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Standard Register Co. (NYSE:SR)

Q4 2007 Earnings Call

February 22, 2008 10:00 am ET

Executives

Bob Cestelli - VP of IR

Dennis Rediker - President and CEO

Craig Brown - CFO

Analysts

Jamie Clement - Sidoti & Company

Charles Strauzer - CJS Securities

Operator

Good day, everyone, and welcome to Standard Register's fourth quarter and full year 2007 conference call. As a reminder, the presentation slides for today's conference are available by accessing the Investor Center's section of the Standard Register website at www.standardregister.com/investorcenter.

Before we begin, a spokesperson from Standard Register will read a brief statement.

Bob Cestelli

This report includes forward-looking statements covered by the Private Securities Litigation Reform Act of 1995. Because such statements deal with the future events, they are subject to various risks and uncertainties, and actual results for fiscal year 2008 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, the timing of the completion and integration of acquisitions, the consequences of competitive factors in the marketplace, cost containment strategies and the company's success in attracting and retaining key personnel.

Additional information concerning factors that could cause actual results to differ materially from those projected is contained in the company's filing with the Securities and Exchange Commission, including its report on Form 10-K for the year ended December 30, 2007. 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.

Operator

Thank you. We will now turn the conference over to Mr. Dennis Rediker, President and Chief Executive Officer of Standard Register. Mr. Rediker, please go ahead.

Dennis Rediker

Thank you and good morning everyone, and welcome to the fourth quarter and year-end Earnings Call. As usual Craig Brown, CFO and Bob Cestelli, VP of Investor Relations are here with me.

I'm going to make a few comments, but my comments are going to not talk about the numbers so much, just talk about the sort of framework and the things I want you to think about as Craig goes through explanation of the numbers, so you have a way to understand the way we are looking at things.

So with that, I'll just launch into it.

In our last call, on the third quarter call, we reported significantly improved operating profit, and in this case and all of my discussion, operating profit is defined as profit before restructuring, impairment and pension amortization and settlement.

Our third quarter '07 profit benefited from our cost reduction initiative that we started in July and a significant portion of that cost reduction came from headcount reduction, mainly in the form of mid-management position consolidation and other SG&A reductions.

As you will hear, as you read already, this carrying over into the fourth quarter results, so that the second half is kind of a new base for improved results for the company. And the cost reduction initiative, we target a $40 million annualized cost reduction, of which we expected about $15 million in '07 and rest in '08.

Currently, when we go through it, we see that we've got a run rate tract that we can see to achieve about $35 million of that cost reduction during '08 and of course we will be striving to achieve the rest and maybe even more.

We do have solid activity in terms of bringing new accounts into the company and that's important because as you know we still have some pressure on the traditional business and some customers are expecting price decline from us.

In the fourth quarter, we signed 14 new deals worth $14 million on an annualized basis. The majority of which were in our target markets in healthcare and manufacturing. And we actually are continued to focus on our three core markets where we are having some progress. And we have a good pipeline, for example, in manufacturing we have a strong pipeline for our manufacturing label solutions.

However, we do continue to be challenged in our traditional product document solutions. In our document and label solutions, revenue was down 7%. And as we have been continually saying the top line that we are looking for is probably going to be relatively flat, may be modest increase due to the fact that the traditional products are being commoditized, the print product. But we do have growth in the segment that we are using to replace that decline.

These are businesses or lines of business that are digital, contemporary, they are solution based and there are more services and are software enabled and these businesses like our print on-demand, document systems, our commercial print services, PathForward consulting and international are the ones taking up the slack and growing faster. For example, for the whole year, we signed a total of 46 new deals worth over $36 million on an annualized basis and the good news is in 2007, we realized over $18 million worth of that revenue.

Now as we drive growth in our key vertical segments, healthcare, manufacturing and financial services and we repositioned the company as a solution provider and a process outsourcer, we must invest in talents and motivate our people and improve our workflow processes. Of course, expenses in that area runs through the P&L immediately as apposed to asset investments which get amortized over time.

