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The Standard Register (NYSE:SR)

Q4 2012 Earnings Call

February 22, 2013 10:00 am ET

Executives

Carol Merry

Joseph P. Morgan - Chief Executive Officer, President, Director and Member of Executive Committee

Robert M. Ginnan - Chief Financial Officer, Chief Accounting Officer, Vice President and Treasurer

Analysts

Charles Strauzer - CJS Securities, Inc.

Joseph F. Perdue

Barry Blank

Operator

Good day, everyone, and welcome to the Standard Register's Fourth Quarter Conference Call. Today's conference call is being recorded. As a reminder, the presentation slides for today's conference are available by accessing the Investors Center section of the Standard Register website at www.standardregister.com/investorcenter. I will now turn the conference over to Carol Merry. Please go ahead.

Carol Merry

Thank you, Crystal. Good morning, and welcome to the Standard Register's 2012 Fourth Quarter Conference Call. Joining me today are Joe Morgan, President and CEO; and Bob Ginnan, Chief Financial Officer. Before we get started, I would like to remind you that today's presentation may contain forward-looking language and projections. These types of comments need to be taken into consideration with the Safe Harbor statement that can be found in the earnings release on -- that Standard Register issued this morning, on the webcast slides that accompany this presentation by accessing the company website under Investor Center, or in the company's Securities and Exchange Commission filings.

In addition, we will make use of financial measures that are not in accordance with Generally Accepted Accounting Principles or GAAP. It is management's belief that the use of these measures will assist our audience's understanding of our financial position. They are not meant to be used in isolation or as a substitution for GAAP, and a reconciliation between these measures and their GAAP counterparts can be found in the earnings release that was issued this morning.

For today's presentation, Joe will provide a few opening comments that will be followed by Bob's review of the financials for the quarter and the year, Joe will then discuss the company's strategy and direction. Following his comments, we will open up the call for your questions. And now I'll turn the call over to Joe for his opening comments.

Joseph P. Morgan

Thanks, Carol. Good morning, and thank you, all, for joining us today. I'm going to make some comments, as Carol said, about the performance of the company for the year. I'll draw some threads and themes throughout. Bob will talk about the financials of the business, giving more clarity, and then I'll conclude with some comments that will bring it together.

During and throughout 2012, our company implemented a strategic restructuring program that we announced last January, intended to reduce cost and allow us to better align resources to support the growth solutions for the future of our company. With this program, we made significant changes to our go-to-market model in terms of how we sell, focusing on the right field resources and the right market segments, along with leveraging online selling, as well as strengthening our marketing organization. We've segmented companies -- excuse me, customers additionally. And all of these actions supported our evolution from a product-focused company to a market-focused innovator. I'm happy to say that even though revenue declined, which I'll talk about more in a few moments, there were significant positive performance points in the quarter and throughout last year. As the direct result of the restructuring measures, as well as the growing success of our technology-oriented solutions, we saw our financial performance improving throughout 2012.

First point I'd like to make is regarding cash flow. We told our investors that there would be positive cash flow in 2012 of at least $2 million. We overperformed on this objective and even after funding the qualified pension plans, $2 million more than required, to get a head start on 2013, we ended the year with positive a cash flow of $8.2 million, giving us confidence for the future. Operating profit is another area where we see -- saw a continued improvement. While operating profit is being affected by unit declines in printed transactional product revenue and overall industry issue, growth in certain of our higher-margin technology solutions and savings from the aforementioned restructuring program is having a positive impact on our operating income, again, giving us confidence. Our management focuses on operating profit as a driver -- is -- as a driver of shareholder value is where we spend a vast majority of our time. Our objective is continually improving operating profit, driven to investment and growth in sales of our newest solutions.

