Exhibit 99.1
Contacts: |
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Michael J. Shea | Timothy D. Green |
Chief Financial Officer | Vice President |
Mac-Gray Corporation | Sharon Merrill Associates, Inc. |
617-492-4040 ext. 310 | 617-542-5300 |
Email: mshea@macgray.com | Email: tgreen@investorrelations.com |
Mac-Gray Reports Second-Quarter Earnings
Company’s Laundry Facilities Business Leads Overall Financial Performance
CAMBRIDGE, MA, July 23, 2003 - Mac-Gray Corporation (NYSE: TUC), the nation’s premier laundry facilities contractor and a provider of other amenities to the multi-housing industry, and the largest provider of such services to the college and university market, today announced its financial results for the quarter ended June 30, 2003.
Mac-Gray reported second-quarter 2003 revenue of $36.0 million, compared with second-quarter 2002 revenue of $38.1 million, a decrease of 6%. Net income for the quarter was $373,000, or $0.03 per share, compared with $856,000, or $0.07 per share, for the quarter ended June 30, 2002. Prior to a charge in the 2003 second quarter of $381,000, or $0.02 per share after tax, for the early extinguishment of debt incurred with the refinancing of the Company’s bank debt announced on June 25th, earnings were $0.05 per share.
For the six months ended June 30, 2003, revenue was $72.0 million, a decrease of 4% from revenue of $74.8 million for the comparable period last year. Net income for the first half of 2003 was $1.3 million, or $0.10 per share, compared with $1.1 million, or $0.08 per share for the same period last year. Prior to the charge for the early extinguishment of debt, earnings for the first six months of 2003 were $0.12 per share. Excluding a $0.07 per share charge, recorded in the first quarter of 2002, earnings for the first six months of 2002 would have been $2.0 million, or $0.15 per share. That charge was required to comply with Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets.”
Comments on the Second Quarter and the First Half of 2003
“Mac-Gray’s laundry facilities division continued to lead the Company’s top-line performance, delivering second-quarter revenue that increased 2% from second-quarter 2002 revenue in the division,” said Stewart MacDonald, Mac-Gray’s chairman and chief executive officer. “Revenue in the division was up 1% for the first half of 2003, compared with the same period in 2002. Despite continuing increases in apartment vacancy rates in key markets and overall weakness in the economy, second-quarter 2003 laundry facilities revenue was the highest second-quarter laundry facilities revenue in the Company’s history. This was possible because we have been able to add new accounts, retain a higher percentage of existing accounts at the expiration of contracts and complete three small acquisitions. We also continued to convert coin-operated facilities to card-operation, which contributes to higher yields.
“Mac-Gray’s other businesses continued to combat larger economic issues. In the second quarter of 2003, sales by our laundry equipment division were down $1.4 million, or 27%, from the prior year’s second quarter, which was a particularly strong quarter. Year-to-date, laundry equipment sales were down $2.0 million, or 21%, from the prior year’s first half. We believe that this result is primarily attributable to the unwillingness of many customers to commit to capital expenditures and even for those who do, their difficulty in obtaining financing.
“Performance in the academic sector of our MicroFridge® division continues to produce disappointing results. MicroFridge’s® total revenue decline of $1.0 million, or 15%, from the second quarter of 2002 is attributable almost exclusively to the academic sector, where revenue for the second quarter declined from $2.4 million to $1.0 million, or 58%. Unfortunately, universities continue to be cautious about making capital commitments.
“On the other hand, a $104,000, or 4%, increase in revenue in the hotel/motel sector along with an increase of $247,000, or 13%, in revenue in the government sector helped offset the academic sector revenue shortfall. The performance of the hotel/motel sector was good news, considering the widespread weakness in the hospitality industry. In the government sector, we are told by purchasing agents that spending has been temporarily effected by the reallocation of domestic military housing funds due to the war in Iraq. Yet, despite the uncertainty surrounding near-term military spending, revenue for the second quarter increased slightly from last year’s second quarter.
“During the second quarter, Mac-Gray’s management continued to respond to this period of economic weakness by focusing on controlling costs, strengthening the Company’s balance sheet and making selective acquisitions. The most noteworthy of these actions was the refinancing of the Company’s bank debt. As a result of locking in low fixed rates for five years for a substantial portion of our debt, Mac-Gray will save interest expense, having reduced interest rates by approximately 200 basis points compared to the prior facility. The second quarter results include a charge of $381,000, or $0.02 per share after tax, associated with the early extinguishment of our prior bank debt. The refinancing also positions the Company to accelerate our acquisition activity. During the second quarter, we added 1,100 machines in three acquisitions.”
