Exhibit 99.1
Angelica Announces Third Quarter Improvements in Gross Margin and Earnings
Third Quarter Gross Margin Increases to 16.1% and Earnings per Share to $0.28
ST. LOUIS--(BUSINESS WIRE)--Dec. 5, 2006--Angelica Corporation
(NYSE: AGL), a leading provider of healthcare linen management
services, today announced third quarter and first nine months fiscal
year 2006 financial results for the period ended October 28, 2006.
Third quarter fiscal 2006 gross margin increased to 16.1% compared
with 14.4% gross margin reported in second quarter fiscal 2006 and
12.8% in third quarter fiscal 2005 helping drive up earnings per share
from continuing operations (EPS) to $0.28 in third quarter fiscal 2006
from $0.09 in third quarter fiscal 2005.
Third Quarter Ended October 28, 2006
Revenues for the third quarter fiscal 2006 were $107.8 million, a
0.2% increase from $107.6 million in third quarter fiscal 2005.
Organic growth excluding acquisitions and divestitures contributed
$3.8 million, representing a 4.2% organic growth rate. Acquisitions
made in fiscal 2005 contributed another $1.1 million of the increase.
These increases were offset by the sale of non-healthcare accounts
representing $4.7 million in revenue. Of the organic growth rate,
pricing represented 3.2 percentage points and volume represented 1.0
percentage point. Total healthcare revenues in third quarter fiscal
2006 were $104.3 million, a 5.0% increase from $99.3 million in third
quarter 2005.
Gross profit for the third quarter fiscal 2006 was $17.3 million,
a 25.8% increase from $13.8 million in the third quarter of fiscal
2005. Gross margin for the third quarter fiscal 2006 increased to
16.1% from 12.8% in the same period last year. The improvement in
gross margin reflects lower delivery and linen costs per pound and
flat production expense per pound year to year while revenues per
pound increased, resulting in expenses being lower as a percentage of
sales.
Selling, general and administrative (SG&A) expenses in the third
quarter fiscal 2006 were $13.4 million, compared to $10.8 million in
third quarter fiscal 2005. The $2.6 million increase primarily
reflects higher accruals of bonus, bad debt and sales tax of $0.9
million, the prior year reversal of $0.7 million of long term unvested
incentive compensation, operations process improvement (OPI)
consulting fees of $0.4 million, higher travel costs of $0.3 million
related to the OPI implementation and increased sales initiatives and
$0.2 million of expenses associated with the Board of Director's
Special Committee.
Other operating income for the third quarter fiscal 2006 was $2.4
million, a $2.2 million increase from $0.2 million recorded in the
third quarter fiscal 2005. Third quarter fiscal 2006 other operating
income includes a gain on the sale of real estate and a settlement we
received in connection with the Vallejo service center eminent domain
proceeding totaling $2.4 million. Third quarter fiscal 2005 other
operating income was primarily from the sale of non-healthcare
business. Interest expense for the third quarter fiscal 2006 was $2.5
million compared to $2.0 million in the third quarter fiscal 2005 due
to higher interest rates.
Income from continuing operations was $2.6 million, or $0.28 per
diluted share, in third quarter fiscal 2006 compared with $0.8
million, or $0.09 per diluted share, in third quarter fiscal 2005.
First Nine Months Ended October 28, 2006
For the first nine months of fiscal 2006 ended October 28, 2006,
revenues were $320.1 million, a 2.2% increase from $313.3 million in
the first nine months of fiscal 2005. Organic growth from net new
business and price increases contributed $10.1 million of revenue,
representing a 3.7% organic growth rate. Acquisitions made in fiscal
2005 contributed another $10.6 million of the increase. The sale of
non-healthcare customer accounts in fiscal 2005 and 2006 representing
$13.9 million in revenue offset the revenue gains. Of the organic
growth rate, pricing represented 3.0 percentage points and volume
represented 0.7 percentage points. Total healthcare revenues in the
first nine months of fiscal 2006 were $309.0 million, up 7.7% from
$286.8 million in the first nine months of fiscal 2005.