A portion of the savings that we achieved via the cost reductions that we announced last year will be put towards improving our talent base, training our people, developing better processes and investing and marketing strategy, so we can drive performance over the long-term in the higher levels. For example, we in 2008 have a target of increasing our sales force personnel by approximately 5% to 10%.

Now taking all this into consideration, itemizing these things; number one, continued pressure on the traditional printer products; number two, achieving our cost saving, of course trying to exceed; number three, the need to invest in people process and marketing efforts; and number four, growing the lines of our new business and penetrating our three vertical markets. All of taken into consideration leads us to the longer-term guidance that we've been offering for the past few months.

Now this longer-term guidance is a little more guidance than we have been offering in the past which was largely only revenue, and so I am going to go through this again.

The long-term financial objectives that we laid out recently are as follows. We want to grow total revenue and that will grow modestly because of the rebased on the change and mix and that will be done by achieving double-digit increases in the growth segments offsetting the decline in traditional business.

We continue to strive to achieve a better cost structure, controls and improve our productivity. The combination of the mix change with better margins, the relatively modest growth in revenue and a good cost structure even with the investments we have to make to continue our journey towards the new products and services will result in what we have called double-digit earnings growth.

We continue to generate cash to fund operations, pay our dividend, meet our retirement obligations and fund restructuring and investments that are capitalized. We also expect to produce return on invested capital as in excess of the cost of capital.

Those items are the long-term financial objectives that we have laid out, in this case the long-term over the next several years. Now those are things we're striving to achieve and that's a mix of building up the new businesses, investing in talent, repositioning the company, developing our people and our technology and our process improvements and continuing to produce at least a double-digit earnings growth on an operating earnings growth basis as I described earlier.

So think about those things and try to keep that in your mind as Craig goes through the detailed numbers and then we'll take questions. Craig?

Craig Brown

Thank you, Dennis. Good morning, everyone. Before we go through the P&L and few of the balance sheet and cash flow items, I thought I would touch on three items. First I want to talk about is our costs reduction program. Also I have comment on our pension settlement charge in the quarter. And I will end with a comment about some changes that we have in the works with regard to our segment reporting.

With regard to the cost reduction program, you will recall that we have targeted a $40 million annualized savings and as of the end of this year, we are running currently at a rate of about annualized savings of around $35 million, so we have done a good of moving toward our target.

Our goal for the second half of '07 compared to the first half of '07 was to save $15 million, which would be a $30 million annualized rate. And we have exceeded that goal as the $35 million annualized savings number indicates. And we have programs in place and we are still working toward the original target of $40 million.

The cost of this restructuring program amounted to about $8 million, so there was a favorable comparison between the cost of restructuring and the annualized $35 million in savings.

As Dennis indicated, the vast majority of this will accrue the bottom line, but we are reinvesting some of it for long-term investment, long-term growth. So if you look at our year or so, in 2007 it becomes to some extent a tale of two different halves, the first half versus the second half.

Our second half was $12 million lower in revenue compared to the first half, some of that related to seasonality of our third quarter which is typically weaker. But nevertheless, our second half was down by $12 million versus the first.

However, our gross margin actually was up $2 million compared to the first, our SG&A was $18 million lower in the second half and so our operating profit in the second half was up $20 million compared to the first half, so a much different second half than the first half.

We are helped in a couple of area in our second half by couple of non-recurring items. We reversed some performance restricted stock in the fourth quarter which helped our quarter by $2.7 million. We also had been working on a proposal to reduce our sales tax and we applied for sales tax refunds which we will receive for about $1.2 million and we had some other non-recurring items of about $700,000, so in total about $5 million in the fourth quarter of non-recurring items that helped us out. We also had some pretty favorable healthcare experience in the year, especially in the second half.

With regard to the pension settlement charge, you are familiar of course with our pension amortization that we have been recording for several years and this amortization originated primarily out of the weak stock market in 2001 and 2002 when there was a gap between our actuarial assumption and the weak returns from the stock market in those years. And those differences of course are not reported in the years in which they occur, they are accumulated and then are amortized over future years and we've been enjoying that expense now for several years.

