DAYTON, Ohio-- Standard Register today reported its financial results for the third quarter ended September 27, 2009.
"Stabilizing our customer base, improving our cost structure, and creating the framework for our new market focused business units are the primary goals for 2009," stated Joe Morgan, president and chief executive officer. "Activities for the current quarter show that we are continuing to progress towards accomplishing these objectives."
Results of Operations
Revenue for the third quarter was $163.5 million, down 13.5 percent compared with $189.0 million recorded for the comparable quarter of 2008. On a year-to-date basis, revenue was $509.2 million, down 14.4 percent compared with $595.0 million in 2008. "The current economic conditions continue to have an impact on our revenue due to lower units and increased price pressures," said Morgan. "However, we are not deterred in that we have seen stabilization through fewer account losses than the previous year and a modest return in units for many sectors. Furthermore, we have begun to see progress in our market focus as we have closed significant contracts during the quarter within each of our three business units that provide access to over $100 million of new annual revenue opportunities."
Gross margin as a percent of revenue for the quarter was 32.5 percent compared with 32.8 percent in the prior year. SG&A was $51.0 million in the quarter versus $54.7 million in the prior year. Net income for the third quarter was a loss of $5.5 million or $0.19 per share compared with net income of $2.2 million or $0.07 per share last year. The loss for the quarter was primarily due to restructuring charges of $10.5 million on a pre-tax basis or $0.22 per share taken as part of a strategic earnings improvement, the MyC3 initiative. Net income through nine months was a loss of $13.3 million or $0.46 per share compared with net income of $6.0 million or $0.21 per share for the prior year. In addition to the restructuring charges noted previously, the Company incurred considerable non-cash pension settlement charges of $20.4 million on a pre-tax basis or $0.43 per share related to lump sum payments made to retirees mainly during the first quarter of 2009. No pension settlement charges were recorded in the prior year.
Capital expenditures were $6.1 million through the first nine months and are expected to end the year at approximately $10 million. Pension funding was $6.1 million for the quarter and $20.6 million through nine months. We do not anticipate any additional contributions this year.
"Previous actions taken around our relentless pursuit of cost reduction are allowing us to maintain margins and lower operating expenses despite the lower revenue," indicated Morgan. "In order to continue our progress, we launched an ongoing company-wide review of business practices and growth acceleration opportunities in July designed around the priorities of client satisfaction, cost reduction, and increased market coverage that we called MyC3."
The intent of MyC3 is to simplify business, move closer to the customer, and improve overall efficiency of our business. As a result of this intensive process, Standard Register will:
* Optimize its manufacturing footprint by investing in regional Print on Demand Centers, scaling down local Print on Demand Centers, closing certain production and distribution centers, improving its supply chain, and simplifying processes
* Proactively address the movement to digital technologies and manage working capital more effectively by moving to on-demand based production, lowering inventory and warehousing requirements
* Reposition and refine its go-to-market organization to capture revenue growth in core markets
* Invest in system enhancements making it easier to serve customers
* Employ strategic procurement processes and systems that leverage vendor relationships company wide
MyC3 was conducted with the assistance of a third party specializing in driving earnings growth through employee collaboration. "The process demonstrated that employees, because they are closest to our customers and closest to the work, can quickly drive dramatic improvements when given the right collaboration tools and process. In just 100 days, employees worked with extraordinary passion and professionalism to develop and analyze specific actions to improve go-to-market processes and streamline operations," said Morgan. Implementation of ideas generated through the MyC3 initiative will continue through 2011, with a majority of the plans to be executed in the next 12 to 18 months.
On October 22, 2009, Standard Register's board of directors approved a restructuring plan as a result of the initiative. When fully implemented, the Company expects to achieve cost savings between $30 and $40 million, on an annual run-rate basis compared with the fourth quarter of 2009, through a combination of workforce reduction, strategic closure of production and distribution facilities, and other efficiency initiatives. The Company expects to have involuntary termination costs of $3.6 million; contract termination costs of $5.8 million; and other associated costs of $8.7 million, all of which are cash expenditures. Of this amount, $10.5 million was recorded in the third quarter with the remaining to be incurred through 2014. Additionally, the Company will conduct an extensive review of assets in the fourth quarter and expect to incur between $1.5 and $2.5 million for asset impairments.
On Wednesday, October 21, 2009, Standard Register's board of directors declared a quarterly dividend of $0.05 per share to be paid on December 4, 2009, to shareholders of record as of November 20, 2009. The board will consider future dividend payments on a quarter-by-quarter basis in accordance with its normal practice.