HA-LO Announces Lower Than Expected Second Quarter Results and A 25-$30 Million One-Time Restructuring Charge
Company Resets Profit Expectations for 1999 and 2000
NILES, Ill., July 1 /PRNewswire/ -- HA-LO Industries, Inc. (NYSE: HMK), the nation's leading provider of promotional and premium advertising products, announced today that results for the second quarter of 1999 will be lower than expected and below analysts' expectations.
The company also announced that it will take a $25-$30 million one-time restructuring charge to streamline its back office facilities and information systems. The one-time restructuring charge will be booked in the third quarter of 1999.
Second Quarter Expectations & Outlook
The company expects diluted earnings per share for the second quarter to be $0.02, below the $0.09 per share earnings reported in the second quarter of 1998, and below analysts' consensus of $0.17. Revenues for the second quarter are expected to be approximately $160 million, down approximately 13 percent from analysts' expectations of $185 million, and up in comparison to $138 million in the second quarter of 1998. The revenue shortfall is the result of customer deferral of marketing programs due to local economic conditions in Europe and South America. In addition, the company experienced a loss of momentum attributable to the transition to a brand marketing organization and is experiencing a deceleration in the growth rate of promotional products sales in some markets.
Based on second quarter results, the company estimates revenues for the full year should be approximately $725 million, seven percent lower than current consensus estimates, and the company's full year 1999 diluted earnings per share estimate should be $0.40. Additionally, the company believes both revenue and per share results in the year 2000 will be affected by these market forces, although not to the same extent, and therefore the company estimates 2000 diluted earnings per share are expected to be $0.55.
Restructuring Charge
The restructuring charge of $25-$30 million will cover the anticipated costs associated with streamlining HA-LO's back office facilities and centralizing information systems in addition to severance and related occupancy costs. While a significant portion of the restructuring effort will be completed this year, the total project will not be finished until the first quarter of 2000. Savings from the consolidation will be realized over four years.
CEO Lou Weisbach Comments on Results
Lou Weisbach, president and chief executive officer, said, "We are in the later stages of a comprehensive review of our business that we commenced in the first quarter of this year, and we have concluded that it's in the best interest of our shareholders, employees, customers and suppliers to take the actions we've announced today." He added that, "Through this process we've reviewed our operations including sales reporting, internal communications, physical flow of goods, and budgeting and financial projections. As a result, we will make several changes to the way we're going to operate our business in the future."
"The company's review has already resulted in several changes including: additional financial staff and installing Hyperion software, the conversion of the company's salespeople from independent contractors to full time employees, linking the sales people to an on-line system, and changing their review process. Additionally, the company is consolidating back office facilities and converting various reporting systems into a central system and, in conjunction with a Big Five accounting firm, is taking steps to improve the efficiencies of its warehouses."
Weisbach added, "Clearly the next several quarters will be challenging for all of us, but we're taking these positive steps to ensure that our conversion from a promotional products company to a brand marketing organization is seamless and will provide consistent and dependable results to shareholders in the future." |
