Standard Register's Results Hampered by Financial Services ClientFebruary 22, 2013
Fourth Quarter Results
Total revenue declined 11 percent to $143.6 million in the fourth quarter compared to $161.4 million in the fourth quarter of 2011. Approximately half of the decline was attributable to reduced volumes with the large financial services customer. Core solutions, the Company’s priority growth products and services, declined 4 percent. Legacy products, generally transactional documents and printed materials, decreased 14 percent.
Healthcare revenue declined 11 percent for the quarter, to $52.5 million compared to $59.3 million in the prior year quarter. Declines in volumes, particularly in printed forms related to the mandated migration to Electronic Healthcare Records, offset increases in Core solutions sales. Operating income for the fourth quarter was $4.1 million compared to $2.1 million for the same period in 2011.
Business Solutions revenue for the fourth quarter was $91.0 million, a decrease of 11 percent compared to the fourth quarter of 2011 revenue of $102.1 million. Core solutions and Legacy products declined, primarily related to the reduction in volume from the large financial services customer. Operating income for the fourth quarter was $2.4 million compared to an operating loss of $1.3 million in the fourth quarter last year.
Consolidated gross margin as a percent of revenue was 30 percent, the same as for the fourth quarter of 2011. Selling, general and administrative (SG&A) expenses declined 18 percent in the quarter.
Full Year Results
Total revenue declined 7 percent to $602.0 million compared to $648.1 million for the full year 2011. Over half of this decline was attributable to reduced volume with the large financial services customer and the remainder was primarily the result of Legacy product unit volumes declining more rapidly than growth in Core solutions sales. For 2012, Core solutions declined 0.3 percent. Legacy products declined 12 percent. At the end of 2012, Core solutions comprised 43 percent of revenue, compared to 40 percent at the end of 2011. Legacy products correspondingly declined to 57 percent from 60 percent for the same periods.
Healthcare revenue declined 9 percent to $215.9 million from $236.8 million in 2011. Operating income for 2012 decreased 12 percent, to $12.7 million from $14.5 million for the prior year.
Business Solutions revenue declined to $386.1 million from $411.3 million for 2011. Nearly all of the decline was from reduced volume with the large financial services customer. Operating income for 2012 more than doubled to $8.1 million from $3.5 million for 2011.
Consolidated gross margin as a percent of revenue was 30 percent for 2012, compared to 31 percent for 2011. SG&A expense declined 13 percent to $180.7 million from $206.9 million in the prior year.
Cash flow on a net debt basis was positive by $8.2 million for 2012 compared to negative cash flow of $11.6 million for 2011.
Capital Expenditures, Restructuring and Pension Contribution Updates
For 2012 capital expenditures were $6.0 million. The company continues to invest at a prudent level to support Core technology solutions growth and to increase efficiencies with management reporting capabilities. Restructuring efforts have more clearly defined investments that will produce the best return. The company expects capital expenditures for 2013 to be within the range of $15 million to $18 million.
In January 2012, the company announced a two-year strategic restructuring plan to better align its resources in support of the growing Core solutions business and reduce costs to offset the impact of declining revenues in Legacy products. When fully implemented at the end of 2013, annual savings of $60 million are expected to be realized. Through 2012, the company achieved approximately $40 million of savings and incurred nearly all of the expected $10.0 million in cumulative costs associated with the program.
Standard Register contributed $22.7 million to the company’s qualified pension plan in 2012, including $2.0 million more than required for the year. With relief provided by the Moving Ahead for Progress in the 21st Century Act (MAPS-21), commonly called the highway bill, and the additional $2.0 million of funding in 2012, contributions for 2013 and 2014 are expected to be $24.8 million and $36.4 million, respectively.
About Standard Register
Standard Register, celebrating 100 years of innovation, is trusted by the world’s leading companies to advance their reputations by aligning communications with corporate standards and priorities. Providing market-specific insights and a compelling portfolio of solutions to address the changing business landscape in healthcare, financial services, commercial and industrial markets, Standard Register is the recognized leader in the management and execution of mission-critical communications.
Source: Standard Register.