As we move into 2013, operating profit is at the top of our priority list. I'd also like to highlight an important achievement that we worked on during the year and recently finalized, which again confirms the emphasis that we placed several years ago on market focus. It was an outcome of our 2011 acquisition of Dialog Medical and its powerful application called, iMedConsent, which provides a standardized approach for engaging and informing patients about medical procedures. This is a very content-focused solution. We've been very pleased with the performance of that acquisition and subsequent innovations that continued to provide us with a path forward toward future solutions in our Healthcare business unit. We announced last week that iMedConsent has achieved a place on the short list of certified applications for complying with electronic health record program. This is significant for our Healthcare business. We expect the certification to provide additional revenue, as well as opening new customer doors in an area where Standard Register Healthcare is one of the acknowledged leaders. It also exemplifies the strategy that we are pursuing in healthcare. As early as the '40s, Standard Register was showing hospitals how to reduce and simplify paperwork. This our 21st century equivalent and has great value for hospitals struggling to comply with the first level of EHR requirements as they plan for the future. We will be showing this and other solutions at the HIMSS show, which is the largest healthcare information management or technology show, in New Orleans in a couple of weeks, and we are very excited about that. We also have an advisory council that we rely on, a strategic way that has healthcare experts from across the Standard industry giving us insight in terms of our future product roadmaps.

Before we turn the call over to Bob for his analysis of the financials for the quarter and the year, I want to address the issue of the decline in our revenue. We've been reporting throughout 2012 that our revenue was being impacted by the reduction in a portion of our business with a very large financial service customer. For the 12-month period, $24 million of the $46 million decline in revenue was attributable to that one customer. Our core solutions, those that will provide future growth for the company, grew in the quarter without the effect of the reduction in business from that financial services customer. I hasten to add that the company continues to be a significant customer of ours and we are leveraging our solution innovations within that relationship. While the dimensions of the relationship will change, we fully expect to have a strong go-forward plan in joint concert with them. One of our strengths as a company is the long-standing relationships with many of our largest hospitals and industrial companies. Our customers continue to rely on Standard Register and we are just transitioning what they're relying on us for. I have more to say about where we're growing in 2013 after Bob makes his comments on the financial position of the company. Bob?

Robert M. Ginnan

Thank you, Joe. Well, revenue came in at $143.6 million versus $161.4 million, which was the revenue situation that Joe described, so I'll move on to the gross margin here as he'd gone through the revenue for us. Margin actually improved in the quarter at 30.4% versus 29.6% last year, and we saw a significant improvement in our SG&A as a result of our efforts throughout the year with our restructuring at 36.3 versus 45.3. This left us at operating profit of $7.3 million versus $2.5 million last year on significantly less revenues, so quite an improvement in our operating profit margins there. Pension amortization and settlement, $6.1 million, consistent with last year. Last year, we didn't book the restructuring in the fourth quarter, leaving us at, this year at $400,000 loss compared to a $9.5 million loss in the same quarter last year. As you recall, last year, we also booked the deferred tax valuation allowance, leaving us last year to a loss of $95 million versus a virtual breakeven this year in the fourth quarter.

For the year, again, margins at 30% versus 30.6%, we saw the improvement in the fourth quarter, but still slightly behind last year, however, on $46 million less revenue. SG&A came in at $157.6 million versus $182.6 million last year. Last year, while the effects of the post-retirement termination are out of that SG&A number, there still was $3.3 million of favorable amortization in the number, leaving us at $22.8 million operating profit versus $15.6 million last year. So quite an improvement on operating profit given the lower revenue base. On a bottom line basis, we see a loss of $9.1 million, which is combination of pension amortization and the additional restructuring in the year.

Turning to the business units. For the quarter, pretty consistent across both business units, $52.5 million in Healthcare versus $91 million in Business Solutions for a total $143.6 million, about the same decline and really continuing the story that Joe described there. On a margin basis, you'll see improvement in both businesses, 34.5% versus 33.7% in Healthcare, and 28% versus 27.2% in Business Solutions. And then also the other important thing about the quarter is, we saw operating profit in both businesses, as well as for the year. So nice performance on both businesses from an operating profit perspective.

