Healthcare revenues declined 7 percent for the quarter, to $54.8 million compared to $59.0 million in the prior year quarter. Operating income for the second quarter was $3.7 million compared to $3.8 million for the same period in 2011. Growth in core solutions was offset by declines in unit sales of legacy products, particularly clinical paper documents. Healthcare Solutions, technology-oriented products and services within the healthcare portfolio, grew 14 percent in the quarter, primarily driven by strong growth in patient information and marketing and communications solutions sales. New customers and new product introductions also impacted the quarter and are expected to contribute to additional core solutions sales in the second half of 2012. As healthcare customers transition to Electronic Medical Records (EMR), accelerated declines in sales of legacy products such as clinical forms is expected throughout 2012.
During the second quarter, the company’s Commercial Markets, Financial Services and Industrial business units were consolidated into one Business Solutions business unit to more efficiently develop and market technology-driven products and services across vertical markets. Business Solutions revenues for the second quarter was $100.3 million, a decrease of 5 percent compared to second quarter 2011 revenue of $105.3 million. Growth in core solutions sales was offset by declines in legacy product sales. Revenue from core solutions increased by 2.6 percent in the quarter, primarily due to new customer implementation and organic growth with existing customers, particularly in critical communications and on-demand publishing. The legacy decrease is primarily attributable to documents no longer being used rather than loss of customers, and to the associated loss of freight and other service revenues.
Consolidated gross margin as a percent of revenue was 30.0 percent compared to 30.9 percent for the second quarter of 2011. The decrease reflects decreased volume in legacy sales, somewhat offset by savings from ongoing restructuring activities and other cost-saving initiatives. Selling, general and administrative (SG&A) expenses declined 13 percent in the quarter.
In the second quarter, Standard Registered announced that it had received notice from the New York Stock Exchange (NYSE) that it was not in compliance with listing requirements related to market capitalization and stock price averages. The Company delivered a plan for returning to compliance regarding market capitalization within 18 months. On June 25, 2012, the Company announced that it had received notice from the NYSE that its plan had been accepted. The plan is currently being implemented.
First Half of Year Results
Total revenues declined 5 percent to $312.7 million compared to $329.2 million for the first half of 2011. Legacy product unit volume continued to decline faster than growth in core solutions. Core solutions grew 3.1 percent in the first half of 2012 while legacy solutions declined 10.4 percent.
Healthcare revenues declined 7 percent to $111.8 million from $119.7 million in the first half of 2011. Operating income for the first half of 2012 was $6.3 million compared to $8.5 million for the prior year. Technology-oriented core solutions grew 14 percent in the first half of 2012 driven by growth in patient information, primarily from Dialog Medical (which was acquired in July 2011) and new customer implementations in marketing and communications solutions. Revenues from legacy products continued to decline as more hospitals adopt EMR.
Business Solutions revenues declined 4 percent to $200.9 million from $209.5 million in the first half of the prior year. Operating Income increased by 18 percent to $3.3 million from $2.8 million driven by increases in core solutions and savings initiatives. The growth was somewhat offset by declines in legacy product sales. As previously announced, the loss of a portion of business from a large financial services customer due to the customer’s restructuring is expected to total $18 to $20 million in 2012. The transition of the customer is proceeding slower than anticipated with a decrease in sales in the first half of 2012 of $5.7 million.