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UNITED STATES SECURITIES AND EXCHANGE
COMMISSION WASHINGTON, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended January 2, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ________ to ________
Commission file number 1-1097
THE STANDARD REGISTER COMPANY
(Exact name of Registrant as specified in its charter)
OHIO 31-0455440
(State or other jurisdiction of (I.R.S. Employer
incorporation or of organization) Identification No.)
600 ALBANY STREET, DAYTON, OHIO 45401
(Address of principal executive offices) (Zip Code)
(513) 434-1000
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT
NAME OF EACH EXCHANGE
Title of each class ON WHICH REGISTERED
Common Over the counter
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ___
----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant' knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ X ]
The aggregate market value of the voting stock held by non-affiliates of the
Registrant at February 25, 1994 was approximately $235,722,263.
At February 25, 1994, the number of shares outstanding of the issuer's classes
of common stock are as follows:
Common stock, $1.00 par value 23,994,546 shares
Class A stock, $1.00 par value 4,725,000 shares
Part III incorporates information by reference from the Proxy Statement for
Registrant's Annual Meeting of Shareholders to be held on April 20, 1994.
Page 1 of 48
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THE STANDARD REGISTER COMPANY
FORM 10-K
PART I
ITEM 1. - BUSINESS
The Standard Register Company began operations in 1912 in Dayton,
Ohio. Throughout its history, its primary business has been the design,
manufacture, and sale of business forms. However, to meet the needs of today's
business environment, the Company provides a wide range of products and
services that facilitate the recording, storage and communication of business
transactions and information. The Company believes that it is the second
largest in the highly competitive U.S. forms industry, which includes
approximately 500 companies. Key differentiating factors within the industry
include quality, level of service, and price.
The variety of forms currently produced and sold is extensive,
ranging from commodity type stock continuous forms to complex custom forms
designed to meet the specific needs of individual customers. The Company
emphasizes high value-added business forms that satisfy the customer's desire
to simplify paperwork and thus improve efficiency. Standard Register also
manufactures, sells, and services a variety of financial, bar coding and
document processing equipment. Other printed products and services include
personalized mail promotional materials and pressure sensitive labels.
The Company's products including business forms, other printed
products and equipment are marketed by direct selling and service organizations
operating from offices located in principal cities throughout the United
States. Forms are produced at thirty five plants located throughout the United
States and are shipped directly to the customer or stored in warehouses for
subsequent on- demand delivery. The management of forms inventories to provide
timely, cost-effective delivery is a major element of customer service.
The Company purchases raw paper in a wide variety of weights, grades,
and colors from various paper mills in the United States and Canada.
Carbonless paper, inks, carbon, and printing supplies are available nationally
and purchased from leading vendors. Continuing efforts are made to assure
adequate supplies to meet present and future sales objectives. The Company
fills its needs by ordering from suppliers of long-standing relationship.
The Company had engineering and research expense during 1993 of
$7,754,000 compared to $7,803,000 in 1992 and $7,854,000 for 1991. These costs
relate to the development of new products and to the improvement of existing
products and services. These efforts are entirely company sponsored and
involve approximately eighty-seven professional employees. The Company had no
expenditures during the last three years for customer sponsored research
relating to the development of new products, services, or techniques or the
improvement of existing products, services, or techniques.
In 1993, the Company continued its STANFAST manufacturing operations
in eighteen print centers located nationwide. These print centers are devoted
to the manufacture and sale of business forms for customers requiring
relatively small quantities on a quick turnaround basis.
-2-
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Expenditures for property, plant and equipment totaled $31,076,000 in
1993, compared to $22,697,000 and $28,039,000 in 1992 and 1991, respectively.
No significant changes occurred in the types of products,
manufacture, or method of distribution during the past fiscal year nor does the
Company intend to change its method of doing business in the near future.
Other items of information which may be pertinent to an understanding of the
Company and its business are as follows:
1.) No material patents, trademarks, licenses, franchises, or concessions
are held which have a significant effect upon the business.
2.) No material portion of the Company's business could be considered
seasonal.
3.) The Company believes its working capital is sufficient for its
current operations. The current ratio has been maintained at 3.9 to 1 at the
end of the last three fiscal years. Total debt, including long-term and
current maturities, was 6.7% of equity at year-end 1993, compared to 9.2% and
12.7% for years-end 1992 and 1991, respectively. At year-end 1992, cash and
cash equivalents exceeded current and long-term debt by approximately
$54,977,000. These relationships demonstrate the soundness of the Company's
financial position.
4.) No material segment of the Company's business is dependent upon a
single or a few customers. No single customer accounts for 10% or more of
total revenue.
5.) The Company's backlog of custom printing orders at January 2, 1994
was $51,897,000 compared to $42,670,000 and $43,702,000 at January 3, 1993 and
December 29, 1991, respectively. All orders were expected to be filled within
the ensuing fiscal year.
6.) The Company has no significant exposure with regard to the
renegotiation or termination of government contracts.
7.) Expenditures made by the Company in order to comply with federal,
state, or local provisions of environmental protection have not had a material
effect upon the Company's capital expenditures, earnings, or competitive
position.
8.) At January 2, 1994, the Company had 5,769 employees compared to 5,724
and 5,852 at January 3, 1993 and December 29, 1991, respectively.
9.) Substantially all of the Company's products and services facilitate
the recording, storage and communication of business transactions and
information.
10.) The Company has no foreign operations and no material portion of the
Company's sales or net income is derived from sales to foreign customers. The
Company does offer technical assistance to foreign business forms manufacturers
and receives royalties for these services. Royalties from these foreign
associates are approximately .1% of total revenue.
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ITEM 2 - PROPERTIES
The principal production plants of the Company are located in the
following cities:
Dayton, Ohio, 677,000 sq. ft., printing and equipment products
production plants and corporate headquarters
Newark, Ohio, 234,000 sq. ft., promotional printing plant
Shelbyville, Indiana, 61,000 sq. ft., printing plant
Middlebury, Vermont, 113,000 sq. ft., printing plant
York, Pennsylvania, 214,000 sq. ft., printing plant and warehouse
Fayetteville, Arkansas, 146,000 sq. ft., printing plant
Porterville, California, 126,000 sq. ft., printing plant
Cincinnati, Ohio, 52,000 sq. ft., pressure sensitive label
production plant
Murfreesboro, Tennessee, 82,000 sq. ft., printing plant
Terre Haute, Indiana, 54,000 sq. ft., pressure sensitive label
production plant
Salisbury, Maryland, 114,000 sq. ft., printing plant
Rocky Mount, Virginia, 105,000 sq. ft., printing plant
Kirksville, Missouri, 191,000 sq. ft., printing plant and warehouse
Tampa, Florida, 38,000 sq. ft., pressure sensitive label production
plant
All plants are owned by the Company except for the Tampa location.
STANFAST print centers are generally much smaller than the preceding
plants and are in eighteen other locations nationwide. STANFAST also operates
an imprint center in Tolland, Connecticut, a plastic card embossing plant in
Rochester, New York and a printing plant in Phoenix, Arizona. STANFAST
generally leases its plants.
ITEM 3 - LEGAL PROCEEDINGS
(a) No material claims or litigation are pending against the Company.
(b) The Company is named as a potentially responsible party by the U.S.
