Thursday March 11, 5:06 pm Eastern Time
Company Press Release
SOURCE: Safeskin Corporation
Safeskin Anticipates Lower than Expected Sales and Earnings for the First Quarter and Full Year 1999
- Company Results to be Affected as Distributors Reduce Inventory Levels and New Contracts Ramp Up More Slowly than Anticipated -
- End-User Demand for Safeskin Products Expected to Remain Strong -
SAN DIEGO, March 11 /PRNewswire/ -- Safeskin Corporation (Nasdaq: SFSK - news) today announced that the Company expects sales and earnings to be below analysts' expectations for the first quarter and full year of 1999.
FIRST QUARTER 1999 IMPACT
Safeskin's sales are expected to be approximately $28 million below analysts' expectations for the first quarter ending March 31, 1999. The Company believes that it is prudent to reduce sales and earnings expectations in light of higher than estimated distributor inventory levels and slower-than-anticipated ramp up of orders from new customer contracts. It is anticipated that these events will reduce earnings in the first quarter by approximately $0.25 - $0.26 per share below analysts' expectations.
FULL YEAR 1999 IMPACT
While the Company expects that end-user demand for Safeskin products will remain strong, it believes that sales growth will be tempered by the continuing effects of the slower-than-anticipated ramp up of orders from new customer contracts and by increased pricing pressures. Safeskin estimates that sales for the year will be lower by approximately an additional $25 million. The Company expects gross margins to decline four-to-six percentage points by the end of the year to the 46-to-48 percent range.
BUSINESS REMAINS STRONG
Richard Jaffe, chairman, president and chief executive officer of Safeskin, said: ''While we are disappointed with the reduction of our anticipated results for the current year, we believe the fundamentals of our business remain strong.
''As Safeskin's distributors were coming off allocation in the third quarter of 1998, we were delivering product into our distribution channels to support an expected rapid increase in sales to meet strong market demand for our products. As it turns out, there was more inventory in the system at that time than we had previously estimated and the ramp up of orders from new contracts took longer than anticipated.
''Going forward,'' Mr. Jaffe continued, ''we believe that the slower-than-anticipated sales ramp-up from new contracts, as well as increased pricing pressures, will negatively affect this year. However, we are optimistic that these issues will be partially offset by planned reductions in expense growth and by continued operating efficiencies being generated by the relocation of our production facilities to Thailand. In addition, the Company will review its 1999 capital expenditure program in light of the developments this quarter.
''Our business is healthy, and our opportunity to grow remains strong. We continue to sign new customers and, at the same time, will remain the low-cost producer of high-quality gloves. We will continue to invest in sales, marketing and product development, to introduce new products and to focus on our high-growth markets,'' Mr. Jaffe concluded. |
