Notes to Consolidated Financial Statements
    
(Dollars in thousands, except per share amounts)

NOTE 1 - S u m m a r y  o f  S i g n i f i c a n t  A c c o u n t i n g  P o l i c i e s
The Standard Register Company is a leading domestic supplier of printed documents, pressure sensitive labels, document management services, and e-procurement services. The Company markets its products and services primarily through direct sales organizations operating throughout the United States.

The accounting policies that affect the more significant elements of the financial statements are summarized below.

U s e  o f  E s t i m a t e s
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

F i s c a l  Y e a r
The Company's fiscal year is the 52 or 53-week period ending the Sunday nearest to December 31. Fiscal years 2000, 1999, and 1998 ended on December 31, 2000, January 2, 2000, and January 3, 1999, respectively. Fiscal years 2000 and 1999 each included 52 weeks; fiscal year 1998 included 53 weeks.

P r i n c i p l e s  o f  C o n s o l i d a t i o n
The consolidated financial statements include the accounts of The Standard Register Company and its wholly owned subsidiaries (collectively, the Company) after elimination of intercompany transactions, profits and balances.

S e g m e n t  R e p o r t i n g
The Company manages its business on the basis of one reportable segment.

C a s h  E q u i v a l e n t s
The Company classifies as cash equivalents all highly liquid investments with original maturities of three months or less. The carrying value of cash equivalents approximates fair value due to the short-term maturity of these instruments.

T r a d i n g  S e c u r i t i e s
Securities are classified as trading when held for short-term periods in anticipation of market gains and are reported at fair market value, with unrealized gains and losses included in income.

I n v e n t o r i e s
Inventories are valued at the lower of cost or market. Substantially all inventory costs are determined by the last-in, first-out (LIFO) method. Finished products include printed forms stored for future shipment and invoicing to customers.

P l a n t  a n d  E q u i p m e n t
These assets are stated at cost less accumulated depreciation. Costs of normal maintenance and repairs are charged to expense when incurred. Upon the disposition of assets, their cost and related depreciation are removed from the respective accounts and the resulting gain or loss is included in current income. Impairment of asset value is recognized whenever events or circumstances indicate that carrying amounts are not recoverable. Prior to December 31, 2000, the Company had followed the accounting practice of eliminating from the balance sheet the respective cost and accumulated depreciation for all fully depreciated assets still on hand. The December 31, 2000 and January 2, 2000 balance sheets have been restated to include the cost and accumulated depreciation of all fully depreciated assets. This restatement had no effect on reported earnings.

D e p r e c i a t i o n
For financial reporting purposes, depreciation is computed by the straight-line method over the estimated useful lives of the depreciable assets. Depreciation expense from continuing operations was $50,683 in 2000, $46,847 in 1999, and $41,016 in 1998. Estimated asset lives are:
Classification
Years
Buildings and improvements
10-40
Machinery and equipment
5-15
Office furniture and equipment
5-15

G o o d w i l l
Goodwill represents the excess of the cost of businesses acquired over the fair market value of identifiable net assets at the dates of acquisition. Goodwill is amortized on a straight-line basis over 15 years. Amortized goodwill expense from continuing operations was $4,011 in each of fiscal years 2000, 1999 and 1998. The Company reviews the recoverability of goodwill whenever events or changes in circumstances indicate potential impairment of the carrying value. Goodwill impairment of $48,129 has been recognized in 2000.

R e v e n u e  R e c o g n i t i o n
The Company generally recognizes product and related services revenue at the time of shipment to the customer. Under contractual arrangements with some customers, custom forms that are stored for future delivery are recognized as revenue when manufacturing is complete and the order is invoiced under normal credit terms. Revenue from equipment service contracts is recognized ratably over the term of the contract.

I n c o m e  T a x e s
The Company accounts for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences of temporary differences between the financial and tax bases, using enacted rates.

E a r n i n g s  P e r  S h a r e
Basic earnings per share is the per share allocation of net income available to shareholders based on the weighted average number of shares outstanding during the period. Diluted earnings per share represents the per share allocation of net income based on the weighted average number of shares outstanding plus all common shares that potentially could have been issued under the Company's stock option program.

S t o c k - B a s e d  C o m p e n s a t i o n
The Company accounts for stock-based employee compensation arrangements in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations. Pro forma information regarding net income and earnings per share, as calculated under the provisions of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation," are disclosed for stock options in Note 10.

C o m p r e h e n s i v e  I n c o m e  (L o s s )
Comprehensive income (loss) represents net income (loss) and any revenues, expenses, gains and losses that, under accounting principles generally accepted in the United States of America, are excluded from net income and recognized directly as a component of shareholders' equity. Components include net income (loss) and the minimum pension liability adjustment.

R e c l a s s i f i c a t i o n s
Certain prior-year amounts have been reclassified to conform to the current-year presentation.

N e w  A c c o u n t i n g  S t a n d a r d
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities," requires companies to record derivatives on the balance sheet as assets and liabilities, measured at fair value. Gains or losses resulting from changes in fair value are required to be recognized in current earnings unless specific hedging criteria are met. SFAS No. 133, as amended, will become effective for the Company beginning in the first quarter of fiscal year 2001. Due to the Company's limited use of derivatives, the impact is not expected to be material.