Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. STANDARD REGISTER CO (93456) 10-Q published on Oct 31, 2014 at 1:41 pm
Reporting Period: Sep 27, 2014
Our revolving credit facility ("Credit Facility") requires that we maintain certain levels of liquidity, initially the greater of $15,000 or 15% of our aggregate commitments, which are currently $125,000. Failure to maintain this liquidity level would trigger an activation period and would give our lenders the right to dominion of our bank accounts. This would not make the underlying debt callable by the lender and would not affect our ability to borrow on the Credit Facility. However, we would be required to reclassify the Credit Facility balance to “Current maturities of long-term debt” on our Consolidated Balance Sheet, as our Credit Facility does contain a subjective acceleration clause. In the third quarter our liquidity was $36,136 and our required minimum was $12,500. In addition, the Credit Facility contains a fixed charge coverage covenant of 1:1 that becomes applicable if liquidity falls below 12.5% of the aggregate commitments or $12,500, whichever is greater.
Our Company's reporting structure is based on customer markets. Healthcare serves hospitals and other providers of healthcare and related services. Business Solutions primarily serves customers in the financial services, manufacturing, retail, business services, and transportation markets. Corporate consists of unallocated selling, general, and administrative costs, which primarily include restructuring and other exit costs, pension benefit plan expense, acquisition and integration costs, and asset impairments. The loss before income taxes reported in our consolidated financial statements also includes other income and expense, primarily interest expense, in addition to the operating income (loss) reported below.
The Company has participated with other Potentially Responsible Parties (“PRPs”) in the investigation, study, and remediation of the Pasco Sanitary Landfill Superfund Site (the “Pasco Site”) in eastern Washington State since 1998. The Company is a member of a PRP Group known as the Industrial Waste Area Generators Group III (the “IWAG Group”). The IWAG Group and several other PRP groups have entered into agreed orders with the Department of Ecology for implementation of interim remedial actions and expansion of groundwater monitoring. At this time, an agreement has not yet been reached on the final remediation approach. We have accrued our best estimate of our obligation and have an undiscounted long-term liability of $1,185 that we currently believe is adequate to cover our portion of the total future potential costs of remediation. We expect the costs to be incurred over a period of 60 years; however, the current proposed remediation approach could require
Discount rate - One of the principal components of calculating the projected benefit obligation is the assumed discount rate, which is the assumed rate at which future pension benefits could be effectively settled. Discount rates are established based on prevailing market rates for high-quality, fixed-income instruments with maturities equal to the future cash flows to pay the benefit obligations when due. At December 29, 2013, we used a 4.45 percent discount rate; however, interest rates have declined and we expect to be required to use a lower rate to measure our pension obligations at the end of 2014.
A future decrease in the discount rate would increase the pension obligations, thus changing the funded status of our pension plans. To illustrate the sensitivity of pension liabilities to changes in the discount rate, holding all other assumptions constant, a one percent decrease in the discount rate applied to our qualified pension plan would increase the liability by approximately $43.8 million, increasing the under-funded status of the plan. Depending on whether the affect of the change is outside the corridor, a decrease in the discount rate could result in a mark-to-market (MTM) loss recognized in our results of operations in the fourth quarter of 2014. Although not guaranteed, we believe that any adjustment will be within the corridor and recorded against Accumulated Other Comprehensive Income.
Net cash provided by operating activities was negative in the first three quarters of 2014, largely due to reduced operating profit, restructuring payments, and pension contributions and payments, partially offset by improved receivable collections. Restructuring payments year-to-date were $11.5 million and are expected to total approximately $30.4 million upon the plan's completion in 2015. We also contributed $29.6 million to the Company’s qualified pension plan in the first three quarters of 2014, including $15.5 million in the third quarter. Due to the passage of the Highway Transportation and Funding Act, our minimum funding requirements are now lower than previously reported. The minimum funding requirement for 2014 and 2015 will be approximately $36.0 million and $19.2 million, a reduction of $6.2 million and $15.2 million, respectively, from amounts previously reported.