2007 total year amortization was $26.1 million compared to 2006, that was $25.6, it was about the same number in '07 as in '06. And we're pleased to report that in '08, we expect that number to be lower and we're currently estimated about $20 million to $21 million but the final version of that number won't be available for few more months. But we believe that it will be in that range.

In the fourth quarter, we also had a larger pension settlement charge, and pension settlement charge is required when payment under the plan exceeded certain threshold. Our plan paid a lump sum benefit. And that we had as a result of our restructuring and other things in the year we had a significant amount of retirements and therefore we had a lot of payments and that triggered this charge.

That charge is non-cash charge and effectively represents an acceleration of some of that amortization of past losses. So the pension settlement and the prior year amortization are really of the same kind of thing.

The some of our amortization settlement was a significant item for the year, it was almost a $1 a share, $0.99.

Finally, with regard to segment reporting, we are making some changes effective with the end of this year. We want to breakout our label business which we think has good growth opportunities and we want to feature that and provide more transparency to that business. And we are making several other changes that I think will also help in transparency. And we will not talk about those specifically today, as these are changes that you are not familiar with yet. We'll still stay with the old structure in today's comments, but we will post these new structure and new numbers on the web in a few days with history we stated as well, and of course it will be in our 10-K when it comes out.

So now let's turn to the P&L and go through the quarter. I'll remind you that we are talking here on continuing operations. We did sell our digital pen operation in the year, and so what we'll be describing for the fourth quarter and full year will be on a continuing operations basis.

Revenue in the quarter was $218.6 million, and it was down $9.4 million from the same quarter of '06. That's a decline of about 4%. One account figure prominently in that decline and other than that item it was down slightly.

Our document and label solutions was $132.8 million compared to 141.3, that's down 6%. If you exclude that single account, we would be basically down about 1% in this business for the quarter. So it was a better than average quarter for most of our traditional business.

Print on demand was off in the quarter as well, it was $67.8 million compared to 70.3 a year earlier, that's down 3.5%. We were up against a particularly strong quarter last year and the $67.8 million compares pretty favorably to preceding quarters of this year but was not up to the standard that we set a year earlier.

Our document systems business was $4.9 million compared to $5.9 million a year ago, did not have growth in the quarter, although it was up for the year. And our all other segments which are primarily represented by commercial print and are beginning to start up consulting business was up $2.6 million or 25%. We did our first installation of software under the program that we acquired late last year and the commercial print was up about 12%. So we had continued good success in that front.

Our gross margin for the year, for the quarter rather was down $2.4 million on a drop of the $9 million in revenue, but the gross margin percentage actually improved from 33.7% last year to 34% this year. The 34% is about the same percent we had in the preceding third quarter.

So again if you look at the second half versus first half, our second half was at 34% gross margin versus a 32.6% in the first half, so the effect of the restructuring of the cost savings was clearly evident in our gross margin number for the quarter and second half.

On SG&A; excluding pension amortization and settlement, SG&A was down nearly $12 million in the quarter, $48.6 million this year versus $60.4 million last year. This is primarily reflecting the restructuring that Dennis discussed. We also had those $5 million of non-recurring items for the restricted stock and the sales tax items.

That brought our operating profit before amortization, before restructuring and before impairment up to $19 million in the quarter compared to $10 million. It's our second consecutive quarter of sharp increase in operating earnings.

We've talked about the pension amortization and the pension settlement and other items of interest. Our interest expense was up slightly over last year based on higher debt balances. If you drop all the way to the bottom line on EPS, we had a loss in the quarter of $0.14 a share which is primarily driven by the large pension settlement charge.

If you look at the attribution of that $0.14, we had $0.51 that related to the pension loss, amortization and pension settlement and about a $0.05 for restructuring. And so you end up therefore with $0.38 on operations compared to $0.19 last year, double last year's rate.

