Standard Register Reports Second Quarter 2011 Financial Results

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.

Conference Call

Standard Register’s President and Chief Executive Officer Joe Morgan and Chief Financial Officer Bob Ginnan will host a conference call at 10:00 a.m. EDT on July 29, 2011, to review the second quarter results. The call can be accessed via an audio web cast accessible at: http://www.standardregister.com/investorcenter.

About Standard Register

Standard Register (NYSE:SR) 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, commercial and industrial markets, Standard Register is the recognized leader in the management and execution of mission-critical communications. More information is available at http://www.standardregister.com.

Safe Harbor Statement

This report includes forward-looking statements covered by the Private Securities Litigation Reform Act of 1995. Because such statements deal with future events, they are subject to various risks and uncertainties and actual results for fiscal year 2011 and beyond could differ materially from the Company’s current expectations. Forward-looking statements are identified by words such as “anticipates,” “projects,” “expects,” “plans,” “intends,” “believes,” “estimates,” “targets,” and other similar expressions that indicate trends and future events.

Factors that could cause the Company’s results to differ materially from those expressed in forward-looking statements include, without limitation, variation in demand and acceptance of the Company’s products and services, the frequency, magnitude and timing of paper and other raw-material-price changes, general business and economic conditions beyond the Company’s control, timing of the completion and integration of acquisitions, the consequences of competitive factors in the marketplace including the ability to attract and retain customers, results of continuous improvement and other cost-containment strategies, and the Company’s success in attracting and retaining key personnel. The Company undertakes no obligation to revise or update forward-looking statements as a result of new information, since these statements may no longer be accurate or timely.

Non-GAAP Measures Presented in This Press Release

The Company reports its results in accordance with Generally Accepted Accounting Principles in the United States (GAAP). However, we believe that certain non-GAAP measures found in this press release, when presented in conjunction with comparable GAAP measures, are useful for investors. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position, or cash flows where amounts are either excluded or included, not in accordance with generally accepted accounting principles. We discuss several measures of operating performance including non-GAAP net income and earnings per share and cash flow on a net debt basis, which are not calculated in accordance with GAAP. These non-GAAP measures should not be considered as substitutes for, or superior to, results determined in accordance with GAAP.

Management evaluates the Company’s results, excluding pension loss amortization, pension settlements, restructuring charges, and asset impairments. We believe this non-GAAP financial measure is useful to investors because it provides a more complete understanding of our current underlying operating performance, a clearer comparison of current period results with past reports of financial performance, and greater transparency regarding information used by management in its decision making. Internally, management and our Board of Directors use this non-GAAP measure to evaluate our business performance.

In addition, because our credit facility is borrowed under a revolving credit agreement, which currently permits us to borrow and repay at will up to a balance of $100 million (subject to limitations related to receivables, inventories, and letters of credit), we take the measure of cash flow performance prior to borrowing or repayment of the credit facility. In effect, we evaluate cash flow as the change in net debt (credit facility debt less cash and cash equivalents).

The table below provides a reconciliation of these non-GAAP measures to their most comparable measure calculated in accordance with GAAP.