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Standard Register Reports Second Quarter 2014 Financial ResultsDAYTON, Ohio --(Business Wire)-- Standard Register (NYSE: SR) today announced its financial results for the second quarter of 2014. The Company reported revenue of $225.3 million and a net loss of $5.8 million or $0.67 per diluted share. For the 2013 second quarter, revenue was $136.8 million and net income was $2.0 million or $0.34 per diluted share. Adjusted EBITDA, which excludes certain items as detailed in the attached reconciliation, was $15.5 million compared to $8.9 million for the second quarter of 2013. Results for the second quarter of 2013 do not include results from WorkflowOne, which Standard Register acquired on August 1, 2013. "The benefits from integration are evident, with increased revenue in all solutions and improvement in margin and adjusted EBITDA over the first quarter," said Joseph P. Morgan, Jr., president and chief executive officer. "The business is stabilizing as we continue to invest in our growth solutions, sell our portfolio of solutions across our growing base of more than 12,000 customers and move new business through implementation." Second Quarter Results Total revenue increased 64.7 percent to $225.3 million from $136.8 million in the 2013 second quarter. On a pro forma basis, including WorkflowOne, revenue for the second quarter of 2013 was $247.8 million. Gross margin as a percentage of revenue improved to 28.2 percent from 27.3 percent in the first quarter of 2014 and compared to 28.5 percent in the second quarter of 2013. Selling, General and Administrative (SG&A) expenses were $57.1 million for the second quarter of 2014 compared to $35.4 million for the second quarter last year. The increase is primarily attributable to the inclusion of WorkflowOne. Standard Register operates two business units: Business Solutions and Healthcare. Business Solutions revenue was $160.9 million for the second quarter of 2014, an increase of 81.5 percent over revenue of $88.6 million in the 2013 second quarter. Business added from the acquisition, and growth in Mexico-based label manufacturing operations and promotional products sales contributed to the increase. Operating profit was $2.6 million compared to $0.9 million last year. Healthcare revenue was $64.4 million, an increase of 33.7 percent over revenue of $48.2 million in the second quarter of 2013. Technology-enabled solutions in patient information management continued to grow in the second quarter, and business added from the acquisition contributed to the increase. Health insurance reform, electronic health record (EHR) adoption and state electronic records adoption are decreasing orders for printed forms. Operating profit was $2.9 million for the quarter compared to $1.8 million last year. Second Quarter Highlights
First Half of Year Results Total revenue increased 63.0 percent to $453.8 million and the Company incurred a net loss of $12.9 million or $1.50 per diluted share, compared to revenue of $278.4 million and net income of $6.7 million or $1.13 per diluted share for the first half of 2013. On a pro forma basis, including WorkflowOne, revenue for the first half of 2013 was $501.5 million. Adjusted EBITDA was $28.6 million for the first half of 2014 compared to $21.1 million for the first half of 2013. Business Solutions revenue increased 79.6 percent to $324.6 million for the first half of 2014 compared to $180.7 million for the prior year first half. Operating profit increased 4.6 percent, to $4.0 million from $3.8 million last year. Healthcare revenue increased 32.3 percent to $129.2 million compared to $97.7 million for the first half of 2013. Operating profit increased 23.4 percent to $4.8 million from $3.9 million last year. Gross margin as a percentage of revenue was 27.7 percent for the first half of 2014 compared to 29.1 percent last year. SG&A expenses were $115.8 million for the first half of 2014 compared to $70.1 million last year. The increase is primarily attributable to the inclusion of WorkflowOne. Capital expenditures, including capital leases, for the first half of 2014 were $14.9 million compared to $6.4 million last year. The Company continues to invest in the areas with growth potential, including digital printing, label operations in Mexico, marking and decorative technology, software development and its SMARTworks® workflow platform. Standard Register contributed $14.1 million to its qualified pension plan in the first half of 2014 compared to $10.5 million in the first half of 2013. Total pension contributions for 2014 are expected to be $42.2 million in 2014 and $34.4 million in 2015. The Company is monitoring the progress of the Highway Bill, which may reduce pension funding obligation for 2014 and 2015. Conference Call Standard Register's president and chief executive officer Joseph P. Morgan, Jr., and chief financial officer Robert Ginnan will host a conference call at 10:00 a.m. EDT on Friday, July 25, 2014, to review the second quarter results. The call can be accessed via an audio webcast at http://www.standardregister.com. About Standard Register Standard Register (NYSE:SR), is trusted by the world's leading companies to advance their reputations and add value to their operations by aligning communications with corporate brand standards. Providing market-specific insights and a compelling portfolio of workflow, content and analytics solutions to address the changing business landscape in healthcare, financial services, manufacturing, transportation and retail 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 press release contains 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 could differ materially from the Company's current expectations. Factors that could cause the Company's results to differ materially from those expressed in forward-looking statements include, without limitation, our ability to successfully integrate the acquired assets or achieve the expected synergies of the WorkflowOne acquisition, future pension funding requirements and recognition of actuarial gains and losses, access to capital for expanding in our solutions, the pace at which digital technologies and electronic health records (EHR) adoption erode the demand for certain products and services, the success of our plans to deal with the threats and opportunities brought by digital technology, results of cost containment strategies and restructuring programs, our ability to attract and retain key personnel, variation in demand and acceptance of the Company's products and services, frequency, magnitude and timing of paper and other raw material price changes, the timing of the completion and integration of acquisitions, general business and economic conditions beyond the Company's control, and the consequences of competitive factors in the marketplace, including the ability to attract and retain customers. 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. For more information, see the Company's most recent Form 10-K and other filings with the Securities and Exchange Commission. 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 Adjusted EBITDA 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 uses Adjusted EBITDA, defined as earnings before interest, taxes, depreciation and amortization and excludes pension benefit cost, restructuring and impairment charges, acquisition and integration expense and certain acquisition fair value and other miscellaneous adjustments, to evaluate the Company's results. 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. The Company's debt covenants are also based on the Adjusted EBITDA calculation. 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 $125 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 equivalents). A reconciliation of non-GAAP measures to their most comparable measure calculated in accordance with GAAP is included in the tables below.
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