Turning to the year, we had $865 million in revenue, that was down about $29 million or 3.2%. Our DLS business was $533.4 million for the year, down about 7%. POD $266.4 million, up $6 million or about 3%. Document systems $21.4 million, up about a 0.5% over last year's result and the other commercial print and international segments was $44.3 million in total, up nearly 17% fueled primarily by growth in commercial print.

Gross margin $288 million versus $307 million, so our gross margin was off nearly $19 million from last year. We had high cost after we closed our Middlebury facility and consolidated its operations into other plants, a high training cost over time, some quality cost and so forth.

The cost savings from the second half helped us close the gap, but we didn't quite get to the same percentage as we had last year. We were at 33.3% this year compared to 34.3% in all of 2006. I remind you, however, that our second half of '07 was 34%, so pretty close in the second half to the prior year.

SG&A was down $20 million, primarily driven by the restructuring and the other items that we discussed. Our operating earnings were $45 million compared to $42 million. So we closed strongly in the second half and we are able to push our operating earnings above the prior year.

On an EPS basis, we are $0.26 a loss all in for the year compared to a profit last year of $0.11, but if you look at the $0.26 as I indicated earlier $0.99 is attributable to pension amortization and settlement. We had $0.16 for restructuring, so we did $0.89 on an operating basis compared to $0.84 in the year earlier.

Turning to couple of comments on the balance sheet and cash flow. First for the quarter, we had very good cash flow in the quarter. Our cash flow was $12 million positive and improved our net debt by that same amount ending the year at $51.3 million.

The improvement in cash flow is driven primarily by the improved operations. So our restructuring program and the other things that we have been doing have helped our cash flow. In fact, if you look at the second half of the year, we had net positive cash flow of nearly $3 million. So clearly the second half was a stronger half for us.

A couple items on the balance sheet, our working capital end of the year lower than the prior year and our capital assets balance was also slightly below the prior year as our depreciation exceeded our CapEx.

Our capital spending in '07 was $21.6 million, a little bit below the prior year and in 2008, our expectation is that our CapEx would be in the $23 million range and we expect depreciation to be approximately $26 million.

If you look at the total of our working capital and our capital assets, the assets that we use to manage the business, we see that our turnover improved slightly from 3.8 times a year ago to about 3.9 times, so we continue to do make some progress there.

Overall, as I indicated before, our net debt was $51 million at the end of '07 that compared to $41 million at the end of '06. So we for the year had a $10 million increase in debt. And I remind you that we had a couple items here, $8 million was spent on restructuring and also we had above normal nonqualified retirement payments of about $10 million which contributed to that.

Overall we had funded our pension plan for $20 million and pay $27 million in dividends. Our expectation for 2008 is that our pension funding would remain at $20 million. Balance sheet overall remains very strong, and that is my report. Turn it over for question.

Question-and-Answer Session

Operator

(Operator Instructions) We already have our first question from Jamie Clement from Sidoti & Company.

Craig Brown

Jamie?

Jamie Clement - Sidoti & Company

Hello.

Craig Brown

Jamie?

Jamie Clement - Sidoti & Company

Yeah. Craig, I can hear you.

Craig Brown

At Sidoti and we are glad you are on the call.

Jamie Clement - Sidoti & Company

Thank you very much. I appreciate that. Good morning, Dennis and Craig, let me ask you a little bit about some of the reinvestment plans in 2008. And obviously, Craig alluded or Dennis, I forgot whose prepared remarks this was in, and obviously '07 a tale of two halves, if you will.

To me in kind of looking at the $40 million some odd of operating income excluding pension-related items, restructuring and all that, a low double-digit growth number in 2008. To me assumes that you're going to be taking a reasonable step back off the level of profitability on that you all showed in the second half of 2007. I mean I just sort of the way I kind of get to my numbers.

Can you talk a little bit about, first of all, is that accurate? And second of all, are any of the cost, the investment cost that you are talking about, I mean if you are talking about additions to the sales force, how long does it typically takes salesmen to ramp up? Are there costs that you're going to be facing in the near-term, and for example in 2009 you might not be facing? Can you give us a little bit more clarity on that?

