Exhibit 99.1
Angelica Announces Second Quarter Fiscal 2005 Financial Results;
Revenues Increase 37.7% but Energy Costs and Strike Threat Hurt Earnings
ST. LOUIS--(BUSINESS WIRE)--Sept. 7, 2005--Angelica Corporation
(NYSE:AGL), a leading provider of healthcare linen management
services, today announced second quarter and first half fiscal year
2005 financial results for the period ended July 30, 2005.
Second Quarter Ended July 30, 2005
Net revenues for the second quarter of fiscal 2005 were $107.2
million, a 37.7% increase from $77.9 million in second quarter of
fiscal 2004. Acquisitions, net of divestitures, added $27.8 million of
the $29.3 million increase in fiscal second quarter 2005 revenue, or
35.7%. Organic growth year-over-year was $1.5 million, accounting for
2.0% of the increase in revenues.
Gross profit for the second quarter of fiscal 2005 was $13.6
million, an 8.4% increase from $12.5 million in the second quarter of
fiscal 2004. The $1.1 million increase in gross profit reflects higher
revenues being offset primarily by production payroll costs increasing
as a percent of revenue by 2.1% and natural gas and delivery fuel
costs increasing as a percent of revenue by 1.1% versus the prior year
comparable period. For reference, the production payroll cost increase
includes higher workers' compensation expense and increased payroll
related to labor strike contingency planning, as well as costs
associated with the consolidation of our Vallejo facility into other
Northern California plants necessitated by an eminent domain
proceeding. Savings in linen procurement mostly offset other cost
increases in plant security, operating supplies, repairs and fixed
expenses. As a result, gross profit margin was 12.6% in second quarter
fiscal 2005, down 3.5 points from 16.1% in second quarter fiscal 2004.
Selling, general and administrative (SG&A) expenses in second
quarter fiscal 2005 were $13.0 million, up 28.6% from $10.1 million in
second quarter fiscal 2004. Second quarter fiscal 2005 SG&A included
$0.4 million of management transition expense related to the senior
management change, $0.6 million of legal expenses associated with the
union settlement and $0.4 million of expenses associated with a
financing alternative that the Company did not complete after
determining it was not the most favorable option. Second quarter of
fiscal 2004 included $0.3 million of union related SG&A expenses.
Nevertheless, second quarter SG&A decreased by 90 basis points as a
percent of revenue to 12.1% in fiscal 2005, compared to 13.0% in
fiscal 2004, due to increased revenues and ongoing efforts to control
operating costs.
Other operating expense for second quarter fiscal 2005 was $0.4
million compared to other operating income of $1.3 million in second
quarter fiscal 2004, a difference of $1.7 million. Second quarter
fiscal 2005 includes $1.1 million of amortization expense related to
recent acquisitions, compared to $0.2 million of amortization in
second quarter fiscal 2004. Second quarter fiscal 2005 also included a
$0.5 million gain on the sale of non-healthcare business compared to a
$1.3 million gain on the sale of non-healthcare business in second
quarter fiscal 2004.
Interest expense for second quarter fiscal 2005 was $1.8 million
compared to $0.3 million in second quarter fiscal 2004 due to higher
borrowings for acquisitions and higher interest rates.
Net loss from continuing operations for second quarter fiscal 2005
was $0.9 million, or $0.10 per diluted share, compared to net income
of $2.8 million, or $0.30 per diluted share in second quarter of
fiscal 2004.
First Six Months Ended July 30, 2005
For the first six months of fiscal 2005 ended July 30, 2005, net
revenues were $209.8 million, a 34.9% increase from $155.6 million in
fiscal 2004. Acquisitions, net of divestitures, added $49.5 million to
the first six months fiscal 2005 revenue, a 31.8% increase. Organic
growth year-over-year was $4.7 million, a 3.1% increase in revenues.
Gross profit for the first six months of fiscal 2005 was $29.1
million, a 17.9% increase from $24.7 million in fiscal 2004. The $4.4
million increase in gross profit reflects higher revenues being offset
primarily by production payroll costs increasing as a percent of
revenue by 1.7% and natural gas and delivery fuel costs increasing as
a percent of revenue by 1.0% versus the prior year comparable period.
For reference, the production payroll cost increase includes higher
workers' compensation expense and increased payroll related to labor
strike contingency planning, as well as costs associated with the
closure of the Vallejo facility as a result of an eminent domain
proceeding. Savings in linen procurement costs mostly offset other
cost increases in plant security, operating supplies, repairs and
fixed expenses. Gross profit margin was 13.9% in the first six months
of fiscal 2005, down 2.0 points from 15.9% in fiscal 2004.