Moving to the balance sheet. Probably, the big thing I want to point out in the balance sheet is in the pension liability. In 2012, we continued to see declines in the long-term interest rate. Our overall rate that we used to value the net present value of reliability went from 4.25% to 3.65%, resulting in an another pretty significant increase in the liability, about $16 million over where we were last year this time. So continued decline there have impacted the liability. But overall, we saw improvement in our working capital, helping to drive the positive cash flow for the year, and pretty consistent with the balance sheet other than the change in the pension liability.

On the cash flow side, we -- as Joe said, we were at $8.2 million positive cash flow. One of the things we did in the quarter was we actually accelerated our pension funding, contributing to $2 million more than required. That'll help us in '13 as well. So quite a strong cash flow performance for the year. We spent $6 million in capital and $20 -- $28.6 million on our restructuring efforts, leaving us with the $8.2 million.

So in summary, the positive cash flow for the year was extremely important at $8.2 million. Actually, if you look over the last 2 years and take out our acquisitions, we've actually been positive on a cumulative basis over the last 2 years. We're seeing the positive results from the restructuring. The expenses are being controlled, we can see that in the SG&A and the operating profit, and we're ahead of plan on the pension because we're confident our cash flow will enable us to get a jump on the pension as well. So that's the financial summary, and Joe, I will turn it back to you.

Joseph P. Morgan

Thanks, Bob. In 2013, we've been able to sharpen our focus based on what we learned in 2012. Being very bold in our structure production, our investments are focused on the customer, and we will drive long-term efficiency in our operations and be compliant given that, that is very important in the markets that we serve. By talking to customers' researching trends and relying on our experience in the expertise that we've developed in the markets and industries that we've focused on, we've validated a few very important trends. Companies are going more digital and looking for partners who can help them figure out what they need to do to be successful with digital communications and delivery. It's not about print anymore, that is a component of the discussion, but it's about digitization of the business. The EHR acceleration is great evidence of that. The transition to digital is not coming soon, it's here, it's a reality. And I should point out that print is digital, too. If you remember, actually, 2 years ago, in our Investor Call, we talked about the digital print investments that we were making, a smart move on our part, it's really helped, particularly in our digital publishing solutions in support of our customers. Companies know they need to communicate across multiple channels and maintain the integrity of their core messages, more communications that were previously printed are being presented and transacted online, particularly in financial services. We see that with ePresentment. Another example is the dramatic decline in printed materials since the introduction of tablets about 2 years ago. Companies are more concerned than ever with efficiency and that applies to enterprise workflow management, as well as individual communications. Related to that last point, analytics are growing in importance, both in the perspective of determining the proper communication channels per audience and in analyzing the effectiveness of communication campaigns whether to patients, customers or partners. This is a very important emphasis of our company as measuring the effectiveness of the solutions that we bring to our clients and how they utilize them. Our restructuring and transformation efforts are contributing to position Standard Register perfectly to address our customers' objectives in the aforementioned areas. In 2012, we signed more contracts that are relevant to our strategy and for the transaction of document production. But they were smaller than the large enterprise print contracts of prior years. Tie that back to my comment about operating profit. This is a trend that we expect to continue, however, we see margin improvement in many of these new areas. We've moved to a demand-based strategy, focusing our energy on areas where our customers need help and where they're concentrating their spending. Our current portfolio has been defined by the evolution of our solutions. There are older solutions that are still valuable, as well as newer solutions that are contributing to growth. I'll also point out that many of our older solutions have intellectual property tied into them around security and how we perform for our clients, which will continue to have value going forward. We are evolving in our approach to our portfolio, looking across solution life cycles instead of only whether the solution falls into a broad category of Legacy or Core. We will be better able to identify customer and market trends and then proactively address them. We believe this will lower the risk, as well as increase opportunities for our company. One evidence of that is some of the channel relationships that we're beginning to evolve, that I hope to speak to you about it in the future -- on future calls. We still have challenges. Our qualified pension plan obligation, which I imagine will be a question about marketing our contemporary portfolio to change some customers' appreciation for our scope, and compliant with the New York Stock Exchange requirements for continued listing. We filed, as you know, our preliminary proxy statement earlier this week announcing that we will ask our shareholders to approve a reverse split at the upcoming annual meeting in April. Our board and management believes that maintaining listing on the NYSE will provide Standard Register with a market for its common stock that is more accessible if the company's common stock were traded on the OTC bulletin board.