Craig Brown

Sure. Let me just sort of just build off the second half. I think that's where you started your question?

Jamie Clement - Sidoti & Company

Yes.

Craig Brown

So the second half, if you would add the operating profit before restructuring amortization and the pension charges, you have about $32.7 million.

Jamie Clement - Sidoti & Company

Okay.

Craig Brown

That included as I indicated about $5 million of non-recurring.

Jamie Clement - Sidoti & Company

Yes.

Craig Brown

So back that off and you are $27.5 million or so.

Jamie Clement - Sidoti & Company

Yes.

Craig Brown

Multiply that by 2, and now you are running at annualized rate of about $55 million.

Jamie Clement - Sidoti & Company

Yes.

Craig Brown

Now, we signaled that we -- in Dennis' comment I think he mentioned that we expected to continue to see a favorable mix change in our business but at the traditional products, we are going to continue to be under pressure and so net-net, for revenue, we expect our revenue in '08 to be not significantly different than '07.

Jamie Clement - Sidoti & Company

Right.

Craig Brown

But if you compare that total year revenue that would result in '08 under that assumption to our second half revenue run rate, you would see that that is still a step up for us considering the run rate.

Jamie Clement - Sidoti & Company

Yes.

Craig Brown

Now, if you take that revenue increase, which would be $10 million, $11 million, $12 million or something there versus the second half and apply a margin to that, you might add another let's just say $3 million or so to that $55 million operating profit number we got to a moment ago.

Jamie Clement - Sidoti & Company

Yes.

Craig Brown

Follow me?

Jamie Clement - Sidoti & Company

Yes.

Craig Brown

So that put us in the high 50s 58 or so.

Jamie Clement - Sidoti & Company

Right.

Craig Brown

In terms of investments, we have merit increase that we pay here and comp kind of things that are going to be in the just say $4 million to $ 5 million range. We have marketing programs that we are kicking off, Dennis mentioned a couple of things on sales, and so if you were to just take for sake of this discussion, about $8 million okay, off that $58 million, you are around $50 million.

Jamie Clement - Sidoti & Company

Yes.

Craig Brown

That $50 million compared to the $45 million is about a low double digit.

Jamie Clement - Sidoti & Company

Right.

Craig Brown

Okay. Now that's kind of the baseline.

Jamie Clement - Sidoti & Company

Yes.

Craig Brown

Now in giving guidance, we are not giving you the best it could possibly be.

Jamie Clement - Sidoti & Company

Right.

Craig Brown

What we are giving you is sort of some guidance to get you to a logic.

Jamie Clement - Sidoti & Company

Right.

Craig Brown

Now, there are other things going on of course. We are still targeting our $40 million, so that could be another $5 million.

Jamie Clement - Sidoti & Company

Right.

Craig Brown

We could do a little better in revenue.

Jamie Clement - Sidoti & Company

Yeah.

Craig Brown

And the mix effect will probably help us. So those are all positives.

Jamie Clement - Sidoti & Company

Right.

Craig Brown

The negative side, we had very good healthcare experience this year, exceptionally good. We aren't necessarily going to count on that again.

Jamie Clement - Sidoti & Company

Yeah.

Craig Brown

And paper costs have been announced, we have an increase in paper costs coming up.

Jamie Clement - Sidoti & Company

Sure.

Craig Brown

And we will recover that, but we don't always recover immediately, it's a quarter or two. So that's going to be a little bit of solution as we go long, but we think we will recover as we always do. So those are pluses and minuses. So rather than be on the upside of every one of those pluses and the downside of every one of those minuses, we have decided to signal the number that we gave. So that's our explanation.

Jamie Clement - Sidoti & Company

Sure. And just if I one other, and I know that there was a list of questions. But if you are expanding the sales force, presumably that is to address proceed needs in the growth of your areas of your business, I assume that's right, right?

Dennis Rediker

Well, yeah, it's to develop new talent, especially for the new products and services and capabilities, but also we need to continue to bring people along in our sales force to be replacing the ones that get a little older and retire.

