Standard Register Reports First Quarter Loss on Lower Sales
Press release from the issuing company
April 27 -- Standard Register today reported its financial results for the first quarter ended April 1, 2007.
Results of Operations
Total Revenue on Continuing Operations was $227.4 million in the first quarter 2007, compared to $228.5 million for the comparable quarter of 2006. Document and Label Solutions (DLS) was down 5.4 percent, reflecting lower unit demand and pricing pressures on some traditional forms products that face slow but steady erosion due to technology. Conversely, Print-On-Demand Services was up 7.6 percent, Document Systems was 16.7 percent ahead of last year, and other operating segments rose a collective 11.4 percent. "Although our sales were relatively flat overall for the quarter, I am very encouraged by the growth we have experienced in areas where we have made investments and see long-term potential," said Dennis Rediker, president and chief executive officer.
As previously reported, the Company sold its Digital Solutions start-up business in April for $2.5 million. The results of this business unit are reported as a discontinued operation. Revenue was not material and pre-tax losses were $1.0 million in the first quarter 2007 and $5.2 million for the whole of last year. The Company expects to report a pre-tax gain of approximately $1.5 million in the second quarter. "We remain bullish on digital writing technology, but we elected to focus our resources on advancing our core document services strategy," said Rediker.
The Company took action in the quarter to reduce its DLS cost structure, closing its Middlebury, Vermont plant and redistributing most of its output capacity to other manufacturing facilities. Restructuring expense in the quarter was $2.4 million. Impairment charges related to this facility were recorded in the fourth quarter 2006 and were revised downward by $0.4 million in the current quarter based on an offer received for the property.
The Company expects to incur some additional restructuring, training, and relocation-related costs before the realignment actions conclude late in the third quarter; on-going annualized savings are estimated at approximately $4.5 million.
The amortization of prior years' pension gains and losses produced a first quarter expense of $7.0 million. This compares to an amortization expense of $6.0 million for the first quarter of 2006. These amortization expenses relate primarily to the decline in pension assets during the weak stock markets in 2001 and 2002, and the coincident increase in pension liability brought about by lower interest rates.
Operating income on continuing operations before the above expenses for restructuring, impairment, and prior years' pension losses was $9.4 million in the quarter, compared to $14.2 million on a comparable basis for the prior year. The $4.8 million decline is attributed primarily to a $5.9 million drop in the gross margin due to a revenue decrease at a major account in mid-2006 and higher DLS manufacturing costs related in major part to the restructuring action now underway. SG&A expense, excluding the pension amortization, and depreciation expense totaled about $1.0 million lower in the current quarter.
Including restructuring, impairment, and amortization of past years' pension losses, the Company reported an income on continuing operations of $0.4 million this year versus $5.4 million last year. After interest and tax, and including the losses on discontinued operations, the net loss in the quarter was $0.8 million or $0.03 per share compared to a prior year net income of $1.5 million or $0.05 per share.
The Company's net debt, total debt less cash and short-term investments, increased $10.0 million in the quarter -- about the same increase as was recorded for the first quarter of 2006. This year's increase reflects seasonal demands on cash, slightly higher capital spending of $8.2 million, $5.0 million in voluntary pension contributions, and dividends of $6.7 million.
"We are encouraged by the strong showing in our growth businesses," said Rediker, "and we expect our total year to show low-to-mid single digit top- line growth overall. Capital spending should be in the $25 - $28 million range for the year and we continue to plan for $20.0 million in pension contributions."
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