Environmental Protection Agency or received a similar designation by
state environmental authorities in several situations. None of these
matters have reached the stage where liabilities have been assessed
against the Company. The Company has evaluated each of these matters
and believes that none of them individually, nor all of them in the
aggregate, would give rise to a material charge to earnings or a
material amount of capital expenditures even if the Company is
required to make payments within the range of its current estimates
of those potential liabilities. This assessment does not take into
account the ability of the Company to recover on existing insurance
policies or from other parties which the Company believes would be
held as joint and several obligors under any such liabilities.
However, since these matters are in various stages of process by the
relevant environmental authorities, future developments could alter
these conclusions. However, management does not now believe that
there is a likelihood of a material adverse effect on the financial
condition of the Company in these circumstances.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to shareholders during the fourth quarter
of the fiscal year.
-4-
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PART II
ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
(a) The common stock $1.00 par value of the Registrant is traded in the
over-the counter market and is quoted on the NASDAQ National Market
System. The range of quotations as supplied by NASDAQ stock market
and dividends paid per share on such securities for each quarterly
period during the two most recent fiscal years are presented below.
1 9 9 3
----------------------------------------------------------------------
Cash
Quarter Dividend High Low Last
------- -------- ---- --- ----
1st $0.16 21 3/4 17 19 1/4
2nd $0.16 20 1/4 16 18 1/2
3rd $0.16 20 1/4 17 1/4 18 1/2
4th $0.16 21 18 20 3/4
1 9 9 2
----------------------------------------------------------------------
Cash
Quarter Dividend High Low Last
------- -------- ---- --- ----
1st $0.15 18 7/8 13 3/4 18 3/4
2nd $0.15 18 7/8 14 15
3rd $0.15 17 3/4 14 7/8 17 1/4
4th $0.15 19 3/4 16 3/4 18
(b) Approximate number of security holders of the Company's common stock
as of February 25, 1994 - 3,408 excluding individual holders whose
shares are held by nominees. There are also 17 holders of Class A
stock.
(c) Dividend policy - The Company expects to continue paying cash
dividends in the future, however, the amounts paid will be dependent
upon earnings and the future financial condition of the Company. No
events have occurred which would indicate a curtailment of the
payment of dividends.
-5-
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ITEM 6 - SELECTED FINANCIAL DATA
SELECTED INCOME STATEMENT DATA
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
Thousands except for per share data
------------------------------------------------------------------
Revenue $722,120 $705,215 $693,712 $716,410 $708,876
Net income before cumulative
effect of accounting changes 42,185 39,372 32,707 21,794 40,360
Cumulative effect of
accounting changes - 13,362 - - -
Net income 42,185 26,010 32,707 21,794 40,360
Earnings per share:
Net income before cumulative
effect of accounting changes 1.47 1.37 1.14 .74 1.35
Cumulative effect of
accounting changes - .47 - - -
Net income 1.47 .90 1.14 .74 1.35
SELECTED BALANCE SHEET DATA
Total assets $502,333 $482,463 $463,560 $453,725 $459,196
Long-term debt 17,546 24,454 35,189 41,940 48,736
OTHER
Cash dividends paid
per common share .64 .60 .56 .56 .52
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
1 9 9 3
1993 completed the third year of operations since the Company
announced its restructuring plan late in 1990. Many of the characteristics of
the forms industry remain little changed since that time, including excess
productive capacity, the slowing sales growth of some traditional business
forms, and a very price competitive marketplace. Against this backdrop, the
Company has produced three consecutive years of improving operating results,
culminating in 1993's record profit performance. Net income for 1993 was $42.2
million or $1.47 per share, a 7% increase compared to the $39.4 million and
$1.37 operating result reported for 1992.
-6-
7
Revenue increased 2.4%, a combination of 1.2% fewer shipment units
and 3.6% higher average selling prices, excess industry capacity
notwithstanding. Fundamental product mix changes were evident in 1993.
Traditional business form products, including custom continuous, unit set, and
stock forms declined about 5% and now represent approximately 45% of total
revenue. The most significant drop within the traditional forms category was
in low value added, low margin stock forms which declined 26% and now represent
only 4% of total revenue. Emerging growth products such as cut sheet,
Stanfast, Imprint, labels, and distribution services represent about one third
of revenue and recorded a 15% increase. Rounding out the remaining major
product categories, forms related equipment rose 4% and promotional direct mail
increased 15%.
The percentage gross margin improved for the third consecutive year,
rising to 37.4% compared to 36.6%, 35.5%, and 35.2% for years 1992 through
1990, respectively. This trend reflects the generally improving product mix,
actions to reduce excess capacity, and the higher average selling prices
mentioned earlier. Paper prices, taken as a whole, averaged about the same in
1993 as in 1992, but have shown some weakness early in 1994. Paper companies
are anxious to repair their depressed margins and are expected to increase
prices when supply and demand conditions permit. The Company would attempt to
recover any paper price increases by raising the price of its business forms.
Operating expenses continue to be well controlled. Selling and
administrative expenses dropped in relation to revenue for the third
consecutive year, reflecting improved productivity. Engineering and research
expenses have been maintained at their targeted 1.1% of revenue. Among other
expense categories, depreciation and amortization has edged higher in relation
to revenue, but this has been offset by reductions in interest expense as a
result of lower debt balances and falling interest rates. Overall, operating
expenses dropped to 27.7% of revenue compared to last year's 27.9% and 1991's
28.1%. This, coupled with the improved gross margins, pushed the pretax profit
margin to 9.7% vs. 8.8% and 7.4% in the preceding two years. Pretax profit
dollars were up 14% in 1993 vs. 1992.
The effective income tax rate in 1993 was 39.9%, 3.6 percentage
points above the 1992 rate. This increase reflects the one percent rise in the
Federal rate, higher state and local tax rates, and the absence of favorable
investment tax credit amortization. The higher tax rate reduced earnings per
share in 1993 by $.09 and halved the 14% pretax growth to 7% after taxes.
The AMS Division, a provider of materials management software to
hospitals, recorded a loss in 1993 equivalent to $.11 per share as a result of
major investments to improve management depth, standardize business practices,
improve customer service, and release upgraded application software. The
results also reflected nonrecurring charges for bad debt and other adjustments
unrelated to 1993 operations. Management expects AMS to return to profitable
quarterly performance during the second half of 1994.
The financial condition remained strong. Cash and cash equivalents
ended 1993 at $79.0 million, $55.0 million higher than the $24.0 million ending
balance of total debt. This $55.0 "net cash" balance is identical to that at
the end of 1992. Shareholders' equity increased $22.7 million to $361.0
million. Net working capital was $243.6 million with current assets 3.9 times
current liabilities.
-7-
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Cash flow from operating activities was $48.1 million compared to
$74.5 million in 1992. This $26.4 million unfavorable swing is primarily the
result of higher current accounts receivable that accompanied the increased
revenue and a rise in inventories to service an expanded third party equipment
maintenance program. The average collection period for accounts receivable
improved from 50 days in 1992 to 49 days in 1993.
Capital expenditures in 1993 totalled $31.1 million, $8.4 million
higher than 1992 spending. Excluding any acquisitions, 1994 capital
expenditures should increase 10-15% above the 1993 level, primarily related to
capacity increases, new product introductions and programs to improve
productivity.
The Company expects to finance its 1994 operating and financial
requirements from present cash reserves and internally generated funds.
1 9 9 2
Net income from operations was $39.4 million, a 20% increase over the
$32.7 million recorded for 1991. Per share operating net income was a record
$1.37; the comparable 1991 result was $1.14.