Our key priorities for 2013 are incorporating digital delivery solutions into our portfolio mix, bringing to new customers innovative ideas that we are commercializing, sharpening our emphasis on workflow, communications and analytics, as well as on controlling costs and continuous improvement in operating profit driven by those same solution sales as I noted earlier, with the overall objective of being a sustainable business as we have been for the past 100 years.

I'd like to just point out a few final things to summarize the call today as noted on this slide. Key ratios that measure financial health of a company are very strong. Credit and ability to borrow is adequate for our operating needs. Positive cash flow of $8.2 million even after funding $2 million of 2013 pension obligation. The operating profit of the business is improving. Contracts were signed and pipeline is strong for the future. Restructuring efforts are contributing positively and continue on, and we continue to validate our strategy with market trends and customer behavior. We made a lot of progress in 2012, we feel more confident than ever with the value we bring to our customers. We're better equipped to show them how we can create value for them, and we are well-positioned to continue to increase that value with the new solutions and capabilities that we're investing in. Our whole company is focused on success for 2013 and looking forward to that very much.

Now we'll be happy to answer any questions, Bob and I.

Question-and-Answer Session

Operator

[Operator Instructions] Your first question comes from the line of Charles Strauzer at CJS Securities.

Charles Strauzer - CJS Securities, Inc.

If we could just talk a second about the comments about the listing in the reverse split. Assuming the reverse split is approved and moves forward, would you then be in kind of in line with what the NYSE requires, post that split?

Joseph P. Morgan

Well, there's 2 listing, continued listing requirements that we're dealing with, Charlie, and the first one is the less-than-dollar standard and yes, we would absolutely be in compliance with that at that point. The second standard, which is the 18-month plan is the minimum market cap, and of course, just the math of the reverse stock split won't necessarily change the total market cap, so we're still working towards that plan.

Charles Strauzer - CJS Securities, Inc.

Got it, okay. And Joe, if you can talk a little bit more broadly on the business, obviously some of the Core growth products are performing as you had probably hoped and obviously, the Legacy stuff is still falling off. Are you seeing the inflection point yet at all in the future? Obviously, we're not close to it yet, but does it feel like we're getting close to that inflection point where kind of growth avenues are starting to kind of take more of the share, the point where they can start offsetting the decline with the Legacy?

Joseph P. Morgan

That is the key question, and thanks for raising it. I would say that as you look at the business now, if you piece together some of the things that I said, by segmenting the business the way we have, we can start to see more clearly that we are stabilizing in the areas where those core products are being sold. So the inflection point, we can see where that horizon point would be, I'm not ready to say exactly when that'll happen. But yes, we're becoming more confident in terms of when that will occur. The other thing that is subtle but important here is that, as we look at the document management business or the Legacy business, the size of those contracts is -- has historically been very, very large, and Standard Register's position, specifically in financial services has often found us with some very large customers. While we never want to lose a customer like we did or lose business to the degree that we did, and noted earlier in the call, we started to operate the business not dependent upon those larger customers, to that same magnitude. And so therefore, as we plan for the future, our confidence and ability to report that the inflection point is coming, that we can see growth on the horizon gets clearer for us. So I -- it's a little bit of stay tuned, but our confidence is definitely building in the area that you described.

Charles Strauzer - CJS Securities, Inc.

And Joe, when you look at the overall portfolio, and when you talk to your customers, especially in hindsight when you've bid on jobs or bid on contracts that maybe you hadn't won, are there pieces of the portfolio that are still missing that you think are necessary to kind of get you close to that inflection point?