During the second quarter, the Company also repurchased approximately 20,000 shares of its common stock under its buyback program. In December 2002, the Company’s Board of Directors authorized the repurchase of up to $2 million of Mac-Gray common stock for a period of 12 months in the open market, or in privately negotiated transactions.
Outlook
“On the strength of our recent refinancing and steady cash flow from our laundry facilities operations, Mac-Gray continues to position itself for the future. At a time when many companies are struggling, we continue to invest in technology and sales resources to help sustain our leading position in the laundry contract management field, particularly in the area of card operations and the development of on-line applications.
“In the MicroFridge® division, several programs are underway to open new distribution channels in the retail sector. Also, a recent agreement with the Maytag Corporation to market its Magic Chef, Amana and Maytag lines of home appliances is expected to open new revenue opportunities in future quarters. Additionally, MicroFridge® was recently awarded the ENERGY STAR designation, recognizing our unique line of patented, energy-efficient products. We expect that this will increase the division’s marketing strength,” said MacDonald.
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About the Financial Results Conference Call
Mac-Gray plans to broadcast its second-quarter fiscal 2003 financial results conference call over the Internet today at 10:00 a.m. ET. During the call, Stewart MacDonald, Mac-Gray’s chairman and chief executive officer, and Michael Shea, chief financial officer, will summarize the Company’s quarterly financial results and review business and operating highlights from the quarter. To listen to the Webcast, visit the Investor Relations section of the Company’s Web site at www.macgray.com at least 15 minutes prior to the event’s broadcast. Interested parties unable to listen to the live call may access an archived version of the call, also located on the investor relations section of Mac-Gray’s Web site.
About Mac-Gray Corporation
Mac-Gray derives its revenue principally through the contracting of card- and coin-operated laundry facilities in multiple housing facilities such as apartment buildings, colleges and universities, condominiums and public housing complexes. Mac-Gray contracts its laundry rooms under long-term leases. These leases typically grant Mac-Gray exclusive contract rights to laundry rooms on the lessor’s premise for a fixed term, which is generally seven to ten years, in exchange for a negotiated portion of the revenue collected. Mac-Gray’s laundry facilities business consists of approximately 30,000 multiple housing laundry rooms located in 27 states in the Northeastern, Midwestern and Southeastern United States, as well as the District of Columbia. Mac-Gray also sells, services and leases commercial laundry equipment to commercial laundromats and institutions. Through its MicroFridge® division, Mac-Gray sells its proprietary MicroFridge® line of products, which are combination refrigerators/freezers/microwave ovens utilizing patented Safe PlugTM circuitry. The products are marketed throughout the United States to colleges and universities, military bases, hotels and motels and assisted living facilities. To strengthen its revenue opportunities MicroFridge® has also entered into agreements with Maytag Corporation to market Maytag’s Magic Chef, Amana and Maytag lines of home appliances throughout the U.S. In addition, MicroFridge® was recently awarded the ENERGY STAR designation. Through its Copico division, Mac-Gray is a provider of card- and coin-operated reprographics equipment and services to the academic and public library markets in New England and New York, as well as Florida, Illinois, Maryland and New Jersey.
Safe Harbor Statement
This release contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Company intends such forward-looking statements to be covered by the Safe Harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and is including this statement for purposes of complying with these Safe Harbor provisions. Forward-looking statements, which are based on certain assumptions and describe future plans, strategies and expectations of the Company, may be identified by use of the words, “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project” or similar expressions. Investors should not rely on forward-looking statements because they are subject to a variety of risks, uncertainties and other factors that could cause actual results to differ materially from such forward-looking statements. Certain factors which could cause actual results to differ materially from the forward-looking statements include, but are not limited to, those set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2002 under “Management’s Discussion and Analysis of Financial Conditionand Results of Operations” and in other reports subsequently filed with the Securities and Exchange Commission.