During 1992, the Company adopted Financial Accounting Standards 106
and 109 which set forth new accounting rules for reporting post-retirement
health care costs and deferred income taxes respectively. The net cumulative
effect of these two accounting changes was a one-time charge to net income of
$13.4 million, or $.47 per share, which has been segregated on the statement of
income as a non-operating item. These accounting changes are described in
greater detail in Notes 5 and 7.
Total revenue was $705.2 million, representing a 1.7% increase over
the $693.7 million result for 1991. Revenue from shipments of custom business
forms and labels, comprising approximately 73% of revenue, grew 4.2% on the
strength of higher net selling prices, excess industry productive capacity
notwithstanding; unit volume was down approximately 2%. Non-custom business
forms, commonly referred to as stock forms, declined sharply -- continuing a
pattern established over the past several years. These low-margin, commodity
type forms now represent less than six percent of total revenue. Printed
material sold to promotional direct mail users declined 6.2%, reflecting the
residual effects of the higher third class postage rates and temporarily lower
customer spending on advertising and promotion. Incoming orders for
promotional direct mail printing recovered during the year, however, and
year-end production backlogs were well above prior year levels. Installations
of equipment products and systems were up 19.2%, bolstered in part by
customers' expectations of an improving economy; related supplies and
maintenance services were up modestly. Finally, revenue from the installation
and support of hospital materials management systems, comprising about one
percent of total revenue, rose 9.8%.
-8-
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The percentage gross margin improved from 35.5% in 1991 to 36.6% in
1992, primarily as a result of the stronger business forms pricing mentioned
earlier. The 1992 cost of products sold included a one-time $3.0 million
charge for the first quarter 1993 closing of the Bedford, Pennsylvania stock
forms plant. This action is expected to save approximately $2.0 million
annually, improving production efficiency at other sites that will continue to
produce
Paper suppliers have announced an approximate 16% increase in the
cost of white bond papers, effective February 15, 1993; other papers are
expected to rise by lesser amounts. The Company has announced a forms price
increase and expects to recover the higher papers costs.
Operating expenses including research, selling, administration, and
depreciation increased 1.2%, reflecting the Company's continued emphasis on
cost control. Interest expense declined 29.5% as a result of lower outstanding
debt and lower interest rates.
The financial condition remained exceptionally strong. Cash flow
from operations rose 5.8% to $74.5 million, producing a $24.5 million increase
in cash and cash equivalents after satisfying $22.7 million in capital
expenditures, $17.2 million in dividend payments, and $10.8 million in
long-term debt payments. The latter included a $4.0 million prepayment of
8-1/4% debt. At year-end, cash and cash equivalents were $86.2 million
compared to $31.2 million in total debt. Shareholders' equity increased $9.0
million to $338.3 million after allowing for the $13.4 million in dividend
payments. The Company expects to finance its near term operating and financing
needs from internally generated funds and current cash reserves.
The recently released Financial Accounting Statement No. 112 requires
companies to accrue for expected post-employment costs other than pensions and
health care. Adoption of this new statement will not have a material effect on
the Company's financial condition or results of operations.
1 9 9 1
Net income for 1991 was $32.7 million or $1.14 per share, compared to
$21.8 million and $.74 per share in 1990. The 1990 result included a $14
million charge to pretax earnings for restructuring actions described in the
1990 section below. Excluding this charge, 1990 net income would have been
$31.1 million or $1.05 per share.
Total revenue declined 3.2% from $716.4 million in 1990 to $693.7
million in 1991. Business forms sales were down 3.3%, reflecting a 4.3% drop
in unit shipments offset by very modest gains in pricing. Forms pricing was
held down by a combination of recessionary demand, industry-wide overcapacity,
and generally declining paper prices. Communicolor's revenue increased 1% as
the market for promotional direct mail experienced relatively weak demand
brought about by the recession and a 27% increase in third- class postal rates,
which temporarily reduced customers' advertising budgets. The Business
Equipment and Systems Division reported relatively flat volume in its service
and consumables segments, but sold less new equipment as customers deferred
their purchase of discretionary capital items; overall. Business Equipment and
Systems Division sales were down 8%. Advanced medical Systems' (AMS) sales of
materials management software and related systems to hospitals increased 52%.
-9-
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The increase in profits occurred, despite the revenue decline as a
result of significant reductions in operating costs. Selling, administrative,
engineering, and production costs were down compared to the prior year, both in
absolute dollars and in relation to revenue. The restructuring program met its
cost saving objective, establishing a lower expense base for 1991 and beyond.
Raw material paper costs were also lower during 1991, as the recession reduced
demand for paper products, including forms bond. An improving 1992 economy may
put upward pressure on paper prices, however. Interest expense declined as a
result of debt repayment and lower interest rates. Pretax profit as a percent
of revenue improved from 6.6% in 1990, excluding the restructuring charge to
7.4% in 1991.
Cash flow from operations, was $70.4 million, a 40.3% increase over
1990, sufficient to finance $28 million in capital expenditures, $16.1 million
in dividends, $6.8 million in debt repayment, and provide a $20.3 million
increase in cash and short- term investments. At year-end, cash and
investments totalled $61.7 million, compared to $42 million in long-term debt
including current maturities, and current assets were 3.9 times the level of
current liabilities. The Company expects to meet its near-term operating and
financing needs from existing cash sources and internally-generated funds.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Financial Statements
Page
Independent Auditors' Report 14
Consolidated Balance Sheet - January 2, 1994
and January 3, 1993 15-16
Consolidated Statement of Income - Years ended
January 2, 1994, January 3, 1993 and December 29, 1991 17
Consolidated Statement of Shareholders' Equity - Years ended
January 2, 1994, January 3, 1993 and December 29, 1991 18
Consolidated Statement of Cash Flows - Years ended
January 2, 1994, January 3, 1993 and December 29, 1991 19
Notes to Consolidated Financial Statements 20-27
Quarterly Results of Operations 26-27
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
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PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning directors is incorporated by reference from
the Company's proxy statement for the 1994 annual meeting of shareholders.
EXECUTIVE OFFICERS OF THE REGISTRANT
Officer
Name and Position Age Since
----------------- --- -------
Paul H. Granzow, Chairman of the Board of Directors 66 1984
John K. Darragh, President and Chief Executive Officer 64 1974
Craig J. Brown, Vice President - Finance and Treasurer 44 1987
Gerard B. Chadwick, Vice President - Customer Service &
Communications 64 1987
A. Paul Cox, Jr., Vice-President and General Manager -
Business Equipment & Systems Division 56 1992
Rebecca A. Kagan - Corporate Secretary and In-House Counsel 41 1992
Peter S. Redding, Executive Vice President and General
Manager - Forms Division 55 1981
Joseph V. Schwan, Vice President - Forms Sales & Marketing 57 1991
Harry A. Seifert, Vice President - Forms Manufacturing 56 1987
William P. Sherman, Vice-President 73 1957
Michael Spaul, Vice President and General Manager -
Communicolor Division 46 1991
There are no family relationships among any of the officers; however,
William P. Sherman, Vice-President and retired director is related to James L.
Sherman, retired director and Charles F. Sherman, director. Officers are
elected at the annual meeting of the Board of Directors, which is held
immediately after the annual meeting of shareholders, for a term of office
covering one year. William P. Sherman and James L. Sherman retired as
directors on February 17, 1994. Roy W. Begley, Jr. and John A. Sherman II
were appointed by the Board in February to fill their vacancies.
