Graham-Field Reports Final Financial Results for Quarter Ended March 31, 1999 and Year Ended December 31, 1998
Company Obtains an Amended Credit Agreement
BAY SHORE, N.Y., June 4 /PRNewswire/ -- Graham-Field Health Products, Inc.
(NYSE: GFI), a manufacturer and supplier of healthcare products, reported
final financial results for the first quarter ended March 31, 1999 and the
year ended December 31, 1998. These results are consistent with the Company's
preliminary results announced on May 18, 1999. The Company today filed with
the Securities and Exchange Commission its Quarterly Report on Form 10-Q for
the first quarter of 1999 and its Annual Report on Form 10-K for 1998, which
also included restated financial results for 1996 and 1997.
For the quarter ended March 31, 1999, the Company reported revenues of
$85.5 million, a pre-tax loss of $7.4 million and a net loss of $7.4 million.
These results include professional and other advisory fees of approximately
$4 million, a substantial portion of which is anticipated to be non-recurring.
For the same period in 1998, the Company reported restated net revenues of
$98.3 million, a restated pre-tax loss of $884,000 and a restated net loss of
$1.7 million. The revenue decline in the first quarter of this year compared
with last year is attributable to various factors including the Company's
tighter credit policy.
"We are addressing the Company's losses by moving forward on two tracks
simultaneously," said John G. McGregor, who was appointed President and Chief
Executive Officer in March 1999. "We are focused on increasing cash flow from
operations through a series of initiatives designed to improve the Company's
performance. And at the same time, we are evaluating the feasibility of
selling all or parts of the business. As previously announced, the Company
has retained Warburg Dillon Read LLC to assist in that evaluation. The Board
of Directors and the management of the Company are proceeding aggressively on
both tracks with the objective of maximizing stockholder value," said Mr.
McGregor.
For the year ended December 31, 1998, the Company reported net revenues of
$380.9 million and an adjusted pre-tax loss of $12 million, excluding all
non-recurring, restructuring, merger-related and other charges. Including
these charges, the Company reported a pre-tax loss for 1998 of $32.6 million
and a net loss of $49 million. The non-recurring, restructuring,
merger-related and other charges of $20.6 million for 1998 include provisions
for accounts receivable and inventory write-downs, other charges for asset
write-offs/impairments and accrual adjustments, charges for stock compensation
and the reversal of merger and restructuring accruals no longer required. In
addition, the net loss for 1998 included a charge of $18.3 million relating to
the write-off of the Company's deferred tax asset.
As previously announced, the Company also restated the financial results
for the first, second, and third quarters of 1998 to correct for certain
improperly recorded transactions. The 1998 adjustments are unrelated to the
investigation conducted by the Company's Audit Committee, which was announced
in March 1999. Such adjustments, which relate primarily to previously
unrecognized stock compensation charges and previously recorded estimated
separation charges, increased the net loss in the first and second quarters of
1998 by $971,000 and $249,000 respectively, and decreased the net loss
recorded in the third quarter of 1998 by $739,000.
The Company reported that its independent auditors of its 1998 financial
statements, Ernst & Young LLP, issued its opinion with a going concern
qualification. Despite a going concern qualification, the Company has entered
into an amendment with its bank group to extend the term of its Credit
Facility to May 31, 2000, which provides for a line of credit of up to
$50 million. In addition, the Company has decreased the outstanding loan
balance under its Credit Facility from $32.4 million as of March 31, 1999 to
$24.6 million on June 3, 1999, and has increased its availability under the
Credit Facility from $3.6 million to more than $6 million during the same time
period. The improved cash position is primarily the result of reduced
expenditures and working capital improvements. In addition, the Company
believes that it will be able to improve its cash flow from operations through
a variety of initiatives and, if required, will be able to obtain additional
borrowing availability by financing certain unencumbered real estate or
through a secondary financing.
Management has commenced a comprehensive program designed to reduce
operating expenses and its investment in working capital, and improve gross
margins and cash flow. The program includes the following initiatives: the
development of an inventory management and product rationalization program;
the rationalization of the Company's manufacturing and distribution network;
the realignment and consolidation of the Company's various sales forces and
territories; the tightening of credit policies and payment terms; the
implementation of streamlined product pricing and product return guidelines;
and the initiation of programs relating to the collection of past due accounts
receivable. While management believes that such objectives are attainable,
there can be no assurance that the Company will be successful in its efforts
to improve its cash flow from operations or that it will be able to obtain
additional borrowing availability.
As previously announced, the Company has restated its 1997 and 1996
financial results. On a restated basis, 1997 and 1996 revenues were
$262.8 million and $143.3 million, respectively, and adjusted pre-tax income
(excluding non-recurring, restructuring, merger related and other charges) for
1997 and 1996 was $2.4 million and $3.7 million, respectively. Including
these charges, the restated pre-tax loss for 1997 and 1996 was $37 million and
$11.5 million, respectively, and the restated net loss for 1997 and 1996 was
$26.4 million and $13.6 million, respectively. |
