediker, Standard Register's president and chief executive officer. "Despite a very price competitive market for certain of our traditional print products, we believe that our strategic initiatives are beginning to show results that will lead to meaningful growth in our earnings over the next several years," added Rediker.