Effective January 1, 1994, Peter S. Redding was appointed Executive
Vice-President and Chief Operating Officer. Mr. Redding, who was serving as
Executive Vice-President and General Manager of the Forms Division, is now
responsible for the operations of all of Standard Register's five divisions -
Forms, Business Equipment and Systems, Communicolor, International Operations
and Advanced Medical Systems.
Also effective on January 1, 1994, Craig J. Brown was appointed to
the position of Vice President of Finance, Treasurer and Chief Financial
Officer. In addition to his corporate financial responsibilities, Mr. Brown
will also direct the operations of the Advanced Medical Systems Division. Mr.
Brown joined Standard Register in 1975 and has held a number of financial
management positions including his most recent - Vice President of Finance and
Treasurer.
Items 11, 12 and 13 are incorporated by reference from the Company's
Proxy Statement for the 1994 Annual Meeting of shareholders.
-11-
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PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) Financial Statements:
See Index to Financial Statements on Page 10.
(a)(2) Financial Statement Schedules.
Page
I. Marketable Securities - Other Security Investments 28
V. Property, Plant and Equipment 29
VI. Accumulated Depreciation, Depletion and Amortization
of Property, Plant and Equipment 30
VIII. Valuation and Qualifying Accounts and Reserves 31
X. Supplementary Income Statement Information 32
Schedules other than those listed above are omitted for the reason
that they are not required or are not applicable, or the required information
is shown in the financial statements or notes thereto.
Columns omitted from schedules filed have been omitted because the
information is not applicable.
(a)(3) Exhibits:
See Index on Page 33
-12-
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, The Standard Register Company has duly caused this Annual Report
on Form 10-K to be signed on its behalf by the undersigned, thereunto duly
authorized, on March 18, 1994.
THE STANDARD REGISTER COMPANY
By: /S/ J. K. DARRAGH
---------------------------
J. K. Darragh, President,
Chief Executive Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of The Standard
Register Company and in the capacities indicated on March 18, 1994:
Signatures
Title
/S/ P. H. Granzow Chairman of the Board and Director
- ------------------
P. H. Granzow
/S/ C. J. Brown Vice-President - Finance and
- ------------------ Treasurer (Chief Financial Officer)
C. J. Brown
P. H. Granzow, pursuant to power of attorneys which are being filed with this
Annual Report on Form 10-K, has signed below on March 18, 1994 as
attorney-in-fact for the following directors of the Registrant:
R. R. Burchenal J. J. Schiff, Jr.
F. D. Clarke III C. F. Sherman
J. K. Darragh J. L. Sherman
M. C. Nushawg W. P. Sherman
P. S. Redding
/S/ P. H. Granzow
--------------------------
P. H. Granzow
-13-
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INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
The Standard Register Company
Dayton, Ohio
We have audited the accompanying consolidated balance sheet of The
Standard Register Company and subsidiary as of January 2, 1994 and January 3,
1993 and the related consolidated statements of income, shareholders' equity,
and cash flows for each of the three years in the period ended January 2, 1994.
Our audits also included the financial statement schedules listed in Item
14(a)(2). These financial statements and financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and financial statement schedules
based upon our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of The
Standard Register Company and subsidiary as of January 2, 1994 and January 3,
1993, and the results of their operations and their cash flows for each of the
three years in the period ended January 2, 1994, in conformity with generally
accepted accounting principles. Also in our opinion, such financial statement
schedules, when considered in relation to the basic consolidated financial
statements taken as a whole, present fairly in all material respects the
information set forth therein.
As discussed in Notes 5 and 7 to the consolidated financial
statements, in 1992 the Company changed its method of accounting for income
taxes to conform with Statement of Financial Accounting Standards No. 109, and
changed its method of accounting for postretirement benefits other than
pensions from the cash to the accrual method to conform with Statement of
Financial Accounting Standards No. 106.
BATTELLE & BATTELLE
Certified Public Accountants
3400 S. Dixie Drive
Dayton, Ohio 45439
January 28, 1994
-14-
15
THE STANDARD REGISTER COMPANY
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
January 2 January 3
A S S E T S 1994 1993
--------- ---------
CURRENT ASSETS
Cash and cash equivalents 78,994 86,203
Accounts receivable, less allowance for losses
of $2,534 and $2,983, respectively 135,067 122,444
Inventories 98,248 87,577
Deferred income taxes 10,860 11,006
Prepaid expense 4,558 5,069
------- -------
Total current assets 327,727 312,299
------- -------
PLANT AND EQUIPMENT
Buildings and improvements 54,688 56,035
Machinery and equipment 181,645 171,837
Office and rental equipment 36,041 34,532
------- -------
Total 272,374 262,404
Less accumulated depreciation 118,411 109,679
------- -------
Depreciated cost 153,963 152,725
Plant and equipment under construction 17,801 13,909
Land 2,488 2,488
------- -------
Total plant and equipment 174,252 169,122
------- -------
OTHER ASSETS
Patents, notes and deferred costs 354 1,042
------- -------
Total assets 502,333 482,463
======= =======
-15-
16
THE STANDARD REGISTER COMPANY
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
January 2 January 3
LIABILITIES AND SHAREHOLDERS' EQUITY 1994 1993
--------- ---------
CURRENT LIABILITIES
Current maturities of long-term debt 6,471 6,724
Accounts payable 20,582 18,204
Dividends payable 4,874 4,594
Accrued compensation 27,224 26,177
Accrued pension expense 7,805 8,037
Accrued other expense 1,223 3,986
Accrued taxes, except income 4,574 4,760
Income taxes payable 4,761 2,866
Deferred service contract income 6,640 5,656
------- -------
Total current liabilities 84,154 81,004
------- -------
LONG-TERM LIABILITIES
Notes payable to banks and others 17,546 24,454
Retiree health care obligation 24,482 24,510
Deferred federal and state income taxes 15,168 14,178
------- -------
Total long-term liabilities 57,196 63,142
------- -------
SHAREHOLDERS' EQUITY
Common stock, $1.00 par value:
Authorized 30,500,000 shares
Issued 1993 - 24,036,796; 1992 - 23,986,317 24,037 23,986
Class A stock, $1.00 par value:
Authorized 4,725,000 shares
Issued - 4,725,000 4,725 4,725
Capital in excess of par value 25,562 24,705
Retained earnings 308,413 284,901
Cost of 90,086 common shares in treasury ( 1,754)
------- -------
Total shareholders' equity 360,983 338,317
------- -------
Total liabilities and shareholders' equity 502,333 482,463
======= =======
See accompanying notes.
