Revenue declined in each of the first, second, and third quarters as low-margin business was eliminated. The fourth quarter 2001 revenue rebounded from the third quarter result, signaling the end of the restructuring and reflecting typical seasonality. The fourth quarter 2001 revenue was $65 million below that in the fourth quarter 2000, representing a seasonally adjusted annualized decrease of approximately $250 million, within the expected range announced at the outset of the restructuring.     The Company slightly exceeded its goal of reducing annualized fixed costs by $125 million. The savings resulted from the consolidation of production facilities, warehouses, and sales offices and a corresponding decrease in employment of 2,330 persons, equivalent to 29% of the workforce. The effects of these reductions are reflected in the improved percentage gross margin, lower SG&A expense, and reduced depreciation expense.
    The percentage gross margin trended lower during the restructuring period as a result of the timing of business eliminations and subsequent cost reductions described earlier, as well as higher training costs that pushed variable manufacturing expense temporarily higher. The fourth quarter 2001 gross margin was 39.0% compared to 35.5% in the quarter preceding the restructuring period, reflecting an improved mix of business and the reduction in fixed overhead manufacturing costs. During the restructuring, 25 plants and print centers were closed. Some production capacity was relocated to other locations, but overall capacity was reduced by about 30%, in line with the original plan.
    In addition, 29 warehouses were closed and their operations were consolidated into other locations. The consolidation of the warehousing network was the single restructuring action that continued into the fourth quarter. This was planned to ensure uninterrupted service to customers during the heavy restructuring activity of the first three quarters of the year.
    The Company received a payment from a vendor during the fourth quarter 2001 as a result of price negotiations related to past purchases. The portion of the payment related to the first three quarters of 2001 added approximately $2 million, or $0.04 per diluted share, to the fourth quarter results.
    SG&A expense declined in the first, second, and third quarters primarily as a result of job eliminations. The fourth quarter 2001 expense of $76 million was $20 million below the comparable period of 2000, representing an $80 million annualized decrease. The company eliminated positions in its headquarters and field selling organizations, closing 149 sales offices and consolidating their operations into 43 regional locations and adopting virtual offices for selected markets. As will be more fully described later, this significant decrease in expense occurred despite new or increased investments in Six Sigma, sales productivity software, SMARTworks, and two new growth initiatives.
    Depreciation and amortization declined as a result of the reduction in assets. There was $1 million in goodwill amortization in the fourth quarter 2000, but no goodwill amortization in any period of 2001.
    Interest expense changed little over the five-quarter period, reflecting stable debt balances and an interest rate swap that fixed the interest rate at 5.84% over the LIBOR spread and fees paid to banks under a revolving credit agreement.
    Effective May 11, 2001, the Company replaced its existing bank revolving credit agreement with a new revolver that contains a higher spread over LIBOR, reflecting market changes since the original revolver was established. This change effectively raises the Company's all-in fixed rate from 6.09% to 6.65%. The interest rate swap has a notional value of $200 million, identical to the borrowings under the revolver, and matures in January 2003.
    In the final analysis, the Company completed the restructuring in accordance with its timetable, eliminated low-margin business within the range forecasted in the Renewal Plan, and exceeded the targeted cost reductions. Fourth quarter 2001 Earnings Per Share before restructuring and impairment were over 50% above pre-restructuring levels and exceeded the Company's goal.


Standard Register                          
2001 Annual Report