Joseph P. Morgan

Yes, it's interesting. In the print side, which often finds its way to those contracts, we do have print-related solutions that are part of the core going forward. Generally, we have everything we need, that's not an issue. What's interesting is, that the opportunities in many of the core areas are not RFP-able, if that's a word, because our customers don't actually know, in many cases, how to digitize their business, and they're asking us to help them operationally with the core -- the components of our company. So we're leveraging partnerships and channels very often to bring in the components that we don't have. And then building an analytics engine on the back end to validate that this solution is, in fact, achieving its objective. I actually feel more confident that we can access and integrate the appropriate solutions in the Core than sometimes I felt in the traditional side, which sometimes, size matters more than whether you can print the product or not.

Charles Strauzer - CJS Securities, Inc.

Got it. All right. Then shifting to the balance sheet and the cash flows, when you look at this year, obviously last year, you had a better-than-expected year of cash flows, it looks like you paid down a little bit of debt, as well as a little bit more on the pension funding side, this coming year, you've got a little bit of a step-up in the pension funding, are you confident in your ability to fund those needs with the cash flows you're expecting from this year?

Robert M. Ginnan

Yes, Charlie, I think that the work we did this year through changing the business structure, driving the cash flow this year and then going into next year, as you pointed out, it's a fairly slight increase in the pension funding. We are able to accomplish that this year with positive cash flows. So, yes, we feel pretty good going to 2013 from the cash flow perspective.

Charles Strauzer - CJS Securities, Inc.

And then beyond the pension funding, what do you think CapEx, obviously, what do you expect to use part of -- use your excess free cash flow, if there is any, for? Is it more for continued debt paydown?

Joseph P. Morgan

Charlie, could you say that last thing again, I heard most of what you said, the last point I didn't hear.

Charles Strauzer - CJS Securities, Inc.

Just basically, if you have excess free cash flow this year, above and beyond CapEx and pension funding, what's the kind of primary use of that excess free cash, if you have that?

Joseph P. Morgan

We have a very robust governance process in the company as we evaluate where we want to spend our money. And so we have, like all companies, the affordability question. So we know what priorities we can invest in, but as we have success in certain areas or free cash flow that wasn't expected, we bring up the next couple of things that we would invest in, many of which are not maintenance. They are focused on customer advancement. For example, our SMARTworks platform, we are releasing a new release today actually, so we continue to invest in that platform. Our new President in the Healthcare business, John King, coming from the healthcare software and services area has really refined and continued progress that strategy. So there are many new things that are coming out of that business. And one thing I can tell you for sure is every time we go to HIMSS, which is the Healthcare Software and Services show, we absolutely learn new things that would -- we would want to be able to invest in. The one area that I would suggest, though, that's very important for our business, if you look at traditional printing, a lot of times people talk about how much do you outsource to other providers, subcontracting? In the software and services area, and I'm sure you're familiar with this, there are a lot of partners, and so the integration amongst those partners is very important. So our excess cash going forward, in many cases, will be spent on new partner integrations that will help advance the solutions we have for the company.

Operator

Our next question comes from the line of Joe Perdue at Wells Fargo.

Joseph F. Perdue

Joe and Bob, how much time is left to get back -- I think, on the report I read, I think you need a $50 million market cap and you're somewhere around $17 million now. The reverse split would take care of the dollar, you said you have 18 months. Are we already 6 months into that 18 months?

Joseph P. Morgan

Yes. So yes, we have -- it'll go to our reporting in late October.

Joseph F. Perdue

Okay. So basically, the stock would either have to triple after the reverse split or are you thinking that if you can show progress, maybe you can do a secondary or you'd have to issue more shares to try to get back up to that $50? It would have to obviously be on positive news or else, the market would be reluctant to add additional money to Standard Register. But is there a -- maybe a secondary, if you really start showing its turnaround?

Joseph P. Morgan

Well, I don't think more shares will on that market cap than to say on a market cap issue. It really comes down to the performance of the company and the strategic direction.

