Business News

Standard Register Reports Fourth Quarter and 2007 Financial Results

Friday 22. February 2008 - Mid-Year 2007 Cost Reductions Establish Improved Earnings Outlook for 2008

Standard Register (NYSE: SR) today reported its financial results for the fourth quarter and total year ended December 30, 2007.

Results of Operations

Fourth Quarter
Revenue on continuing operations for the quarter was $218.6 million, down $9.4 million or 4.1% compared to $228.0 million reported for the same quarter of 2006.

“Despite a challenging environment for some business segments and lower revenue, our operating result before restructuring, impairment, pension loss amortization, and pension settlement charges increased from $10.0 million last year to $19.0 million in the current period. This was the second consecutive quarter that this (non-GAAP) measure of operating earnings has been up sharply from the prior year,” said Dennis Rediker, president and CEO of Standard Register.

“The cost reduction actions initiated in our mid-year 2007 restructuring have provided improved operating margins and cash flows and will also serve to finance future investments essential for our long-term success,” added Rediker.

The gross margin was down $2.4 million as a result of the lower revenue, but SG&A expense (excluding pension loss amortization and settlement) was $11.8 million lower than the 2006 quarter, producing the increase in operating income. This SG&A expense improvement can be traced primarily to the mid-year 2007 cost restructuring. There were also favorable non-recurring expense items totaling $4.6 million, including a $2.7 million reversal of accruals for previous restricted stock grants.

Cash flow was strong in the quarter, fueled primarily by the improved operating earnings. Net debt was reduced by $12.4 million to end the year at $51.3 million.

There were no pension contributions in the quarter, as the Company completed its planned $20 million in annual funding during the first three quarters of the year. Current plans call for $20.0 million in pension funding for 2008. Capital expenditures ended 2007 at $21.6 million; capital spending for 2008 is currently estimated at approximately $23.0 million.

Total Year

Revenue on continuing operations was $865.4 million for the full year, down $28.9 million or 3.2% compared to the $894.3 million reported for all of 2006. This decrease was primarily in traditional products within the Company’s Document Management and Label segments.

“Pension amortization and settlement charges obviously had a big impact on our year, reducing earnings by $0.99 per share. Operating income before these charges and before restructuring and impairment costs was $45.4 million for the year – up $2.9 million despite the nearly $29 million drop in revenue. This reflected a much stronger second half following the mid-year restructuring,” said Rediker.

Outlook

Our investments in 2008 will be focused in several areas. We see long term growth opportunities in our label business and will begin to report this business as a separate segment. In addition, our print-on-demand business will continue as a major focus, attracting a significant share of our capital. We also see significant promise in our extensive secure document offering and in our various software and service initiatives.

Our investment priorities and the natural forces in the marketplace will continue to fuel a favorable shift in our revenue mix in 2008. However, as a result of continuing pressure on some of our traditional products, we do not expect a substantial change in our total year top line. For the first quarter of the year, we expect to see a return to a more traditional seasonal pattern of revenue with the first quarter below that of the preceding fourth.

Our mid-year restructuring targeted a $15.0 million reduction in costs for the second half of 2007 versus the first half. We exceeded our target, which was a major contributor to our stronger second half performance. On an annualized basis, our cost savings currently stand at approximately $35.0 million. As we move into 2008, we will reinvest a portion of our cost savings on marketing, technology, people, and other initiatives important to our long-term success.

Our earnings goal for the whole of 2008 is to see a low double-digit percentage increase in operating income (before pension amortization and before any pension settlement, restructuring, and impairment charges).

GAAP Reconciliation

The net loss after tax for the quarter was $4.0 million or $0.14 per share, compared to a net income of $1.1 million or $0.04 per share in the prior year. For the total year, the net loss was $7.3 million or $0.25 per share, versus a net loss of $11.7 million or $0.41 in 2006.