O'Sullivan Industries Announces Fiscal Year 2004 First Quarter
Results LAMAR, Mo., Oct. 27 /PRNewswire-FirstCall/ -- O'Sullivan
Industries Holdings, Inc. (OTC Pinksheets: OSULP), a leading
manufacturer of ready-to- assemble furniture, today announced its
fiscal 2004 first quarter operating results for the period ended
September 30, 2003. Our subsidiary, O'Sullivan Industries, Inc.,
previously announced the completion of a $100 million senior
secured notes offering and a new $40 million senior secured
revolving credit facility. The proceeds were used to repay
O'Sullivan's existing $88.3 million senior credit facility and
related fees and expenses. Richard Davidson, president and chief
executive officer of O'Sullivan Furniture, stated, "This
transaction solidifies our capital structure and improved our
financial flexibility by eliminating our debt amortization until
2008 and removing the quarterly financial covenant requirements.
Additionally, this transaction increased the amount of credit
available from our revolving credit agreement and extended the
maturity date of our revolver until 2008." First Quarter Results
Net sales for the first quarter of fiscal 2004 were $71.5 million,
about the same as sales of $71.6 million in the comparable period a
year ago. Operating income for the first quarter of fiscal 2004 was
$3.8 million, or 5.4% of net sales, a decrease of 51.6% from
operating income of $7.9 million, or 11.1% of net sales, in the
comparable period a year ago. The decrease in operating income was
generally caused by lower production levels adversely affecting our
fixed cost absorption as well as increased promotional activities
with several of our major retail partners. Net loss for the first
quarter of fiscal 2004 was $7.3 million compared to net income of
$1.5 million in the comparable period a year ago. The net loss for
the current year period reflects the reduction in operating income
noted above as well as the write-off of debt issuance costs related
to our previous senior secured credit facility. The net loss also
reflects increased interest expense due to the recent adoption of
an accounting pronouncement, Statement of Financial Accounting
Standard No. 150, Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity, that resulted in us
accounting for dividends on our mandatorily redeemable senior
preferred stock as interest expense. EBITDA for the first quarter
of fiscal 2004 was $3.9 million, or 5.4% of net sales, compared to
EBITDA of $11.2 million, or 15.6% of net sales in the comparable
period a year ago. The current year EBITDA amount reflects the $3.3
million in other financing costs for the write-off of debt issuance
costs related to our previous senior secured credit facility. The
attached table reconciles net income to EBITDA. EBITDA should be
considered in addition to, but not as a substitute for or superior
to, operating income, net income, operating cash flow and other
measures of financial performance prepared in accordance with
generally accepted accounting principles. EBITDA may differ in the
method of calculation from similarly titled measures used by other
companies. EBITDA provides another measure of the operations of our
business and liquidity prior to the impact of interest, taxes and
depreciation. Further, EBITDA is a common method of valuing
companies such as O'Sullivan. Working Capital Cash on hand at
September 30, 2003 was $14.3 million compared to $13.3 million in
the prior year. Inventory at September 30, 2003 dropped to $45.3
million from $57.0 million in the prior year period, a decrease of
$11.7 million, or 20.6%, as we aligned our inventory levels with
sales. Accounts receivable levels at September 30, 2003 were $34.0
million. This balance is flat in comparison to the prior year
period. Net cash provided by operating activities for the first
quarter of fiscal 2004 was $4.1 million, compared to net cash used
by operating activities of $7,000 in the comparable period a year
ago. Capital expenditures for the first quarter of fiscal 2004 were
$244,000, a decrease of $1.3 million, or 84.3%, from the $1.6
million spent in the comparable period a year ago. Total long-term
debt at September 30, 2003 was $220.3 million compared to $233.9
million in the comparable period a year ago, a decrease of $13.6
million, or 5.8%. The September 30, 2003 balance reflects our
previously announced $100 million senior secured notes offering.
Management Comments "O'Sullivan Furniture recently returned from
the International Furniture Market in High Point, NC where the
company introduced approximately 100 new products," said Mr.
Davidson. "The recent High Point market provided the venue for our
customers to see the breadth of brand and product strategies
offered by O'Sullivan Furniture. We showcased our Intelligent
Designs(R), Home Architecture(R), Coleman(R) and O'Sullivan
Furniture(R) products. These products demonstrated the innovations
and market strategies that are enabling O'Sullivan Furniture to tap
into new markets to enhance the breadth of our offerings." Mr.