-16-
17
THE STANDARD REGISTER COMPANY
CONSOLIDATED STATEMENT OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
52 Weeks Ended 53 Weeks Ended 52 Weeks Ended
January 2 January 3 December 29
1994 1993 1991
-------------- -------------- -------------
REVENUE 722,120 705,215 693,712
------- ------- -------
COST AND EXPENSE
Cost of products sold 452,163 446,772 447,452
Engineering and research 7,754 7,803 7,854
Selling and administrative 166,267 163,711 162,350
Depreciation and amortization 24,553 22,955 22,028
Interest 1,142 2,124 3,012
------- ------- -------
Total cost and expense 651,879 643,365 642,696
------- ------- -------
INCOME BEFORE INCOME TAXES
AND CUMULATIVE EFFECT OF
ACCOUNTING CHANGES 70,241 61,850 51,016
------- ------- -------
INCOME TAXES
Current 26,920 22,451 19,639
Deferred (benefit) 1,136 27 (1,330)
------- ------- -------
Total income taxes 28,056 22,478 18,309
------- ------- -------
NET INCOME BEFORE
CUMULATIVE EFFECT OF
ACCOUNTING CHANGES 42,185 39,372 32,707
CUMULATIVE EFFECT OF
ACCOUNTING CHANGES (13,362)
------- ------- -------
NET INCOME 42,185 26,010 32,707
======= ======= =======
DATA PER SHARE
Net income before cumulative
effect of accounting changes $1.47 $1.37 $1.14
Cumulative effect of
accounting changes (.47)
----- ----- -----
Net income $1.47 $ .90 $1.14
===== ===== =====
See accompanying notes.
-17-
18
THE STANDARD REGISTER COMPANY
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
52 Weeks Ended 53 Weeks Ended 52 Weeks Ended
January 2 January 3 December 29
1994 1993 1991
-------------- -------------- --------------
COMMON STOCK
Beginning balance 23,986 23,948 23,910
Add shares issued under Stock
Incentive Plan 51 50 54
Less shares purchased and retired ( 12) ( 16)
------- ------- -------
Ending balance 24,037 23,986 23,948
------- ------- -------
CLASS A STOCK 4,725 4,725 4,725
------- ------- -------
CAPITAL IN EXCESS OF PAR VALUE
Beginning balance 24,705 24,246 23,926
Add excess of market over par
value of shares issued under
Stock Incentive Plan 857 650 502
Less excess of cost over par
value of shares purchased
and retired ( 191) ( 182)
------- ------- -------
Ending balance 25,562 24,705 24,246
------- ------- -------
RETAINED EARNINGS
Beginning balance 284,901 276,414 260,065
Add net income for year 42,185 26,010 32,707
Less cash dividends declared ( 18,673) ( 17,523) ( 16,358)
------- ------- -------
Ending balance 308,413 284,901 276,414
------- ------- -------
TREASURY SHARES
Cost of common shares purchased ( 1,754)
-------
Total shareholders' equity 360,983 338,317 329,333
======= ======= =======
See accompanying notes.
-18-
19
THE STANDARD REGISTER COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
52 Weeks Ended 53 Weeks Ended 52 Weeks Ended
January 2 January 3 December 29
1994 1993 1991
-------------- -------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income 42,185 26,010 32,707
------- ------- -------
Add (deduct) items not affecting cash:
Cumulative effect of accounting changes 13,362
Depreciation and amortization 24,553 22,955 22,028
(Gain) loss on sale of facilities ( 96) 77 ( 872)
Provision for deferred income taxes 1,136 27 ( 1,330)
Increase (decrease) in cash arising from
changes in assets and liabilities:
Accounts receivable ( 12,623) 1,754 15,853
Inventories ( 10,671) 5,349 2,138
Other assets 554 ( 714) ( 792)
Accounts payable 2,378 1,624 ( 2,371)
Accrued expenses ( 2,162) 3,530 ( 557)
Income taxes payable 1,895 ( 1,185) 3,388
Deferred service contract income 984 1,729 223
------- ------- -------
Net adjustments 5,948 48,508 37,708
------- ------- -------
Net cash provided by operating
activities 48,133 74,518 70,415
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of equipment 2,134 214 358
Additions to plant and equipment ( 31,076) ( 22,697) ( 28,039)
------- ------- -------
Net cash (used in) investing
activities ( 28,942) ( 22,483) ( 27,681)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on long-term debt ( 7,161) ( 10,779) ( 6,771)
Proceeds from issuance of common stock 908 700 556
Purchase of common stock ( 1,754) ( 203) ( 198)
Dividends paid ( 18,393) ( 17,230) ( 16,066)
------- ------- -------
Net cash (used in) financing
activities ( 26,400) ( 27,512) ( 22,479)
------- ------- -------
NET (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS ( 7,209) 24,523 20,255
Cash and cash equivalents at
beginning of year 86,203 61,680 41,425
------- ------- -------
CASH AND CASH EQUIVALENTS AT END OF YEAR 78,994 86,203 61,680
======= ======= =======
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION
Cash paid during the year for:
Interest 1,173 2,198 3,103
Income taxes 25,025 23,636 16,251
See accompanying notes.
-19-
20
THE STANDARD REGISTER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company operates in a single industry segment - providing
products and services that facilitate the recording, storage and communication
of business transactions and information. The accounting policies that affect
the more significant elements of the consolidated financial statements are
summarized below.
CONSOLIDATION - The consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiary. All significant
intercompany accounts and transactions have been eliminated.
FISCAL YEAR - The Company's fiscal year ends on the Sunday nearest to
December 31. The fiscal year ended January 2, 1994 had 52 weeks; the fiscal
year ended January 3, 1993 had 53 weeks; the fiscal year ended December 29,
1991 had 52 weeks.
CASH EQUIVALENTS - The Company classifies as cash equivalents all
highly liquid investments, primarily composed of repurchase agreements,
municipal notes and bond funds, which are convertible to a known amount of cash
and carry an insignificant risk of change in value.
INVENTORIES - Inventories are valued at the lower of cost or market.
All inventory costs are determined by the last-in, first-out method (LIFO).
Printed finished products include forms stored for future shipment and
invoicing to customers.
PLANT AND EQUIPMENT - Land, buildings and equipment, including
significant improvements to existing facilities, are valued at cost.
Maintenance and repairs are expensed as incurred.
DEPRECIATION - For financial statement purposes, depreciation is
computed by the straight-line method at rates adequate to recover the costs of
the applicable assets over their expected useful lives. For income tax
purposes, depreciation is computed by accelerated methods.
INCOME TAXES - In 1992, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes". Prior to 1992,
the provision for income taxes was based on income and expense included in the
consolidated statement of income.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS - In 1992, the Company
adopted Statement of Financial Accounting Standards No. 106 (SFAS 106),
"Employers' Accounting for Postretirement Benefits Other Than Pensions". Prior
to 1992, the cost of providing these benefits to retired employees was
recognized as a charge to income as the health care claims were received, the
prevalent practice prior to enactment of SFAS 106.
REVENUE RECOGNITION - The Company generally recognizes product and
related services revenue at the time of shipment. Under contractual
arrangements with some customers, custom forms which are stored for future
delivery are recognized as revenue when manufacturing is complete and the order
is invoiced. Revenue from equipment service contracts is recognized ratably
over the term of the contract.
-20-
21
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
NET INCOME PER SHARE - Income per share is calculated using the
average number of shares outstanding during the year.
NOTE 2 - INVENTORIES
Inventories are valued at the lower of cost or market determined by
the last-in, first-out (LIFO) method. If the first- in, first-out method had
been used, these inventories would have been $22,836,000 higher at January 2,
1994 and $22,380,000 higher at January 3, 1993.
During 1992 and 1991, inventory quantities were reduced, which
resulted in a liquidation of LIFO layers carried at lower costs. The effect of
these liquidations increased net income by $1,763,000 or $.06 per share in 1992
and $2,249,000 or $.08 per share in 1991.