Jamie Clement - Sidoti & Company

Sure. Although that presumably would not be something, I mean I guess temporarily that would cost your money. But how long does it typically take a salesman to ramp up in your organization?

Dennis Rediker

Generally speaking, our overall objective here is to improve the productivity of our force of the sales people that are in the sort of one to five years with us. We would expect a sales person after the first year to sort of the earning they are keeping contributing. They don't really reach because it's more complicated custom solution sell. We really don't reach, most of them don't reach the sort of a good real potential for probably year two or three.

Jamie Clement - Sidoti & Company

Okay. Thanks very much. I'll let somebody else get on. Thank you.

Bob Cestelli

You are welcome.

Operator

Our next question is from Charles Strauzer from CJS Securities. Your line is open, sir.

Dennis Rediker

Hello Charles.

Charles Strauzer - CJS Securities

Can you here me okay.

Dennis Rediker

Here we got you now.

Charles Strauzer - CJS Securities

All right, great. Dennis, if you could talk a little bit more about the top line and the decline year-over-year that you saw in the quarter. How much do you think of that is attributable to some of the (inaudible) in the financial industry?

Dennis Rediker

Well, I think we don't really do a lot a with the back room stuff that they might slow down on. We're actually out where the transactions occur. So generally speaking, people are still going to conduct the transactions even if they have smaller amount. Although the financial institution that we served particularly banks, as you know are having a hard time, so they are getting a lot meaner. Let's put it that way.

And they are willing to take more risks in terms of driving cost reductions. So we are having to do a lot of work to be more responsive on pricing and at the same time reducing our cost to try to offset that, but the net effect of that is going to be a little bit of a decline there.

Charles Strauzer - CJS Securities

And the things that you can do for your financial customers to help them maybe offset some of those costs by providing them with different digital solutions etcetera, are you kind of talking about that, are you developing those types of products and services?

Dennis Rediker

Yeah. Absolutely, for example as mailing cost go up, postage cost, it all startling how much money the financial institutions have to spend to provide notices to their customers and clients.

And we developed an innovative approach to that and we have lot of our banking customers taking that approach up now and that's a good product, saves the money and it's good for us, and we're actually expanding our capacity in that area.

So we tried to bring those solutions. Other things can happen, for example, in the area of misappropriation of prescription drugs to illicit uses. We have implemented our secure prescription program across the sort of gold standard on that as our implementation with the State of New York and we are now looking to expand that to other place.

We have a fairly focused effort on that. And in fact there are some legislation that says somewhere in the course of '08, keep moving the target, but somewhere in the course of '08 all the states for Medicare and Medicaid prescriptions have to be on tamper-proof prescription pads. So we are competing heavily in that area.

So in all cases, we tried to do that. Manufacturing is another area. Of course if the housing slows down and the hard goods go into housing upgrades and renovations and so forth, might slowdown some and we offer a solution to help them to change over faster without loss production to reduce their inventory of documentation that goes in the box and the required regulatory compliances safety labels and so forth.

So this is what we try to do, help our customers improve their operation in response to their environment. So those things in the financial services or in the housing market aren't going to be very helpful, but we think we offer solutions that will help our customers do better in those environments.

Charles Strauzer - CJS Securities

Okay, great. Thanks. And if you could, maybe spend a few minutes to address the filing by the third?

Dennis Rediker

Yeah. Over the last couple of years, especially as new people come in to their trust department, they like to get refreshed on what's going on with the company and they look at the terms of the trust and they say what we got to talk to the company about this.

So this happens periodically and it has happened over the past few years. More recently, the trustee has felt some cover on the principal holdings of the trust to be standard registered shares. They felt that was a pretty good cover for them. There has been some recent precedent in the law that says even if that is the desire of the beneficiaries of the trust, for this year responsibility of the trustee is to try to take care of the trust.

So in order to make sure they've got all their (inaudible) to put themselves in the best possible position to say they are executing on their responsibility, they changed the filing last year from the 13G to 13D. Now 13D says they want to take a little more active role in the affairs of the company, and generally speaking they are supposed to describe in that filing what their intention is.