Davidson continued, "During the recent High Point market,
O'Sullivan Furniture added the Home Architecture(R) brand
initiative to our strategy for future growth. This brand, and its
products, will position O'Sullivan Furniture to be a strong
competitor in the growing market for furniture that accommodates
the next generation of electronic entertainment components. This
initiative is just another example of the innovative products that
are beginning to redefine O'Sullivan Furniture." Mr. Davidson
concluded, "We have seen an improvement in point of sale trends
versus the depressed levels of the first two quarters of this
calendar year, and we have begun to benefit from the sales of
products from our new Coleman garage storage and Intelligent
Designs commercial office furniture initiatives. Based on this, we
currently expect sales in the second quarter of fiscal 2004 to be
about $70 to $75 million. Further, we anticipate operating income
in the second quarter of fiscal 2004 to be approximately $5.5 to
$6.0 million." Conference Call O'Sullivan Furniture will host a
conference call on October 28, 2003 at 9:00 a.m. cst (10:00 a.m.
est). To participate in the call, dial (913) 981-5542 five to ten
minutes prior to the scheduled start time. The conference moderator
will establish your participation in the call. You must reference
the conference pass code of 771911. For those who are unable to
participate in the call, playbacks are scheduled to begin at noon,
12:00 p.m. (cst) on October 28, 2003 through midnight on November
4, 2003. Please call (719) 457-0820 and reference the conference
pass code of 771911. For your convenience, we have added an audio
webcast of the conference call to the O'Sullivan Furniture web site
at http://www.osullivan.com/ . The confirmation number is 771911
and leave the pass code field blank. The forward-looking statements
in this release involve risks and uncertainties that are dependent
upon a number of factors such as sales levels, product mix,
customer acceptance of existing and new products, material price
increases, bankruptcy or loss of significant customers, interest
rate fluctuations, and other factors, all of which are difficult to
predict and most of which are beyond O'Sullivan's control. Actual
results could differ materially from those expressed in the
forward-looking statements. Please review the Company's 10-K and
most recent 10-Q reports filed with the Securities and Exchange
Commission. O'Sullivan Industries Holdings, Inc. First Quarter
Results Consolidated Statement of Operations (in thousands)
(unaudited) Three Months Ended September 30, 2003 2002 % Change Net
sales $71,464 $71,557 0% Cost of sales 57,156 51,584 11% Gross
profit 14,308 19,973 -28% Percent of net sales 20.0% 27.9% Selling,
marketing and administrative 10,476 12,059 -13% Operating income
3,832 7,914 -52% Percent of net sales 5.4% 11.1% Interest expense,
net 7,837 6,375 23% Other financing costs 3,294 - Income (loss)
before income taxes (7,299) 1,539 -574% Income tax provision - - -
Net income (loss) (7,299) 1,539 -574% Dividends and accretion on
preferred stock (2,999) (3,482) -14% Net loss attributable to
common stockholders $(10,298) $(1,943) 430% Condensed Consolidated
Balance Sheets (in thousands) (unaudited) September 30, June 30,
2003 2002 2003 Assets Current Assets: Cash and cash equivalents
$14,334 $13,327 $7,977 Trade receivables, net 33,979 34,028 25,032
Inventories, net 45,278 57,006 52,426 Prepaid expenses and other
assets 2,508 3,478 2,772 Total current assets 96,099 107,839 88,207
Property, plant and equipment, net 68,831 77,373 71,867 Other
assets 9,625 18,749 9,226 Goodwill, net 38,088 38,088 38,088
$212,643 $242,049 $207,388 Liabilities and Stockholders' Deficit
Current liabilities Accounts payable $10,752 $11,908 $10,006
Current portion - long term debt - 8,495 4,039 Accrued advertising
9,110 12,901 9,493 Accrued liabilities 13,638 15,472 12,043 Payable
to RadioShack 6,798 10,337 6,798 Total current liabilities 40,298
59,113 42,379 Long term debt - less current portion 220,344 225,399
209,405 Sr preferred stock 22,965 19,182 21,933 Non-current
liabilities 9,107 6,621 6,762 Payable to RadioShack 65,269 67,940
65,269 Stockholders' deficit (145,340) (136,206) (138,360) $212,643
$242,049 $207,388 Condensed Consolidated Statements of Cash Flows
(in thousands) (unaudited) Three Months Ended September 30, 2003
2002 Net cash provided (used) by operating activities $4,102 $(7)
Cash flows used by investing activities (244) (1,557) Net cash
flows provided (used) for financing activities 2,499 (886) Net
increase (decrease) in cash and cash equivalents 6,357 (2,450) Cash
and cash equivalents, beginning of period 7,977 15,777 Cash and
cash equivalents, end of period $14,334 $13,327 Reconciliation of
Net Income to EBITDA (in thousands) (unaudited) Three Months Ended
September 30, 2003 2002 Net income (loss) $(7,299) $1,539 Income
tax provision - - Interest expense, net 7,837 6,375 Depreciation
and amortization 3,312 3,264 EBITDA $3,850 $11,178 EBITDA as a
percent of sales 5.4% 15.6% Schedule of Interest Expense (in
thousands) (unaudited) Three Months Ended September 30, 2003 2002
Interest expense on senior credit facility, industrial revenue
bonds and senior subordinated notes $5,559 $5,876 Interest income
(29) (58) Non-cash items: Interest expense on O'Sullivan Holdings
note 667 594 Interest expense on Sr. Preferred Stock 1,033 -
Interest rate collar - (584) Amortization of debt discount 166 144
Amortization of loan fees 441 403 Net interest expense $7,837
$6,375 DATASOURCE: O'Sullivan Industries Holdings, Inc. CONTACT:
Phillip J. Pacey, Senior Vice President and CFO of O'Sullivan
Industries Holdings, Inc., +1-417-682-8312 Web site:
http://www.osullivan.com/
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