Gross profit for the first nine months of fiscal 2006 was $47.2
million, a 9.8% increase from $42.9 million in the first nine months
of fiscal 2005. Gross margin for the nine month period in fiscal 2006
increased to 14.7% from 13.7% in the same period last year, as higher
revenue levels more than offset increases in production expense driven
by higher energy and payroll costs.
SG&A expenses in the first nine months of fiscal 2006 were $41.2
million, compared to $36.1 million recorded in the first nine months
of fiscal 2005. The increase was primarily a result of a $2.5 million
increase in bonus and bad debt accruals, $2.1 million for operations
process improvement and financial consulting fees, $0.8 million in
fees related to the Board of Director's Special Committee, and the
prior year reversal of $0.7 million of long term unvested incentive
compensation. Fiscal 2005 also included $0.8 million in fees related
to a review of financing alternatives and changes in senior
management.
We recorded $3.2 million of amortization expense in the first nine
months of fiscal 2006, a $0.3 million increase versus the same period
last year related to acquisitions made in fiscal 2005. Other operating
income for the first nine months of fiscal 2006 was $2.9 million,
reflecting gains from the sale of real estate and a settlement
received relating to the Vallejo service center eminent domain
proceeding. The $0.8 million in other operating income recorded in the
first nine months of fiscal 2005 was primarily from the divestiture of
non-healthcare business. Interest expense for the first nine months of
fiscal 2006 was $7.1 million compared to $5.0 million in the first
nine months of fiscal 2005 due to higher interest rates and higher
average borrowings.
Income from continuing operations for the first nine months of
fiscal 2006 was $0.4 million, or $0.04 per diluted share, compared to
$1.2 million, or $0.13 per diluted share in the first nine months of
fiscal 2005.
Commenting on the results, Steve O'Hara, chairman, president and
chief executive officer, stated, "As expected, our heightened focus on
providing delightful customer service and our operations process
improvement initiative continue to yield better gross margins
sequentially and versus a year ago. Lower hospital census counts over
the holidays and higher winter energy costs are expected to prevent
fourth quarter sequential gross margin improvement, but we continue to
expect fourth quarter fiscal 2006 gross margin to be significantly
higher than fourth quarter fiscal 2005. Moreover, we continue to
expect fourth quarter fiscal 2006 earnings to be significantly higher
than fourth quarter fiscal 2005 earnings, allowing full year fiscal
2006 net income to exceed total fiscal 2005 net income.
"Looking forward, we expect continued improvement in fiscal 2007
as we move towards our fiscal 2008 targets of 20% gross margin and of
SG&A under 11%." He continued, "Specifically, we expect net revenues
in fiscal 2007 to increase by approximately 5% excluding any
acquisitions. This reflects continued improvement of our organic
growth rate to the 7% to 10% goal, offset by our recent termination of
a $10 million customer contract when negotiations to improve
profitability were unsuccessful. We expect to continue year over year
gross margin improvement and resume sequential gross margin growth in
the first quarter of fiscal 2007, yielding a significant increase in
total year earnings before interest and taxes, net income and earnings
per share."
