Standard Register Co. ( SR)

Q3 2010 Earnings Call

October 29, 2010 10:00 am ET


Shaun Smith - Investor Relations

Joe Morgan, Jr. - President and Chief Executive Officer


Charlie Strauzer - CJS Securities



Good day, everyone and welcome to Standard Register’s Third 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

I will now turn the conference over to Shaun Smith. Please go ahead.

Shaun Smith

Hi, good morning. And welcome to Standard Register’s Third Quarter 2010 Investor Call. Joining me today is Joe Morgan, Chief Executive Officer and Bob Ginnan, Chief Financial Officer. Before we get started, I’d like to remind you that today any forward-looking statements that we might make are covered by the Safe Harbor statement that can be found in the company’s earnings new release as well as accessing our website.

In addition, we will make references to financial measures that are not in accordance with Generally Accepted Accounting Principles or GAAP. Management believes that the use of those measures will enhance our audience's understanding of our financial performance and are not meant to be considered in isolation or a substitution of GAAP.

For today's call, Joe Morgan will have a couple of comments regarding the highlights for the quarter that will be followed by Bob Ginnan's overview of the financial statements, at which time Bob will turn the call over for questions that him and Mr. Morgan will answer.

So with that I turn the call over to Joe Morgan.

Joe Morgan, Jr.

Good morning. We're excited today to be talking about our earnings and performance for the last quarter. As you're probably well aware at this point, this is a key pivot point in our turnarounds leading to transformation.

And so I'm going to talk a little about that. One of the things that we're doing a little different today is that we've taken this investor call and a follow-up town hall with all of our employees to Boston. We have a great deal of business on the East coast and we have a fairly good size number of employees for our company there as well. So part of our transformation is to connect the performance of the business with employees throughout the country. So we're doing that just by way of reference, so a few a highlights for the month.

As Shaun pointed out, I'm going to provide some specific details to give a little bit clearer view of how we're performing against our strategy. First is around revenue. We came back to growth. It's been a long time since we've grown as a company and it's the sixth quarter in a row where we've demonstrated performance improvement. We're feeling more stable, of course, that the revenue level which is a key driver for the future of the business.

From a gross margin standpoint, we saw slight improvement on a percentage basis when you adjust for LIFO. On an SG&A basis we're controlling our expenses while we reinvest in the business, and the MyC3 plan that we announced last year has progressed quite well. And as we mentioned, we have reinvested a good portion of some of the earnings improvement opportunity that's come from that in the business, and that's a key factor in our transformation.

And then from a net income standpoint, $0.05 a share, 1.4 million positive for the year. Bob will get into more detail there. And then of course, on a cash basis it's very important for us to have positive cash flow. We achieved that in the quarter. We're still negative 3.2 million for the year, but we intend to be break-even by year-end, taking into consideration the level of investment that we've made thus far. So very excited on the financial performance. A lot of work yet to do, but I think, again, consistent progress towards what we ultimately wanted to do is to get back to profit, positive cash flow and grow as a company.

A few things that I'll point out, as Shaun said, the slides are available. When we announced the turn-around back in 2009 when I officially became CEO of the company we were focusing on a few things. We first wanted to stabilize revenue because that was the catalyst for the future and we wanted to begin the process of adjusting the portfolio.

With that would come an improved earnings, but we had to also catalyze that through a very aggressive process which we called MyC3. And then we have some unique attributes of our business, which are around the pension. And we obviously have to do our best to mitigate the risk there, but then make investments in the company and reward our shareholders through dividends.

So we had to manage that cash flow component very closely, and we've been successful in the midst of this turn-around in doing that. The key steps for us to be able to operate in the turn around, though, were first to have a very robust operational plan. I've talked about the five points of change several times on previous calls and that's the way we structure the business and align our objectives.

And the second thing which is really important, we've talked about culture on many calls before in terms of transitioning our go to market business from being very print centric to services and solutions, and we're making that move. But it's not just the go to market, it's the entire company. So we're making progress there.

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