Selling, general and administrative (SG&A) expenses in the first
six months of fiscal 2005 were $25.6 million, up 26.5% from $20.3
million in the first six months of fiscal 2004. First six months
fiscal 2005 SG&A included $0.4 million of management transition
expense related to the senior management change, $0.8 million of legal
expenses associated with the union settlement, and $0.4 million of
expenses associated with the financing alternative that the Company
chose not to complete. First six months fiscal 2004 included $0.5
million of union related SG&A expenses. Nevertheless, first six months
SG&A decreased by 80 basis points as a percent of revenue to 12.2% in
fiscal 2005, compared to 13.0% in the same period fiscal 2004, due to
increased revenues and ongoing efforts to control operating costs.
Other operating expense for the first six months of fiscal 2005
was $1.2 million compared to other operating income of $1.1 million in
the first six months of fiscal 2004, a difference of $2.3 million.
First six months fiscal 2005 include $1.9 million of amortization
expense related to recent acquisitions, compared to $0.5 million of
amortization in first six months fiscal 2004. First six months fiscal
2005 also included a $0.5 million gain on the sale of non-healthcare
business compared to a $1.3 million gain on the sale of non-healthcare
business in first six months fiscal 2004.
Interest expense for the first six months of fiscal 2005 was $2.9
million compared to $0.6 million in the first six months of fiscal
2004 due to higher borrowings for acquisitions and higher interest
rates.
Net income from continuing operations for first six months fiscal
2005 was $0.1 million, or $0.01 per diluted share, compared to $5.3
million, or $0.58 per diluted share in first six months fiscal 2004.
Commenting on the results, Steve O'Hara, CEO, said, "While pleased
with our revenue growth and operating programs to control costs, we
are disappointed that these were overshadowed by energy prices and
four events that, while improving our long-term outlook, had a
negative impact on second quarter earnings. First, hiring our new
President & COO, Dave Van Vliet, while strengthening our ability to
achieve our long-term goals, created a $0.4 million transition charge
in the second quarter. Second, signing a ten year labor peace
agreement and settling seven open plant contracts in June with UNITE
HERE resolved an 18 month labor dispute which cost us $1.0 million in
second quarter and $1.5 million in the first six months. Third, though
necessitated by an eminent domain proceeding, the move to consolidate
our Vallejo, California plant into our newly acquired Turlock and
Sacramento facilities strengthens us longer term. After a profitable
fiscal 2004, Vallejo lost $0.7 million in the first six months of
fiscal 2005 completing this transition. Fourth, signing our new senior
credit facility provides greater flexibility and room for growth, but
we wrote off $0.4 million of costs in the second quarter associated
with the alternate financing arrangement that we chose not to
complete. While these four events negatively impacted our second
quarter, we ended the quarter with a new president leading a more
integrated plant network, with long-term labor peace and a strong
credit facility in place."
Mr. O'Hara continued, "These costs and the significant increases
in natural gas and delivery fuel costs constrained our ability to
expand plant income as we would have liked. While the costs associated
with labor peace, senior management change, refinancing and the
Vallejo transition are behind us now, high energy prices are expected
to impact gross margins during the balance of the year and into early
FY06, given the recent price increases following Hurricane Katrina. In
addition, costs incurred in connection with the consolidation of our
two Dallas facilities in the third quarter fiscal 2005 and a planned
fourth quarter reorganization to heighten customer service are
expected to negatively impact second half gross margins in fiscal 2005
while resulting in future cost improvements. Although we continue to
make good progress in our key initiatives to strengthen gross margins,
especially in linen procurement, we now project for the year to have
gross margins below last year's 15.5% as market pricing has yet to
catch up to higher energy costs.
"To be more specific, we estimate that revenues for fiscal year
2005 will be approximately $420 million, excluding the benefit from
any future acquisitions. However, we expect the first half transition
costs, planned second half consolidations and the continuing effect of
higher energy prices to yield fiscal 2005 gross margin between 13.0%
and 13.5% of revenues. The net result is that we estimate FY05
earnings per share from continuing operations (EPS) to be between
$0.00 and $0.20. Longer term, we remain committed to improving our
gross margins to the 20% level and believe our current plans to do so
are appropriate. We expect to see significant improvement in gross
margin during FY06 but now target the 20% gross margin goal for FY08,
after the competitive marketplace fully reflects current energy costs
in pricing proposals."
Angelica Corporation, traded on the New York Stock Exchange under
the symbol AGL, is a leading provider of textile rental and linen
management services to the U.S. healthcare market. More information
about Angelica is available on its website, www.angelica.com.
Forward-Looking Statements
Any forward-looking statements made in this document reflect the
Company's current views with respect to future events and financial
performance and are made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Such statements are
subject to certain risks and uncertainties that may cause actual
results to differ materially from those set forth in these statements.
These potential risks and uncertainties include, but are not limited
to, competitive and general economic conditions, the ability to retain
current customers and to add new customers in competitive market
environments, competitive pricing in the marketplace, delays in the
shipment of orders, ability to mitigate work disruptions at our plants
arising from work interruptions or stoppages, availability of labor at
appropriate rates, availability and cost of energy and water supplies,
the cost of workers' compensation and healthcare benefits, the ability
to attract and retain key personnel, the ability of the Company to
recover its seller note and avoid future lease obligations as part of
its sale of Life Uniform, the ability of the Company to accomplish its
strategy of redirecting its resources to its healthcare linen
management business in a timely and financially advantageous manner,
unusual or unexpected cash needs for operations or capital
transactions, the effectiveness of certain expense reduction
initiatives, the ability to obtain financing in required amounts and
at appropriate rates and terms, the ability to identify, negotiate,
fund, consummate and integrate acquisitions, and other factors which
may be identified in the Company's filings with the Securities and
Exchange Commission.