Inventories at the respective year-ends are as follows:
(Dollars in thousands)
January 2 January 3
1994 1993
--------- ---------
Finished products $ 52,571 $ 49,450
Jobs in process 26,671 18,877
Materials and supplies 19,006 19,250
------- -------
Total $ 98,248 $ 87,577
======= =======
NOTE 3 - PLANT AND EQUIPMENT
Plant and equipment are carried at cost less accumulated
depreciation. Depreciation for financial reporting purposes was $23,908,000 in
1993, $22,310,000 in 1992, and $21,383,000 in 1991. Depreciation rates are
based on estimates of useful lives:
Classification Years
-------------- -----
Buildings and improvements 10-40
Machinery and equipment 5-15
Office equipment 5-15
Rental equipment 3-4
Leasehold improvements Life of leases
When equipment is retired or has been fully depreciated, its cost and
the related accumulated depreciation are eliminated from the respective
accounts. Gains or losses arising from the dispositions are reported as income
or expense.
NOTE 4 - PENSION PLANS
The Company has qualified defined benefit plans covering
substantially all of its employees. The benefits are based on years of service
and the employee's compensation at the time of retirement, or years of service
and a benefit multiplier. The Company funds its pension plans based on
allowable federal income tax deductions. Contributions are intended to provide
not only for benefits attributed to service to date but also for benefits
expected to be earned in the future. In addition, the Company has
non-qualified plans which provide benefits in addition to those provided in the
qualified plan.
-21-
22
NOTE 4 - PENSION PLANS (CONTINUED)
Assumptions used in the respective accounting years to determine
pension costs, are as follows:
1993 1992 1991
---- ---- ----
Discount rate 8.5% 8.5% 9.0%
Rate of increase in compensation levels 4.5% 4.5% 5.0%
Expected long-term rate of return on assets 10.5% 10.5% 10.5%
Pension costs consist of the following components:
(Dollars in thousands)
1993 1992 1991
---- ---- ----
Service cost of benefits earned $ 4,948 $ 4,696 $ 3,459
Interest cost on projected benefit
obligation 9,780 9,410 7,801
Actual gain on plan assets ( 4,101) ( 12,058) ( 19,025)
Asset (loss) gain deferred ( 6,514) 2,481 11,471
Amortization of transition asset ( 722) ( 722) ( 743)
Amortization of prior service costs 1,522 1,415
Amortization of loss 13
------- ------- --------
Net pension cost $ 4,926 $ 5,222 $ 2,963
======= ======= ========
The following table sets forth the plans' funded status and amounts
recognized in the Company's consolidated balance sheet at the respective year
ends.
(Dollars in thousands)
1993 1992 1991
---- ---- ----
Actuarial present value of:
Accumulated benefit obligation
Vested $ 98,454 $ 91,784 $ 88,828
Non-vested 673 554 426
------- ------- -------
Total $ 99,127 $ 92,338 $ 89,254
======= ======= =======
Projected benefit obligation $124,383 $118,439 $114,109
======= ======= =======
Plan assets at fair market value $101,639 $102,020 $ 91,915
======= ======= =======
Projected benefit obligation in
excess of plan assets ($ 22,744) ($ 16,419) ($ 22,194)
Unrecognized net (gain) loss 2,604 ( 2,436) 2,048
Unrecognized prior service cost 15,412 13,828 14,173
Minimum liability adjustment ( 789)
Unrecognized transition asset ( 2,288) ( 3,010) ( 3,732)
------- ------- -------
Accrued pension (liability) ($ 7,805) ($ 8,037) ($ 9,705)
======= ======= =======
Pension fund assets are invested in a broadly diversified portfolio
consisting primarily of publicly-traded common stocks and fixed income
securities.
-22-
23
NOTE 5 - POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company provides health care benefits for eligible employees who
retired prior to July 1, 1992. In 1992, the Company adopted Statement of
Financial Accounting Standards No. 106, "Employers Accounting for
Postretirement Benefits Other than Pensions". This statement requires the
accrual method of accounting for postretirement health care benefits over the
employees' period of employment based upon actuarially determined costs.
Previously, the Company expensed claims as incurred, the prevalent practice
prior to enactment of SFAS 106.
In fiscal 1992, the Company elected to immediately recognize the
$24,510,000 pretax postretirement benefit obligation existing at December 30,
1991, as a cumulative effect of an accounting change. This equates to
$14,850,000 or $.52 per share on an after tax basis. The Company continues to
pay for retiree benefit costs as claims are incurred. The amount included in
expense for 1991 under the previous accounting method was $1,642,000. Under
the new accounting method retirees' health claims for 1993 and 1992 amounted to
$2,069,000 and $1,892,000, respectively.
The accumulated benefit obligation was determined using the unit
credit method and an assumed discount rate of 8.5%. The assumed current health
care cost trend rate is 11.5% in 1993 and gradually decreases to 6.5% in the
year 2014.
The components of postretirement benefit costs for 1993 and 1992 are
as follows:
(Dollars in thousands)
1993 1992
---- ----
Service cost -0- -0-
Interest cost $ 2,041 $ 1,970
------- -------
Postretirement benefit cost $ 2,041 $ 1,970
======= =======
The funded status of the plan at January 2, 1994 and January 3, 1993
is as follows:
January 2 January 3
1994 1993
--------- ---------
Accumulated postretirement benefit
obligation for retirees $ 28,502 $ 24,510
Plan assets -0- -0-
------- -------
Accumulated postretirement benefit
obligation in excess of plan assets 28,502 24,510
Unrecognized net loss ( 4,020)
------- -------
Retiree health care obligation shown
in balance sheet $ 24,482 $ 24,510
======= =======
The effect of a one percent increase or decrease in the health care
cost trend rates used would result in a $243,000 increase or decrease in the
service and interest components of expense for 1993 ($390,000 for 1992) and a
$2,858,000 increase or decrease in the postretirement benefit obligation at
January 2, 1994 ($3,090,000 at January 3, 1993).
-23-
24
NOTE 6 - LONG-TERM DEBT
(Dollars in thousands)
January 2 January 3
1994 1993
--------- ---------
Unsecured term notes dated December 9, 1986,
bearing interest at 3.6875% and 4.0% at
respective year ends, due in seventeen equal
semi-annual installments commencing
December 9, 1988, payable to:
The First National Bank of Boston $ 10,943 $ 14,588
Wachovia Bank and Trust Co. 4,235 5,647
Society Bank, N.A. 4,235 5,647
------- -------
Total 19,413 25,882
Industrial development revenue bonds issued
by Rutherford County, Tenn., bearing interest
at 6-1/8%, due 1999 through 2003 4,600 4,600
Other obligations with various interest rates 4 696
------- -------
Total 24,017 31,178
Less current maturities 6,471 6,724
------- -------
Long-term debt $ 17,546 $ 24,454
======= =======
The aggregate principal payments for the five fiscal years subsequent
to January 2, 1994, are as follows: 1994 - $6,471; 1995 - $6,475; 1996 -
$6,471; 1997 - None; 1998 - None.
NOTE 7 - INCOME TAXES
The provision (credit) for income taxes consists of the following:
U.S.
