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News Release for PEERLESS CARPET CORPORATION
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NEWS RELEASE TRANSMITTED BY CANADIAN CORPORATE NEWS
FOR: PEERLESS CARPET CORPORATION
ME SYMBOL: PRG
TSE SYMBOL: RPG
AUGUST 17, 1998
Peerless Carpet Reports Second Quarter Results
ACTON VALE, QUEBEC--Peerless Carpet Corporation today reported
breakeven results for the second quarter ended June 30, 1998.
Sales for the three month period were $42 million compared with
$52.5 million the prior year. Net earnings were $59,000 or a
breakeven per share, compared with net earnings of $859,000 or
$0.07 per share for the second quarter of 1997.
For the six months ended June 30, 1998 net earnings were $609,000
or $0.04 per share on sales of $82 million compared with net
earnings of $33,000 or a breakeven per share on sales of $100.7
million for the same period last year. Included in the 1997 sales
figures are revenues related to business that were sold in 1997,
representing an amount of $4 million for the three months ended
June 30, 1997 and $9 million for the six months ended June 30,
1997.
Peerless Carpet President Jeff Casselman said a revenue shortfall
in the broadloom business, principally in the commercial segment,
negatively affected profitability. "The high fixed operating cost
of the company relative to the manufacturing volume renders the
business very sensitive to such changes in volumes," he explained.
In the Residential Segment, delays in meeting sample delivery
schedules to retailers created by a four month strike of the
Company's sample makers, coupled with the on-going construction
workers strike in Ontario, prevented Peerless from achieving
planned growth in the second quarter. Housing construction was
put on hold, affecting shipments in June and July. "We expect
that this will improve during the September through November
selling season, although settlements had not yet been reached with
one of the unions involved."
The Far East export business was insignificant due to the currency
and economic crises affecting this part of the world.
In April, the Company announced the formation of an alliance with
America's Carpet Gallery (ACG) under the banner of Your
HomeStyle(R) (YHS) for the implementation of a retail marketing
concept focused on consumer life styles. The program was launched
to a targeted group of retailers across Canada in June.
"Response was good," said Mr. Casselman. "We are now in the
process of converting letters of intent from the retailers into
YHS service agreements. We expect that the program will
positively impact revenues in 1999. ACG members will see the YHS
programs in the fall as a precursor to an official US launch early
next year."
In the Commercial Segment, Peerless' new strategy, adopted in late
1997, of targeting the architect/design community has, in the
short term, affected volumes. "This required a change in sales
personnel and an investment in developing new relationships.
Although we anticipated that the strategy would take time to
produce, we underestimated the impact that these changes would
have on volume in the short term as we reduced traditional product
offerings through the retail distribution network. We believe
this plan will produce increased margins and sales. Already we
have seen successes in establishing relationships with major
commercial endusers e.g.: Borders Bookstores (U.S.), CIBC
(Canada) and Eaton's (store renovation). Furthermore, we expect
that this will have a positive impact in the fourth quarter this
year," explained Mr. Casselman.
Plans for the Bath & Floor Fashions Segment were on track in the
second quarter both in volume and margins. However on June 29,
1998 a tragic fire in the Bath & Floor Fashions factory, which
took the lives of two fire fighters, destroyed the facility.
"While our immediate concern was for the safety and well being of
our employees and the community, we have since turned our
attention to the business of serving our customers, identifying
alternate manufacturing sources and relocating employees into
existing operations. We currently have entered into contract
supply agreements with two U.S. based manufacturers for certain
product lines and are in the process of re-establishing
distribution operations in Acton. This is an important first step
in rebuilding the business. We anticipate that upon completion of
engineering studies and the insurance claim within the next few
weeks, that we will be in a position to announce plans relative to
the construction of the facilities. The Bath & Floor Fashions
segment is an important part of the Company and we remain
committed to this business," declared Mr. Casselman.
Senior Vice-President and Chief Financial Officer, Raoul Heredia
stated the Company has adequate insurance for the loss associated
with the disaster. He elaborated on the coverage:
- Property damage covers all losses related to the building,
machinery, equipment and inventory on a replacement cost basis.
- Business interruption covers all lost profits and ongoing
overhead costs associated with the business for up to twelve
months.
- The "extra expense" clause covers all additional costs incurred
in maintaining and restarting the business.
- Liability insurance covers all claims from third parties that
may have suffered direct losses as a result of the disaster.
"We expect that the softness in shipments will continue into the
third quarter with improvement in the fourth quarter from the
commercial segment and in the residential segment from pent up
demand in new housing. We are optimistic that the low Canadian
dollar will support our expansion efforts in the U.S. commercial
and residential markets," concluded Mr. Casselman.
Peerless Carpet Corporation is a leading Canadian manufacturer of
tufted broadloom carpet and tufted bath and accent rugs, which are
marketed under the names Peerless, Peerless Ensemble, Peerless
International, Barrymore, Devon Manor and Your Homestyle. Based
in Acton Vale, Quebec, Peerless Carpet Corporation has
distribution in Canada, Australia, the United States and Europe.
Company shares are traded on both the Montreal Exchange and the
Toronto Stock Exchange under the symbol PRG.
/T/
PEERLESS CARPET CORPORATION
FINANCIAL RESULTS
($000)
JUNE 30
______________________________________________________________
3 MONTHS 6 MONTHS
______________________________________________________________
1998 1997 1998 1997
SALES: OPERATING DIVISIONS $41 997 $48 560 $82 006 $91 761
SALES: DISCONTINUED DIVISIONS $- $3 960 $- $8 980
______________________________________________________________
TOTAL COMPANY SALES $41 997 $52 520 $82 006 $100 741
______________________________________________________________
OPERATING EARNINGS (LOSS) $1 160 $2 112 $2 757 $2 483
NET EARNINGS(LOSS) $59 $859 $609 $33
EARNING (LOSS) PER SHARES $- $0,07 $0,04 $-
FULLY DILUTED EARNING PER SHARES $- $0,06 $0,04 $-
/T/
-30-
FOR FURTHER INFORMATION PLEASE CONTACT:
Peerless Carpet Corporation
Jeff Casselman
President & Chief Executive Officer
(514) 546-5034
(514) 546-5067 (FAX)
or
Peerless Carpet Corporation
Raoul F.J. Heredia, c.a.
Chief Financial Officer
(514) 546-5034
(514) 546-5067 (FAX)
or
Maison Brison
Rick Leckner
(514) 731-0000
(514) 731-4525 (FAX)
INDUSTRY: HMF
SUBJECT: ERN
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