DAYTON, Ohio - Standard Register today announced its financial results for the second quarter of 2014.
The Company reported revenue of $225.3 million and a net loss of $5.8 million or $0.67 per diluted share. For the 2013 second quarter, revenue was $136.8 million and net income was $2.0 million or $0.34 per diluted share.
Adjusted EBITDA, which excludes certain items as detailed in the attached reconciliation, was $15.5 million compared to $8.9 million for the second quarter of 2013.
Results for the second quarter of 2013 do not include results from WorkflowOne, whichStandard Register acquired on August 1, 2013.
"The benefits from integration are evident, with increased revenue in all solutions and improvement in margin and adjusted EBITDA over the first quarter," said Joseph P. Morgan, Jr., president and chief executive officer. "The business is stabilizing as we continue to invest in our growth solutions, sell our portfolio of solutions across our growing base of more than 12,000 customers and move new business through implementation."
Second Quarter Results
Total revenue increased 64.7 percent to $225.3 million from $136.8 million in the 2013 second quarter. On a pro forma basis, including WorkflowOne, revenue for the second quarter of 2013 was $247.8 million.
Gross margin as a percentage of revenue improved to 28.2 percent from 27.3 percent in the first quarter of 2014 and compared to 28.5 percent in the second quarter of 2013. Selling, General and Administrative (SG&A) expenses were $57.1 million for the second quarter of 2014 compared to $35.4 million for the second quarter last year. The increase is primarily attributable to the inclusion of WorkflowOne.
Standard Register operates two business units: Business Solutions and Healthcare.
Business Solutions revenue was $160.9 million for the second quarter of 2014, an increase of 81.5 percent over revenue of $88.6 million in the 2013 second quarter. Business added from the acquisition, and growth in Mexico-based label manufacturing operations and promotional products sales contributed to the increase. Operating profit was $2.6 million compared to $0.9 million last year.
Healthcare revenue was $64.4 million, an increase of 33.7 percent over revenue of $48.2 million in the second quarter of 2013. Technology-enabled solutions in patient information management continued to grow in the second quarter, and business added from the acquisition contributed to the increase. Health insurance reform, electronic health record (EHR) adoption and state electronic records adoption are decreasing orders for printed forms. Operating profit was $2.9 million for the quarter compared to $1.8 million last year.
Second Quarter Highlights
- Integration of the WorkflowOne acquisition is progressing on schedule with consolidation of production facilities and technology platforms, sales forces and customer service teams. The Company has exited 19 facilities since the acquisition of WorkflowOne (including third party logistics sites), and continues to anticipate at least $40 million in annual savings when the integration is complete at the end of 2015.
- High-speed ink jet web presses are now operational in Sacramento, Californiaand Columbus, Ohio, contributing to customer communications solutions sales and strengthened pipelines.
- A Customer Service Center of Excellence was established in Denver, Colorado, serving the western United States and Hawaii with the studio concept of specialists to support specific customers and solutions.
- Standard Register was awarded a patent for chemically reactive ink that helps deter certain types of document fraud. The Company has earned approximately 900 patents since its founding in 1912, and has 102 active U.S. patents in the areas of labels and form/label combinations, in-mold labeling, software and/or equipment, security print and specialty inks and business forms.
- The Company invested in its SMARTworks® platform to expand the capabilities for configurable promotional products and support for on-demand publishing and marketing solutions, and added more automation to the Center for Excellence distribution center in Jeffersonville, Indiana.
First Half of Year Results
Total revenue increased 63.0 percent to $453.8 million and the Company incurred a net loss of $12.9 million or $1.50 per diluted share, compared to revenue of $278.4 millionand net income of $6.7 million or $1.13 per diluted share for the first half of 2013. On a pro forma basis, including WorkflowOne, revenue for the first half of 2013 was $501.5 million.
Adjusted EBITDA was $28.6 million for the first half of 2014 compared to $21.1 millionfor the first half of 2013.
Business Solutions revenue increased 79.6 percent to $324.6 million for the first half of 2014 compared to $180.7 million for the prior year first half. Operating profit increased 4.6 percent, to $4.0 million from $3.8 million last year.
Healthcare revenue increased 32.3 percent to $129.2 million compared to $97.7 millionfor the first half of 2013. Operating profit increased 23.4 percent to $4.8 million from $3.9 million last year.
Gross margin as a percentage of revenue was 27.7 percent for the first half of 2014 compared to 29.1 percent last year. SG&A expenses were $115.8 million for the first half of 2014 compared to $70.1 million last year. The increase is primarily attributable to the inclusion of WorkflowOne.
Capital expenditures, including capital leases, for the first half of 2014 were $14.9 millioncompared to $6.4 million last year. The Company continues to invest in the areas with growth potential, including digital printing, label operations in Mexico, marking and decorative technology, software development and its SMARTworks® workflow platform.
Standard Register contributed $14.1 million to its qualified pension plan in the first half of 2014 compared to $10.5 million in the first half of 2013. Total pension contributions for 2014 are expected to be $42.2 million in 2014 and $34.4 million in 2015. The Company is monitoring the progress of the Highway Bill, which may reduce pension funding obligation for 2014 and 2015.
Standard Register's president and chief executive officer Joseph P. Morgan, Jr., and chief financial officer Robert Ginnan will host a conference call at 10:00 a.m. EDT onFriday, July 25, 2014, to review the second quarter results. The call can be accessed via an audio webcast at http://www.standardregister.com.