Joseph F. Perdue

Okay. Every year, I look at the cost savings that -- this has gone on for like 2 or 3 years, obviously, worldwide, you're doing cost savings. And it looks like 2013, you've already realized $40 million in cost savings for 2012. You're trying to get up to $60 million in 2013, which leads me to believe that there could be another $20 million in annual cost savings. And I always seem to be wrong on this and I don't know if I'm looking at it differently from other companies, but if you came in with a loss of $0.31 for 2012, and you realized another $20 million in cost savings for 2013, which would equate to $0.68 per share, if the revenue decline could stop, is it -- are my numbers correct that there -- like if everything stayed the way it was in 2012 and the different divisions did not decline, which is what we're all hoping for, could there be profitability of $0.37? I'm just taking the $0.68 savings from cost savings minus the $0.31 you lost. Am I doing that wrong again or is that -- this is what I was looking for years ago, like dramatic earnings of well over $1 and it just didn't happen, I guess because of the business declining, the Core business, the Legacy business declining. Do you follow what I'm saying? I mean, does this equate to profitability?

Joseph P. Morgan

I think you have a lot of things in there. So let me make sure I address them here.

Joseph F. Perdue

Certainly, it's a loaded -- I mean, I'm just trying to make sure I'm looking at things correctly, although we don't know what the revenue number is going to be.

Joseph P. Morgan

I think the first comment is, you're absolutely right on the revenue, that, that is the key to ultimately seeing the $50 million. But I would say that your math is correct, that we still expect to continue to improve here, and obviously get to profitability. Now there's other factors outside of the operating profit here, for example, the pension amortization, that is subject to change and it will go up a little bit in 2013 as well. So there are some other factors there. I think the other piece of it is that given the deferred tax valuation allowance, that has an impact on EPS as well. But overall, yes, we're looking at continued improvement here.

Joseph F. Perdue

Okay, good. You've been talking about strong Healthcare business. I think it was new software that was coming in, mobile solutions. And there was still an 8.8% revenue decline. Can you touch on what the chances of Healthcare and other segments actually show in revenue increases? I mean, is that realistic or are you just in a declining revenue world?

Joseph P. Morgan

Well, I'll take that one. I think that what's most interesting about our business today, let's take -- let's isolate Healthcare. We know what the impact of EHR is on the traditional printing. We can pretty -- very actively forecast what that looks like. We're not going to state that publicly, but that's how we run the business. So as we look at that, we also have the same way of doing our software and services portfolio, which we bifurcated last year in terms of the organization. We separated how we look at the traditional forms from how we look at the newer software and services. The growth of the software and services was substantial. The decline on the traditional print was also substantial. So when you add them together, you get to the minus 8% or so that you mentioned. What will happen eventually, and we have fairly keen insight into this, is when the business forms, the clinical forms will -- I don’t want to use the term bottom out, but where we'll reach a point where the decline will slow substantially. That is the moment when the other growth will actually overcome that decline, and we'll have the opportunity for growth. We, as a leadership team and a management team, are working towards that objective, and that's how our investments are being made. We're not ready to share that on a public level yet, but we're able to manage the business effectively with variable cost management and the restructuring to get us where we need to be.

Joseph F. Perdue

Okay. And then there was a talk, I think, we were hoping maybe 1 year or 2 ago, that by the end of 2012, you'd be 50-50 Core-Legacy.

Joseph P. Morgan

Right.

Joseph F. Perdue

But is there any comment on that by the end of 2013? Is that still a goal to be 50% core by the end of 2013?

Joseph P. Morgan

I think it's a goal, yes. That's a good way to describe it, yes.

Joseph F. Perdue

Okay. And then I've had trouble following the family trust. I know they've been -- obviously, they've been there longer than anybody and they own 50-plus percent of the stock, does it still appear that they held through that major downturn and dividend cuts?

Robert M. Ginnan

I mean, we're not aware of any [indiscernible]...

Joseph P. Morgan

Yes, I can't really speak for them and I don't have insight in terms of...

Joseph F. Perdue

Yes, obviously, somebody sold to knock it down from $0.35 to $0.56, but I just didn't see that they did. So it looks like they might be hanging through. Now do you have any cash projections for 2013, excuse me, cash flow?

Joseph P. Morgan

We'll have positive cash flow for 2013, that's our objective. We haven't spiked the number yet -- or excuse me, targeted the number yet.