Federal State Total
------- ----- -----
1993
Current $ 21,140 $ 5,780 $ 26,920
Deferred 918 218 1,136
------- ------- -------
Total $ 22,058 $ 5,998 $ 28,056
======= ======= =======
1992
Current $ 18,012 $ 4,439 $ 22,451
Deferred ( 220) 247 27
------- ------- -------
Total $ 17,792 $ 4,686 $ 22,478
======= ======= =======
1991
Current $ 15,653 $ 3,986 $ 19,639
Deferred ( 1,330) ( 1,330)
------- ------- -------
Total $ 14,323 $ 3,986 $ 18,309
======= ======= =======
In 1992, the Company retroactively changed its method of accounting
for income taxes as a result of adopting Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes". Under this method, deferred
tax assets and liabilities are determined based upon the difference between the
financial statement and tax bases of assets and liabilities using enacted tax
rates in effect for the year in which the differences are expected to reverse.
The Company recorded a credit of $1,488,000 or $.05 per share which represents
the net decrease in the net deferred tax liabilities as of that date. This
amount was reported in the consolidated statement of income as a cumulative
effect of an accounting change.
-24-
25
NOTE 7 - INCOME TAXES (CONTINUED)
The significant components of the deferred tax expense (benefit) are
as follows:
(Dollars in thousands)
1993 1992 1991
---- ---- ----
Depreciation $ 1,202 $ 992 $ 52
Pension 5 5 309
Investment tax credit ( 1,128) ( 1,128)
Inventories ( 01) 562 214
Compensation and benefits ( 26) ( 151) ( 867)
Receivables 154 70 113
Plant reconfiguration 314 ( 307)
Retiree health care ( 212) ( 16)
Other ( 23)
------- ------- -------
Total $ 1,136 $ 27 ($ 1,330)
======= ======= =======
The components of the net deferred tax asset and liability as of
January 2, 1994 and January 3, 1993 are as follows:
(Dollars in thousands)
January 2 January 3
1994 1993
--------- ---------
Deferred tax asset:
Accounts receivable $ 1,024 $ 1,178
Inventories 4,606 4,305
Compensation and benefits 2,871 2,845
Pension 2,288 2,293
Plant reconfiguration 71 385
------- -------
$ 10,860 $ 11,006
======= =======
Deferred tax liability:
Depreciation $ 25,057 $ 23,855
Retiree health care benefits ( 9,889) ( 9,677)
------- -------
$ 15,168 $ 14,178
======= ======
The reconciliation of the statutory federal income tax rate and the
effective tax rate follows:
1993 1992 1991
---- ---- ----
Statutory federal income tax rate 35.0% 34.0% 34.0%
State and local income taxes 5.4 5.0 5.2
Investment tax credit ( 1.8) ( 2.2)
Other ( .5) ( .9) ( 1.1)
----- ----- -----
Effective tax rate 39.9% 36.3% 35.9%
===== ===== =====
NOTE 8 - CAPITALIZATION
The Company has two classes of capital stock issued and outstanding,
Common and Class A. These are equal in all respects except voting rights and
restrictions on ownership of the Class A. Each of the 23,946,710 shares of
Common outstanding has one vote, while each of the 4,725,000 shares of Class A
is entitled to five votes. Class A stock is convertible into Common stock on a
share-for-share basis at which time ownership restrictions are eliminated.
-25-
26
NOTE 9 - COMMITMENTS AND CONTINGENCIES
Purchase commitments for capital improvements aggregated $2,134,000
at January 2, 1994. Also, the Company has purchase commitments for equipment
for resale of $3,593,000 at January 2, 1994. In addition, the Company has
entered into several agreements with suppliers to purchase specified minimum
quantities of raw materials through 1994.
The Company is obligated under several leases expiring at various
dates. Annual expense under these leases was $17,747,000 in 1993, $16,746,000
in 1992, and $17,048,000 in 1991.
Rental commitments under existing leases at January 2, 1994, were:
(Dollars in thousands)
Computer and
Real Sales Transportation Other
Estate Offices Equipment Equipment Total
------ ------- -------------- --------- -----
1994 $3,911 $6,975 $1,623 $1,604 $14,113
1995 3,082 5,617 428 1,271 10,398
1996 2,051 3,909 177 1,000 7,137
1997 613 2,134 95 388 3,230
1998 130 777 20 220 1,147
Later years 105 105
In the opinion of management, no litigation or claims, including
proceedings under governmental laws and regulations related to environmental
matters, are pending against the Company which will have an adverse material
effect on its financial condition.
NOTE 10 - QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data, in thousands of dollars except
for per share amounts, follow:
Quarters Ended
-------------------------------------------------------------
April 4 July 4 October 3 January 2
1993 1993 1993 1994
------- ------ --------- ---------
Revenue $169,295 $174,728 $179,104 $198,993
Gross margin* 64,222 64,724 65,712 75,299
Net income 9,366 9,546 9,749 13,524
Net income per share .33 .33 .34 .47
-26-
27
NOTE 10 - QUARTERLY FINANCIAL DATA (UNAUDITED) (CONTINUED)
Quarters Ended
--------------------------------------------------------------
March 29 June 28 September 27 January 3
1992 1992 1992 1993
-------- ------- ------------ ---------
Revenue $168,541 $173,095 $170,177 $193,402
Gross margin* 62,908 63,623 61,845 70,067
Net income before
cumulative effect of
accounting changes 8,743 9,447 8,683 12,499
Cumulative effect of
accounting changes ( 13,362)
Net income (loss) ( 4,619) 9,447 8,683 12,499
Per share
Net income (loss) before
cumulative effect of
accounting changes .30 .33 .31 .43
Cumulative effect of
accounting changes ( .47)
Net income (loss)
per share ( .17) .33 .31 .43
Quarters Ended
---------------------------------------------------------------
March 31 June 30 September 29 December 29
1991 1991 1991 1991
-------- ------- ------------ -----------
Revenue $172,306 $173,677 $163,821 $183,908
Gross margin* 58,522 59,678 56,141 71,919
Net income 5,976 6,969 6,758 13,004
Net income per share .21 .24 .24 .45
* Revenue less cost of products sold and services rendered.
NOTE 11 - CONCENTRATION OF CREDIT RISK
The Company's concentration of credit risk is limited due to the
large number of primarily domestic customers who are geographically dispersed.
As disclosed on the balance sheet, the Company maintains an allowance for
doubtful accounts to cover estimated credit losses.
-27-
28
SCHEDULE I
THE STANDARD REGISTER COMPANY
MARKETABLE SECURITIES - OTHER SECURITY INVESTMENTS
JANUARY 2, 1994
(Shares, Units and Dollars in thousands)
Column A Column B Column C Column D Column E
- -------- -------- -------- -------- --------
Number of Amount at
shares or which each
units - Market security
principal value of issue
amount of Cost of each issue carried in
Name of issuer and title bonds and each at balance the balance
of each issue notes issue sheet date sheet
- ------------------------ --------- ------- ---------- -----------
Temporary cash investments
Municipal Bond Funds (1) 43,879 43,879 43,930 43,930
Municipal Bonds (1) 29,570 29,570 29,709 29,709
Bank Overnight Funds (1) 1,552 1,552 1,552 1,552
------ ------ ------ ------
Total 75,001 75,001 75,191 75,191
====== ====== ====== ======
(1) No single investment exceeds 2% of total assets.