Unaudited results for second quarter and six months ended July 30,
2005 compared with same period ended July 31, 2004
(dollars in thousands, except per share amounts):
Second Quarter Ended First Half Ended
-------------------------- ---------------------------
July 30, July 31, Percent July 30, July 31, Percent
2005 2004 Change 2005 2004 Change
--------- -------- ------- --------- --------- -------
Continuing
Operations:
Net revenues $107,240 $77,864 37.7% $209,820 $155,594 34.9%
Cost of
services (93,678) (65,354) 43.3% (180,724) (130,917) 38.0%
--------- -------- ------- --------- --------- -------
Gross profit 13,562 12,510 8.4% 29,096 24,677 17.9%
Selling, general
and
administrative
expenses (12,980) (10,095) 28.6% (25,643) (20,275) 26.5%
Amortization of
other acquired
assets (1,053) (229) 359.8% (1,864) (454) 310.6%
Other operating
income, net 682 1,545 -55.9% 630 1,516 -58.4%
--------- -------- ------- --------- --------- -------
Income from
operations 211 3,731 -94.3% 2,219 5,464 -59.4%
Interest
expense (1,756) (301) 483.4% (2,906) (581) 400.2%
Non-operating
income, net 258 2 nm 797 2,102 -62.1%
--------- -------- ------- --------- --------- -------
(Loss) income
from
continuing
operations
pretax (1,287) 3,432 nm 110 6,985 -98.4%
Benefit
(provision) for
income taxes 353 (661) nm (24) (1,691) -98.6%
--------- -------- ------- --------- --------- -------
(Loss) income
from continuing
operations (934) 2,771 nm 86 5,294 -98.4%
--------- -------- ------- --------- --------- -------
Discontinued
Operations:
Loss from
operations of
discontinued
segment, net
of tax - (1,307) nm - (635) nm
Gain (loss) on
disposal of
discontinued
segment, net
of tax - 56 nm - (3,008) nm
--------- -------- ------- --------- --------- -------
Loss from
discontinued
operations - (1,251) nm - (3,643) nm
--------- -------- ------- --------- --------- -------
Net (loss)
income $(934) $1,520 nm $86 $1,651 -94.8%
========= ======== ======= ========= ========= =======
Basic (loss)
earnings per
share:
(Loss) income
from
continuing
operations $(0.10) $0.31 nm $0.01 $0.60 -98.3%
Loss from
discontinued
operations - (0.14) nm - (0.41) nm
--------- -------- ------- --------- --------- -------
Net (loss)
income $(0.10) $0.17 nm $0.01 $0.19 -94.7%
========= ======== ======= ========= ========= =======
Diluted (loss)
earnings per
share:
(Loss) income
from
continuing
operations $(0.10) $0.30 nm $0.01 $0.58 -98.3%
Loss from
discontinued
operations - (0.13) nm - (0.40) nm
--------- -------- ------- --------- --------- -------
Net (loss)
income $(0.10) $0.17 nm $0.01 $0.18 -94.4%
========= ======== ======= ========= ========= =======
Unaudited condensed balance sheets as of July 30, 2005 and January 29,
2005
(dollars in thousands):
July 30, January 29,
2005 2005
-------- --------
ASSETS
- --------
Current Assets:
Cash and short-term investments $ 658 $ 926
Receivables, less reserves of $806 and $510 57,160 44,454
Linens in service 43,892 38,846
Prepaid expenses and other current assets 2,602 3,817
Deferred income taxes 5,319 5,386
-------- --------
Total Current Assets 109,631 93,429
Property and Equipment, net 108,731 101,665
Goodwill 50,584 31,272
Other Acquired Assets 42,705 24,860
Other Long-Term Assets 14,863 37,727
-------- --------
Total Assets $326,514 $288,953
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ---------------------------------------------------
Current Liabilities:
Current maturities of long-term debt $ 10,419 $ 419
Accounts payable 17,009 16,865
Accrued wages and other compensation 5,792 5,145
Other accrued liabilities 34,092 33,289
-------- --------
Total Current Liabilities 67,312 55,718
Long-Term Debt, less current maturities 93,301 67,811
Other Long-Term Obligations 13,619 14,068
Shareholders' Equity 152,282 151,356
-------- --------
Total Liabilities and Shareholders' Equity $326,514 $288,953
======== ========
CONTACT: Angelica Corporation
Jim Shaffer or Colleen Hegarty, 314-854-3800
www.angelica.com
or
Integrated Corporate Relations, Inc.
John Mills, 310-395-2215