Joseph F. Perdue

And the other thing I'm not sure I've ever asked either one of you is, can you move more of the fixed side of your pension to equity? Or is there some blend where you're not allowed to do that? Is there any way to change the underlying set up of your pension account so that this low, endlessly low interest rates that only seems to go lower won't be such a problem for you?

Joseph P. Morgan

Well I think I've heard 2 separate questions in there, and I heard in terms of the asset performance can move more of its equity to increase the returns. And I think the answer to that is yes, we can do that. I also would say historically, we've been at the higher range of equity versus other forms of investments. When you look at all pension funds in aggregate, we're generally at the higher end to drive better returns.

Joseph F. Perdue

And I was wondering why the equity performance that's obviously doubled in the last 3 or 4 years, why that hasn't lowered the fixed income side of the liability, like you would think that you're making money on the equity side? Am I looking at that incorrectly?

Joseph P. Morgan

Well I think what's happened is, the asset has actually, over the last 2 years have actually performed very well. In fact, in this past year, it has performed extremely well. But the problem is, on the liability side, which is where the interest rate comes into, a decline in the interest rate, given the liability, has such a dramatic impact on the net of the 2 versus increases in the asset, that's what continuously happen. So the reality is, we could have 3 years of 10% return on the equity side, but a 50 basis point decline in the interest rates going to -- eat all that away, so it's really the 2 sides of the story here.

Operator

[Operator Instructions] Your next question comes from the line of Barry Blank from Murphy & Durieu.

Barry Blank

Joe, I have a question for you on the reverse split. In 85% or more of all reverse splits, usually the stock will decline in value. I mean, I don't know what the reverse split will be, let's say it's 1 for 3. Initially, the first trade would be 3x, $0.56, which trading. But I would say, more than 85% of the time, it drops afterwards, which will hurt you more in getting you a $50 million market cap. Yes, it will take care of the dollar price immediately, and it may not in the long run, because as I said, stock usually it ends up going down. Don't you think it would be better to defer to the reverse split and try to get the stock value up at the later point in time, possibly think about it when the company is having earnings and can sustain the price based on P/E basis?

Joseph P. Morgan

Barry, thank you for participating today and your question. I would say this that the board and management team look at the circumstances of the business that we face today very seriously. And we understand what you just described, that's information that obviously is considered. But we believe, all things being considered, that it's in the best interest of the shareholders, as I said, for us to stay in the NYSE. And in order for us to do that with confidence, we have to maintain compliance now, and this is a way to do that. We also have confidence, which I think we've conveyed throughout this call that in the operations in the business, which will hopefully continue to help us improve. But I will also say, and take this in the spirit it's intended, that there's 15% that don't experience what you described. And we hope and believe that it's very possible that Standard Register may in fact be within that category. I understood exactly what you're saying. But time is of the essence for us and we must do what we believe is appropriate given all factors.

Barry Blank

What reverse split -- what ratio of reverse split are you proposing?

Joseph P. Morgan

We have not made that determination as yet, but we will be communicating that obviously when we have.

Barry Blank

And the last question I've got is, okay, let's say you do this reverse split, what assurances do you have of the exchange that they would maybe even extend your time past the 18 months, because it's highly unlikely, even if we stayed at the same price with 31 million shares outstanding and a stock trading at the present time at $0.56, you're talking about stocking -- stock having to triple in the next 12 months, which is a major thing for any company to triple the stock price of that particular period of time. Do you think that they will give you an additional 18 months or 12 months to reach that level?

Joseph P. Morgan

We don't know. I mean, I think it would be a speculation if I even commented on that. But I will tell you that we'll obviously learn more details over the coming months. And as we do get in and inside, I'll be in the position to answer that question. But right now, it will be pure speculation.

Operator

There are no further questions at this time. I would now like to turn the call back over to Carol Merry for any closing remarks.

Carol Merry

Thank you for joining us today, and we look forward to talking to you next quarter. This will end our call.

Operator

This does conclude today's conference call. You may now disconnect.

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Source: The Standard Register Management Discusses Q4 2012 Results - Earnings Call Transcript
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