Standard Register reports net loss of $0.9 million for second quarter 2011

Standard Register (NYSE: SR) today announced its financial results for the second quarter. The Company reported revenue of $164.3 million and a net loss of $0.9 million, or $0.03 per share. The results compare to prior year revenue of $164.7 million and a net loss of $0.1 million, a relative break-even on a per share basis. Through the first half, the Company reported revenue of $329.2 million and a net loss of $0.4 million, or $0.01 per share. The first half results compare to last year's revenue of $332.1 million and a net loss of $0.9 million, or $0.03 per share.

Results of Operations

Core solution revenues within our focus market segments of healthcare, financial services and industrial grew at double-digit rates during the quarter. However, expected declines in legacy products, such as business forms and transactional labels, continue to challenge progress across all business units, resulting in relatively flat revenue for the overall Company during the quarter.

"As we execute our strategy to transition from a document management, product-focused company to a market-focused provider of solutions that meet our customers' strategic needs, we have demonstrated that these new core solutions can produce organic revenue growth," said Joseph P. Morgan, Jr., president and chief executive officer. "We are making good progress on building a more sustainable business based on these core growth solutions and are accelerating development and introduction through our commercial, healthcare and industrial business units."

Gross margin as a percent of revenue decreased slightly to 31.0 in the current year quarter from 31.4 for the prior year quarter. Cost reduction from continuous improvement initiatives were offset by increases in materials, as well as one-time implementation costs for new customers during the quarter. Year-to-date, gross margin as a percent of revenue improved slightly to 31.8 percent in the current year from 31.7 percent during the prior year, which included the benefit of more favorable LIFO adjustments. LIFO inventory adjustments were a favorable $0.3 million for the current year versus a favorable LIFO adjustment of $1.9 million for the prior year. Selling, general and administrative expenses, excluding pension loss amortization, were similar for the current year and prior year quarter, as well as the year-to-date periods.

Adjusting for pension loss amortization and restructuring charges, non-GAAP net income was $2.9 million, or $0.10 per share for the current quarter, compared with non-GAAP net income of $3.3 million, or $0.12 per share for the prior year quarter. Adjusting for pension loss amortization and restructuring charges, non-GAAP net income was $7.1 million, or $0.25 per share for the first half compared with non-GAAP net income of $5.6 million, or $0.19 per share for the prior first half.

For the first half, capital expenditures were $6.6 million and are expected to be in the range of $18-21 million for the year, the majority of which will support the advancement of core growth solutions. Pension funding contributions were $13.0 million through the first half and are expected to be approximately $24-30 million for the year. Non-GAAP cash on a net debt basis was $1.4 million positive for the first half.

Dialog Medical Acquisition

On July 6, the Company acquired 100% of the ownership interest in iMedConsent, LLC (dba Dialog Medical) for approximately $5.2 million in cash, plus up to an additional $2.0 million in contingent payments based upon the performance of the business through the two-year anniversary of the transaction. Dialog Medical provides solutions for managing the patient informed consent process and will be operated as a wholly-owned subsidiary reporting through our healthcare business unit.

"We will continue seeking opportunities such as the Dialog Medical acquisition, which provides a complementary suite of solutions and strengthens our market position," noted Morgan.

Dividend

On Thursday, July 28, 2011, Standard Register's board of directors declared a quarterly dividend of $0.05 per share to be paid on September 9, 2011, to shareholders of record as of August 26, 2011. The board will consider future dividend payments on a quarter-by-quarter basis in accordance with its normal practice.