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, 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
its former Life Uniform division, the ability of the Company to
execute its operations strategies , unusual or unexpected cash needs
for operations or capital transactions, the effectiveness of the
Company's initiatives to reduce key operating costs as a percent of
revenues, 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 third quarter and nine months ended October 28,
2006 compared with same period ended October 29, 2005 (dollars in
thousands, except per share amounts):
Third Quarter Ended Nine Months Ended
Oct. 28, Oct. 29, % Oct. 28, Oct. 29, %
2006 2005 Change 2006 2005 Change
------------------------------------------------------
Continuing
Operations:
Revenues $107,768 $107,582 0.2% $320,060 $313,281 2.2%
Cost of
services (90,467) (93,830) -3.6% (272,893) (270,335) 0.9%
--------- --------- --------- ---------
Gross profit 17,301 13,752 25.8% 47,167 42,946 9.8%
Selling,
general
and
administrative
expenses (13,392) (10,764) 24.4% (41,237) (36,105) 14.2%
Amortization of
other acquired
assets (1,061) (1,111) -4.5% (3,221) (2,952) 9.1%
Other operating
income, net 2,415 210 nm 2,912 840 246.7%
--------- --------- --------- ---------
Income from
operations 5,263 2,087 152.2% 5,621 4,729 18.9%
Interest
expense (2,486) (2,045) 21.6% (7,055) (4,951) 42.5%
Non-operating
income, net 185 382 -51.6% 567 1,179 -51.9%
--------- --------- --------- ---------
Income (loss)
from continuing
operations
before income
taxes 2,962 424 598.6% (867) 957 nm
Income tax
(provision)
benefit (387) 387 nm 1,228 270 354.8%
--------- --------- --------- ---------
Income from
continuing
operations 2,575 811 217.5% 361 1,227 -70.6%
--------- --------- --------- ---------
Discontinued
Operations:
Loss from
discontinued
operations,
net of tax
benefit of $0,
$708, $0 and
$800 - (838) nm - (1,168) nm
Loss on
disposal of
discontinued
operations,
net of tax
benefit of $0,
$243, $0 and
$243 - (354) nm - (354) nm
--------- --------- --------- ---------
Loss from
discontinued
operations - (1,192) nm - (1,522) nm
--------- --------- --------- ---------
Net income
(loss) $2,575 $(381) nm $361 $(295) nm
========= ========= ========= =========
Basic earnings
(loss) per
share:
Income from
continuing
operations $0.28 $0.09 211.1% $0.04 $0.14 -71.4%
Loss from
discontinued
operations - (0.13) nm - (0.17) nm
--------- --------- --------- ---------
Net income
(loss) $0.28 $(0.04) nm $0.04 $(0.03) nm
========= ========= ========= =========
Diluted earnings
(loss) per
share:
Income from
continuing
operations $0.28 $0.09 211.1% $0.04 $0.13 -69.2%
Loss from
discontinued
operations - (0.13) nm - (0.16) nm
--------- --------- --------- ---------
Net income
(loss) $0.28 $(0.04) nm $0.04 $(0.03) nm
========= ========= ========= =========
Unaudited condensed balance sheets as of October 28, 2006 and January
28, 2006 (dollars in thousands):
October 28, January 28,
2006 2006
----------- -----------
ASSETS
- -----------------------------------------
Current Assets:
Cash $ 5,463 $ 4,377
Receivables, less reserves of $2,089 and
$994 57,569 58,151
Linens in service 49,223 43,785
Prepaid expenses and other current
assets 2,958 3,602
----------- -----------
Total Current Assets 115,213 109,915
Property and Equipment, net 97,774 106,293
Goodwill 49,259 49,259
Other acquired assets 38,879 42,470
Other Long-Term Assets 24,944 23,491
----------- -----------
Total Assets $326,069 $331,428
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
- -----------------------------------------
Current Liabilities:
Current maturities of long-term debt $ 171 $ 319
Accounts payable 33,572 37,229
Accrued wages and other compensation 8,515 7,037
Other accrued liabilities 40,722 36,833
----------- -----------
Total Current Liabilities 82,980 81,418
Long-Term Debt, less current maturities 82,600 85,096
Other Long-Term Liabilities 15,158 15,366
Shareholders' Equity 145,331 149,548
----------- -----------
Total Liabilities and Shareholders'
Equity $326,069 $331,428
=========== ===========
MULTIMEDIA AVAILABLE:
http://www.businesswire.com/cgi-bin/mmg.cgi?eid=5288489
CONTACT: Angelica Corporation
Chief Financial Officer
Jim Shaffer, 314-854-3800
or
Director of Investor Relations
Colleen Hegarty, 314-854-3800
www.angelica.com
or
Integrated Corporate Relations, Inc.
Devlin Lander, 203-682-8200