LMAR..cheap enough...
May 17, 2000 07:16
Lamaur Announces Improved First Quarter Results
FRIDLEY, Minn.--(BUSINESS WIRE)--May 17, 2000--The Lamaur Corporation (OTCBB:LMAR) has announced improved first quarter results.
Lamaur develops, formulates, and markets personal hair care products to mass merchandisers, drug, and food chains.
In the first operating quarter following the sale of Lamaur's manufacturing facility at the end of December 1999, Lamaur's loss for the first quarter ended March 31, 2000, totaled $463,000 vs. a loss of $1,280,000 for the first quarter 1999. The improved performance reflects the Company's repositioning as a sales and marketing entity with complete focus on sales of its brands to the country's largest chain retailers.
Simultaneously with the sale of the plant, Lamaur divested its historically low margin custom manufacturing business to the purchaser of the plant and completed a 3-year manufacturing agreement with the purchaser which guarantees a fixed manufacturing fill fee per unit for the life of the contract. The Company believes that in subsequent quarters, cost of goods savings will be achieved vs. the prior year.
The Company reported sales of $8 million for the quarter ended March 31, 2000, compared with $13.0 million for the same period in 1999, a decrease of $5 million. This decline in sales was due to a $3.7 million reduction in sales of the former Custom Manufacturing Group and a $1.3 million reduction in sales of the Company's retail business. These reductions were the result of the Custom Manufacturing Group divestiture, along with the discontinuance of certain low margin and slow selling items.
The sales of WILLOW LAKE(R) and STYLE(R) brands in total have declined for several consecutive quarters. Sales of DESIGN ELEMENTS(R) by SALON STYLE(R), a product line of styling aids introduced in early 1999, has shown encouraging growth.
Lawrence Pesin, Chief Executive Officer, who joined Lamaur in December 1999, said: "The Company considers the development of new products to be of critical importance in the fashion-sensitive hair care and styling category. Management is aggressively pursuing initiatives to stabilize and grow existing brands and to accelerate its new product development and marketing planning to enable the Company to bring unique new products to market more quickly than in the past compared to our larger competitors. Additionally, we are pursuing potential domestic and international alliances and joint ventures with other companies in an effort to increase sales and gross margin dollars. While at this time there can be no assurance that any of these actions will prove successful, we are encouraged by developments to date."
Gross margin improved to 34% from 32.8% for the prior year period. This improvement is primarily due to the phase-out of the low margin custom manufacturing business compared to substantially higher retail brand margins. Gross margin was also impacted by the sale of various excess and close-out inventory, actions taken in the first quarter to ensure improved return on invested inventory. "We have reorganized our forecasting, purchasing, and materials management staff to improve the Company's ability to manage inventory on a just-in-time basis. This will help maximize our yield on invested inventory and minimize low or no margin sales on various excess and closeout inventory. Nevertheless, margin improvement represents a major challenge going forward, particularly in view of recent aggressive competitive promotional pricing tactics," Pesin said.
Selling, general and administrative expenses declined from 40.5% to 39.8% of net sales and by $2.1 million. This was principally attributed to an overall reduction in general and administrative and materials management costs of $1.2 million related to the downsizing of the Company to a sales and marketing entity outsourcing its manufacturing requirements. In addition, the decrease in selling, general and administrative expenses was also attributable to the decrease in marketing and advertising of $.7 million and reduced freight and broker commissions as a result of the decrease in sales. Interest expense declined by almost $300,000 principally due to no borrowings under the Company's credit facility in the first quarter. This was a result of generating approximately $.7 million in positive cash flow from operations provided principally from accounts receivable collections, reduction of accounts receivable outstanding (due to phase-out of the custom manufacturing business), and an overall reduction in inventory. Pesin said, "tight control and daily monitoring of all expenses is, of course, critical to our profitability going forward."
Due to financial difficulties in prior years, the Company had been unable to pay its vendors in their normal terms. During the first quarter, the Company negotiated an agreement with its key creditor vendors on behalf of all creditors for a 100% payment plan through December 2001 for all past due vendor debt. As a result of this agreement, key creditor vendors signed a forbearance agreement for the benefit of all general unsecured creditors. Although there can be no guarantee that all creditors will accept the plan, to date no adverse actions have been taken by any creditor. Substantial legal expenses were incurred to finalize this agreement. Legal expenses for this purpose will not be repeated in subsequent quarters. "The Company believes that the successful negotiation of this agreement was critical to the Company in terms of restoring its credibility and good faith to the vendor community. We are pleased that this was concluded in a timely and productive manner," said Pesin.
As of March 31, 2000, the Company had no long-term debt.
"The Company made substantial progress in the first quarter, particularly in view of the past few troubled years. While significant challenges lie ahead in terms of the highly competitive nature of the personal care category, we believe the Company has overcome the difficulties of the past and is uniquely and positively positioned for the future," concluded Pesin.
The foregoing contains historical information and forward-looking statements including but not limited to those regarding future performance of the retail brands, the Company's ability to achieve cost of goods savings, the Company's ability to manage inventory on a just-in-time basis, the Company's ability to minimize low or no margin sales, and other statements regarding the future performance of the Company. Such forward-looking statements are made pursuant to the "safe harbor" provision of the Private Securities Litigation Reform Act of 1995. These statements involve known and unknown risks and uncertainties that may cause the Company's actual results in future periods to be materially different from any future performance suggested herein. Please refer to the discussions of risk factors and investment considerations detailed in, as well as other information contained in, the Company's filing with the Securities and Exchange Commission.
THE LAMAUR CORPORATION CONDENSED STATEMENTS OF OPERATIONS (In
thousands, except per share data) (Unaudited)
Three Months Ended
March 31,
-------------------------------------
2000 1999
------------ ------------
Net Sales $ 7,974 $13,047
Cost of Goods Sold 5,262 8,774
------------ ------------
Gross Margin 2,712 4,273
Selling, General and
Administrative Expenses 3,175 5,279
------------ ------------
Operating Loss (463) (1,006)
Interest Expense (25) (321)
Other Income 25 47
------------ ------------
Net Loss (463) (1,280)
Dividends on Series B
Preferred Stock (100) (100)
------------ ------------
Net Loss Available to
Common Shareholders $ (563) $(1,380)
============ ============
Basic Loss per Common Share $ (0.08) $ (0.21)
============ ============
Weighted Average Common Shares
Outstanding -- Basic 7,423 6,686
============ ============
Diluted Loss per Common Share $ (0.08) $ (0.21)
============ ============
Weighted Average Common Shares
Outstanding -- Diluted 7,423 6,686
============ ============
CONTACT: The Lamaur Corporation
John D. Hellmann, 763/571-1234
|
