The Standard Register Company (SR)

Q2 2010 Earnings Call

July 30, 2010, 10:00 am ET

Executives

Joe Morgan - President and CEO

Bob Gannin - VP, Treasurer and CFO

Analysts

Charlie Strauzer - CJS Securities

Presentation

Operator

Good day everyone and welcome to Standard Register's Second Quarter 2010 Conference Call. Today's conference call is being recorded as a reminder the presentation slides for today's conference are available by accessing the investor center section of the Standard Register website at www.standardregister.com/investorcenter. I will now turn the conference over to Mr. Shaun Smith. Please go ahead.

Shaun Smith

Thank you, Angie. Welcome to the company’s second quarter 2010 earnings conference call. Joining me today are Joe Morgan, President and Chief Executive Officer and Bob Ginnan, Chief Financial Officer.

Before we start, I would like to remind you that this conference call may contain forward-looking statements including language concerning future projections. These projections should be considered in the conjunction with the Safe Harbor statement contained in our earnings news release as well as the Safe Harbor statement that can be found by accessing the home page of the investor center on the company’s website.

In addition, we will make references to financial measures that are not in accordance with generally accepted accounting principles, or GAAP. This information is not meant to be considered in isolation or as a substitution of GAAP. The use of these measures is meant to enhance our audience’s understanding of the company’s performance.

For today’s call, Joe has some highlights to discuss. This will be followed by Bob’s review of our financial statement. After Bob’s report, he will open it up for questions, that both Joe and him will answer.

Now let me turn the call over to Joe for his remarks.

Joe Morgan

Good morning, thanks for joining us on this investor call. We’re pleased that the foundation we’re building is making progress as is evident in this first half. From a revenue standpoint we had a 3.7% decline which continues to trend favorably, that’s the fifth quarter in a row where we have been able to step down our decline. Obviously our intent ultimately is growth, but we’re moving in that direction.

As we analyze our performance for the first half, it’s very evident that we have areas that are growing, which I’ll talk about in a minute. And then we have the core declining component of our business, but we have separated those things so that we can in fact take appropriate actions at the portfolio level.

Form a gross margin standpoint Bob will talk in detail about our MyC3 activities that we’ve talked about previously. But we continue to work very hard there and our gross margin being maintained at approximately the same percentage is a good indicator of that.

In the quarter we also spent several million dollars on investments that followed the SG&A line, again this is to advance the portfolio and continue to build out technology capabilities. As I mentioned MyC3 is on track, last year we mentioned the range of expectations was between $30 million and $40 million of savings once fully implemented, we are seeing that that performance within the business. And Bob as I said will describe that in more detail.

For the quarter our earnings were breakeven, which were in line with our internal expectations. From a capital standpoint we’ve mentioned in the first quarter that we were making a significant investment in our digital network, upgrading equipment in workflow so that we could take advantage of the transition that’s taking place in the print space toward a more digital delivery.

That upgrade is now complete in the second quarter and what that is allowing us to do is to increase our capacity where growth exists where it matters, which is in the digital space. We’ve created super regional centers as a result of this, which is enhancing our ability to serve our customers going forward but also allowing us to bounce our go-to-market effort which will have direct sales but also you will see more and more rep capability from Standard Register as we go forward.

And it really is allowing us to additionally optimize our network with no customer that being negative impact. Thus far this year we’ve announced three facility closures, we have actually closed one, the other two will be closed as the year progresses. Our focus on the markets is enabling us to identify growth, separate growth from the declining categories and that insight is providing us with significant optimism for the future.

I want to make a few comments here about each of the markets and again reinforcing that our market focus is transitioning our company from internal operational focus to everyone in the company moving toward the market so that we can understand where the trends are and then act upon them and our operations are being build so that we can respond quickly.

So from a commercial standpoint, some key points here, revenue trends are improving across commercial in the emerging segment, we have 4% growth for the quarter. It’s been a while since we can state that, that’s a good indication of where the focus is helping us.

The financial segment as everyone is aware with the regulatory environment and many of the changes that are happening there is a little unclear however we have stabilized the revenue and improved the profit in the quarter. We did sign 16 new customers through the first half and that continues to ramp and what’s also interesting is our portfolio on the print side shifts, our marketing solutions is taking advantage of some of the new investments that are taking place in this segment and we had double digit growth again 4% in emerging but one very significant part of the digital communications, digital print growth is marketing solutions and we are playing in that space at double digit growth.

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