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MAC-GRAY CORPORATION
CONSOLIDATED INCOME STATEMENTS
(In thousands, except per share amounts; Unaudited)
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| Three months ended |
| Six months ended |
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| 2003 |
| 2002 |
| 2003 |
| 2002 |
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Revenue |
| $ | 36,028 |
| $ | 38,088 |
| $ | 72,002 |
| $ | 74,846 |
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Cost of revenue: |
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Cost of route revenues |
| 18,262 |
| 17,937 |
| 36,887 |
| 36,887 |
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Depreciation and amortization |
| 4,302 |
| 4,287 |
| 8,549 |
| 8,468 |
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Cost of products sold |
| 6,593 |
| 7,737 |
| 12,103 |
| 13,245 |
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Total cost of revenue |
| 29,157 |
| 29,961 |
| 57,539 |
| 58,600 |
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Operating expenses: |
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Selling, general and administration expenses |
| 5,382 |
| 5,687 |
| 10,620 |
| 10,960 |
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Loss on early extinguishment of debt |
| 381 |
| — |
| 381 |
| — |
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Total operating expenses |
| 5,763 |
| 5,687 |
| 11,001 |
| 10,960 |
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Income from operations |
| 1,108 |
| 2,440 |
| 3,462 |
| 5,286 |
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Interest and other expenses, net |
| 457 |
| 975 |
| 1,256 |
| 1,945 |
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Income before provision for income taxes and effect of change in accounting principle |
| 651 |
| 1,465 |
| 2,206 |
| 3,341 |
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Provision for income taxes |
| 278 |
| 609 |
| 927 |
| 1,382 |
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Net income before effect of change in accounting principle |
| 373 |
| 856 |
| 1,279 |
| 1,959 |
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Effect of change in accounting principle - net of taxes |
| — |
| — |
| — |
| (906 | ) | ||||
Net income |
| $ | 373 |
| $ | 856 |
| $ | 1,279 |
| $ | 1,053 |
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Net income per common share before effect of change in accounting principle – basic and diluted |
| $ | 0.03 |
| $ | 0.07 |
| $ | 0.10 |
| $ | 0.15 |
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Net income per common share – basic and diluted |
| $ | 0.03 |
| $ | 0.07 |
| $ | 0.10 |
| $ | 0.08 |
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Weighted average common shares outstanding - basic |
| 12,672 |
| 12,653 |
| 12,676 |
| 12,652 |
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Weighted average common shares outstanding – diluted |
| 12,691 |
| 12,664 |
| 12,687 |
| 12,658 |
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MAC-GRAY CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
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| June 30, |
| December 31, |
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| (Unaudited) |
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Assets |
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Current assets: |
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Cash and cash equivalents |
| $ | 4,810 |
| $ | 5,016 |
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Trade receivables, net |
| 6,660 |
| 7,670 |
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Inventory |
| 4,187 |
| 6,186 |
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Prepaid route rent and other current assets |
| 9,159 |
| 8,662 |
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Total current assets |
| 24,816 |
| 27,534 |
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Property, plant and equipment, net |
| 74,097 |
| 74,928 |
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Intangible assets, net |
| 45,864 |
| 45,739 |
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Prepaid route rent and other assets |
| 13,946 |
| 14,178 |
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Total assets |
| $ | 158,723 |
| $ | 162,379 |
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Liabilities and Stockholders’ Equity |
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Current liabilities: |
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Current portion of long-term debt and capital lease obligations |
| $ | 3,517 |
| $ | 8,850 |
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Accounts payable and accrued expenses |
| 16,363 |
| 20,007 |
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Deferred rental revenues and customer deposits |
| 736 |
| 1,278 |
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Total current liabilities |
| 20,616 |
| 30,135 |
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Long-term debt and capital lease obligations |
| 54,858 |
| 47,975 |
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Other liabilities |
| 489 |
| 2,760 |
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Deferred income tax liabilities |
| 17,486 |
| 17,821 |
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Total liabilities |
| 93,449 |
| 98,691 |
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Stockholders’ equity: |
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Common stock |
| 134 |
| 134 |
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Additional paid in capital |
| 68,540 |
| 68,540 |
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Accumulated other comprehensive loss |
| (1,389 | ) | (1,723 | ) | ||
Retained earnings |
| 6,925 |
| 5,805 |
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Treasury stock |
| (8,936 | ) | (9,068 | ) | ||
Total stockholders’ equity |
| 65,274 |
| 63,688 |
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Total liabilities and stockholders’ equity |
| $ | 158,723 |
| $ | 162,379 |
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