-28-
29
SCHEDULE V
THE STANDARD REGISTER COMPANY
PROPERTY, PLANT AND EQUIPMENT
FOR THE THREE YEARS ENDED JANUARY 2, 1994
(Dollars in thousands)
Column A Column B Column C Column D Column E Column F
- -------- -------- -------- -------- -------- --------
Balance at Balance at
beginning Additions Other changes end of
Classification of period at cost Retirements add (deduct) period
- -------------- ---------- --------- ----------- ------------- ----------
Year Ended January 2, 1994
- --------------------------
Land 2,488 2,488
Buildings and improvements 56,035 1,070 ( 444) ( 1,973)(a) 54,688
Machinery and equipment 171,837 20,937 (2,173) ( 8,956)(a) 181,645
Office equipment 34,320 5,109 ( 248) ( 3,331)(a) 35,850
Rental equipment 212 67 ( 32) ( 56)(a) 191
Plant and equipment
under construction 13,909 3,892 17,801
------- ------ ----- ------ -------
278,801 31,075 (2,897) (14,316) 292,663
======= ====== ===== ====== =======
Year Ended January 3, 1993
- --------------------------
Land 2,488 2,488
Buildings and improvements 56,194 987 ( 23) ( 1,123)(a) 56,035
Machinery and equipment 165,688 10,694 ( 577) ( 3,968)(a) 171,837
Office equipment 29,806 6,949 ( 500) ( 1,935)(a) 34,320
Rental equipment 349 86 ( 179) ( 44)(a) 212
Plant and equipment
under construction 9,928 3,981 13,909
------- ------ ----- ------ -------
264,453 22,697 (1,279) ( 7,070) 278,801
======= ====== ===== ===== =======
Year Ended December 29, 1991
- ----------------------------
Land 2,546 ( 58) 2,488
Buildings and improvements 58,248 561 ( 27) ( 2,588)(a) 56,194
Machinery and equipment 145,093 33,099 (1,101) (11,403)(a) 165,688
Office equipment 28,971 5,006 ( 484) ( 3,687)(a) 29,806
Rental equipment 299 97 ( 22) ( 25)(a) 349
Plant and equipment
under construction 18,448 ( 8,520)(b) 9,928
------- ------ ----- ------ -------
253,605 30,243 (1,692) (17,703) 264,453
======= ====== ===== ====== =======
(a) Fully depreciated and written off
(b) Excess of items capitalized over additions
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SCHEDULE VI
THE STANDARD REGISTER COMPANY
ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF PROPERTY AND EQUIPMENT
FOR THE THREE YEARS ENDED JANUARY 2, 1994
(Dollars in thousands)
Column A Column B Column C Column D Column E Column F
- -------- -------- -------- -------- -------- --------
Additions
Balance at charge to Balance at
beginning costs and Other changes end of
Classification of period expenses Retirements add (deduct) period
- -------------- ---------- --------- ----------- ------------- ----------
YEAR ENDED JANUARY 2, 1994
Buildings and improvements 20,809 2,783 ( 192) ( 1,973)(a) 21,427
Machinery and equipment 74,106 15,494 ( 460) ( 8,956)(a) 80,184
Office equipment 14,648 5,568 ( 186) ( 3,331)(a) 16,699
Rental equipment 116 62 ( 21) ( 56)(a) 101
------- ------ ----- ------ -------
109,679 23,907 ( 859) (14,316) 118,411
======= ====== ===== ====== =======
YEAR ENDED JANUARY 3, 1993
Buildings and improvements 19,095 2,850 ( 13) ( 1,123)(a) 20,809
Machinery and equipment 64,157 14,317 ( 400) ( 3,968)(a) 74,106
Office equipment 11,986 5,050 ( 453) ( 1,935)(a) 14,648
Rental equipment 189 93 ( 122) ( 44)(a) 116
------- ------ ----- ------ -------
95,427 22,310 ( 988) ( 7,070) 109,679
======= ====== ===== ====== =======
YEAR ENDED DECEMBER 29, 1991
Buildings and improvements 18,718 2,977 ( 12) ( 2,588)(a) 19,095
Machinery and equipment 61,721 14,771 ( 932) (11,403)(a) 64,157
Office equipment 11,204 4,589 ( 120) ( 3,687)(a) 11,986
Rental equipment 106 119 ( 11) ( 25)(a) 189
------- ------ ----- ------ -------
91,749 22,456 (1,075) (17,703) 95,427
======= ====== ===== ====== =======
(a) Fully depreciated and written off
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31
CHEDULE VIII
HE STANDARD REGISTER COMPANY
ALUATION AND QUALIFYING ACCOUNTS AND RESERVES
OR THE THREE YEARS ENDED JANUARY 2, 1994
(Dollars in thousands)
Column A Column B Column C Column D Column E
- -------- -------- -------- -------- --------
Additions
---------
(1) (2)
Charged
Balance at (Credited) Balance
beginning to costs Other at end
Description of period and expenses Additions Deductions of period
- ----------- ---------- ------------ --------- ---------- ---------
YEAR ENDED JANUARY 2, 1994
Allowance for doubtful
accounts 2,983 2,085 2,534(a) 2,534
Inventory obsolescence 3,024 1,377 1,451(b) 2,950
YEAR ENDED JANUARY 3, 1993
Allowance for doubtful
accounts 3,164 2,312 2,493(a) 2,983
Inventory obsolescence 4,723 822 2,521(b) 3,024
YEAR ENDED DECEMBER 29, 1991
Allowance for doubtful
accounts 3,497 2,480 2,813(a) 3,164
Inventory obsolescence 6,487 1,579 3,343(b) 4,723
(a) Net uncollectible accounts written off
(b) Obsolete inventory scrapped or written
down to realizable value
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32
SCHEDULE X
THE STANDARD REGISTER COMPANY
SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR THE THREE YEARS ENDED JANUARY 2, 1994
(Dollars in thousands)
Column A Column B
- -------- --------
Charged to costs
and expenses
----------------
Year Ended
------------------------------------------------------------------------
Item January 2, 1994 January 3, 1993 December 29, 1991
---- --------------- --------------- -----------------
1. Maintenance and repairs 15,006 14,140 13,490
====== ====== ======
2. Depreciation and
amortization of
intangible assets,
preoperating costs
and similar deferrals * * *
3. Taxes, other than payroll
and income taxes:
Real estate and
personal property 3,132 3,102 3,106
Franchise and other 979 787 1,090
----- ------ ------
Total 4,111 3,889 4,196
===== ===== =====
4. Royalties * * *
5. Advertising costs * * *
* Less than 1% of total revenue
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INDEX TO EXHIBITS
3. Amended Articles of Incorporation of the Company, Filed as Exhibit 4 to
the Company's Registration Statement No. 33-8687.
10. Material contracts.
10.1 The Standard Register Company Key Employees Incentive Plan.
Incorporated by reference to the Company's Proxy Statement for the
Annual Meeting of Shareholders held on April 26, 1976.
10.2 The Standard Register Company Stock Incentive Plan. Incorporated by
reference to the Company's Proxy Statement for the Annual Meeting of
Shareholders held on April 19, 1978.
10.3 The Standard Register Company Non-Qualified Retirement Plan filed
herewith.
10.4 The Standard Register Company Officers' Supplemental Non-Qualified
Retirement Plan filed herewith.
10.5 The Standard Register Company Amended and Restated Stock Incentive Plan
filed herewith.
11. Computation of Earnings Per Share.
17.1 Letter of James L. Sherman resigning from Board of Directors.
17.2 Letter of William P. Sherman resigning from Board of Directors.
24. Power of Attorney of R. R. Burchenal, F. D. Clark III, J. K. Darragh,
M. C. Nushawg, P. S. Redding, J. J. Schiff, Jr., C. F. Sherman,
J. L. Sherman and W. P. Sherman.
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