What they put in their filing was everything including the kitchen sink that they might do. So it was just simply everything that a 13D filing could possibly mean was what they put in. So far we've had no communication from Fifth Third about anything. They just simply made the filing and we haven't even had any conversation with them about it.

So we think it's just a way for them to make sure they are in the best possible position to exercise their duty to the trustees and providing themselves the best possible cover from a legal point of view.

Charles Strauzer - CJS Securities

Great. Thanks for the explanation, Dennis. Craig, can you just go through a couple housekeeping items on the financials. What were cash taxes in the quarter that were paid?

Craig Brown

Probably zero.

Charles Strauzer - CJS Securities

Okay.

Craig Brown

It might be some smaller amount but we have an NOL and I don't believe the cash taxes were much of anything.

Charles Strauzer - CJS Securities

What are your expectations for '08 for cash taxes?

Craig Brown

Pretty much zero.

Charles Strauzer - CJS Securities

Okay.

Craig Brown

We've a net operating loss of about $23 million or so and we expect to use that as we go through the year. We won't use it all, but we'll use good amount.

Charles Strauzer - CJS Securities

Very good. And then on the remaining debt is that still roughly where it's been?

Craig Brown

I am sorry, I couldn't catch that.

Charles Strauzer - CJS Securities

The interest rate on the existing debt (inaudible)?

Craig Brown

I'll have to call with that to give you a precise number, I know it moved around a little bit recently. There has been on change in the revolver, but I just don't know what it right now, I should know that, Bob will call you with that.

Charles Strauzer - CJS Securities

Not a problem there. And then just generally give thoughts on use of cash flow for the year besides the dividend?

Craig Brown

You are talking about 2008 or 2007?

Charles Strauzer - CJS Securities

2008, I am sorry.

Craig Brown

Well, the major items I think that we would look forward would be CapEx we talked about that was about, we said about $23 million. If the Board continue to approve the dividend, it would be about $27 million round numbers. Pension contributions would be $20 million. Interest payments probably $3.5 million to $4 million range. And those are the major payments. We also pay some retirement benefits that are nonqualified plan that typically runs about $6 million.

Charles Strauzer - CJS Securities

Got it. And then if you look at all of the restructuring charges that were taken in the year, how much of that was cash related?

Craig Brown

The charges for the year, how much on the 2007?

Charles Strauzer - CJS Securities

Correct.

Craig Brown

Restructuring spending in 2007 was just under $8 million, it was $7.6 million in the year and I think our P&L showed an accrual of $8 million. So there is probably another $400,000 or so left to be spent on our restructuring in '08.

Charles Strauzer - CJS Securities

Great. And then, Craig, when you look at the pension amortization going down to about $22 million to $21 million in 2008, do you expect that to continue to decelerate over the coming years beyond that?

Craig Brown

Over the last three quarter we got from actuaries indicated that was the case and it would continue to drop off at a good rate going forward. And as I indicated also that they do their final mop up on this in a coming weeks, and so we'll see where that ends up and we will let people know in the next call where that lands. And it obviously depends on how things going in the market and so forth.

But to the extent we have any kind of an actuarial miss in 2007 that will go in to the calculation, but it dribbled out over many years and so it won't have a significant effect, I don't think.

Charles Strauzer - CJS Securities

Got it.

Craig Brown

I think that number is reasonably close.

Charles Strauzer - CJS Securities

Got it. Thank you very much.

Craig Brown

You are welcome.

Operator

At this time gentlemen, we have no further questions in queue.

Dennis Rediker

Okay. Well, thank you very much for joining us on the call. We appreciate the questions. I think you can see that we are making progress and moving forward. We have given the best guidance we can at this time. Certainly, we want to exceed in those things. So, we would like to do better and we will strive to do that. But, it is the guidance that we have. So we will talk to you next time. Thank you very much.

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Source: Standard Register Co. Q4 2007 Earnings Call Transcript
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