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FOR IMMEDIATE RELEASE
ST. LOUIS, MISSOURI
September 4, 2007
Angelica Announces Second Quarter Fiscal Year 2007
Results
Provides Insights into Edison Impact
St. Louis, Missouri (September 4, 2007) – Angelica Corporation (NYSE: AGL),
announced today financial results for the second quarter and six months ended
July 28, 2007. Based on the announcement earlier today of its intent to sell or
close its Edison, NJ service center and consolidate into eight markets, the
Company discusses below the results of its former New York City/New Jersey
market, which have been negatively impacted by Edison.
Revenues for the second quarter of fiscal 2007 were $107.6 million, up 2.2%
from $105.3 million for the second quarter of fiscal 2006. Total healthcare
revenues increased 3.3% while non-healthcare revenues declined due to prior
divestitures of non-healthcare accounts. Organic revenue growth excluding the
impact of acquisitions and divestitures was 2.4%, achieved through pricing
improvements, which offset a 2.1% volume decline. Edison revenues were
approximately $3.5 million in second quarter of fiscal 2007.
Gross profit for the second quarter of fiscal 2007 was $14.0 million, down
7.7% from $15.1 million in the second quarter of fiscal 2006. Gross margin for
the second quarter of fiscal 2007 was 13.0%, down from 14.4% in the second
quarter of fiscal 2006. The decline in gross margin was primarily related to
operational difficulties at the Edison, New Jersey service center, which
negatively impacted the entire New York City/New Jersey market area. Gross
profit for the former New York City/New Jersey market area was down $1.9 million
in the second quarter of fiscal 2007 from the second quarter of fiscal 2006
primarily due to higher production payroll, repairs and maintenance and delivery
costs incurred to correct deficiencies at the Edison facility. Excluding the
New York City/New Jersey market area, gross margin in Angelica’s eight other
markets increased to 15.4% in the second quarter of fiscal 2007 from 14.8% in
the second quarter of fiscal 2006.
SG&A expenses for the second quarter of fiscal 2007 were $13.7 million,
up $0.3 million from $13.4 million in the second quarter of fiscal 2006. As a
percentage of revenue, SG&A declined slightly to 12.7% in the second quarter
of fiscal 2007 from 12.8% in the second quarter of fiscal 2006. Included in the
second quarter fiscal 2007 SG&A was $0.5 million of additional retirement
benefit accruals and severance costs related to recent staffing reductions, $0.4
million related to the settlement of civil litigation filed on behalf of former
employees at our Long Beach, California facility, which was sold in December
2005, $0.4 million in increased healthcare insurance costs and $0.2 million
charge for resolution of hiring practice violations in prior years at a Los
Angeles service center. These increases were partially offset by the absence of
prior year expenses of $1.3 million associated with our operations process
improvement implementation, the Board of Directors’ Special Committee, and
professional fees related to union contract negotiations, litigation and
financial consulting projects.
Net loss for the second quarter of fiscal 2007 was $1.4 million versus a net
loss of $0.7 million in the second quarter of fiscal 2006. Loss per share was
$0.16 in the second quarter of fiscal 2007 versus $0.08 in the second quarter of
fiscal 2006.
For the six months ended July 28, 2007, revenues were $215.4 million, up 1.4%
from $212.3 million for the first six months of fiscal 2006. Total healthcare
revenues increased 2.6% while non-healthcare revenues declined due to the prior
divestiture of non-healthcare accounts. Organic revenue growth excluding the
impact of acquisitions and divestitures was 1.7%, achieved through pricing
improvements, which offset a 2.6% volume decline. Edison revenues were
approximately $7.3 million for first half of fiscal 2007.
Gross profit for the first six months of fiscal 2007 was $28.2 million, down
5.4% from $29.9 million in the first six months of fiscal 2006. Gross margin
for the first half of fiscal 2007 was 13.1%, down from 14.1% in the first half
of fiscal 2006. The decline in gross margin was primarily related to
operational difficulties at the Edison, New Jersey service center, which
negatively impacted the entire New York City/New Jersey market area. Gross
profit for this market area was down $3.8 million in the first six months of
fiscal 2007 from the first six months of fiscal 2006 primarily due to higher
production payroll, repairs and maintenance and delivery costs incurred to
correct deficiencies at the Edison facility. Excluding the New York City/New
Jersey market area, gross margin increased to 15.5% in the first six months of
fiscal 2007 from 14.5% in the first six months of fiscal 2006.
SG&A expenses for the first six months of fiscal 2007 were $27.1 million,
down 2.6% from $27.8 million in the first six months of fiscal 2006. As a
percentage of revenue, SG&A declined to 12.6% in the first six months of
fiscal 2007 from 13.1% in the first six months of fiscal 2006. The decrease
resulted from the absence of prior year expenses of $2.2 million associated with
our operations process improvement implementation, the Board of Directors’
Special Committee, and professional fees related to union contract negotiations,
litigation and financial consulting projects, as well as $0.5 million in lower
incentive compensation accruals year over year. These decreases were partially
offset by current year increases of $0.6 million related to the resolution of
hiring practice violations in prior years at a Los Angeles service center and
legal fees for this resolution and other employee matters, $0.5 million related
to higher health insurance costs, $0.5 million related to additional retirement
benefit accruals and severance costs due to staffing reductions, and $0.4
million related to the settlement of civil litigation filed on behalf of former
employees at our Long Beach, California facility which was sold in December
2005.
Net loss for the first six months of fiscal 2007 was $2.6 million versus a
net loss of $2.2 million in the first six months of fiscal 2006. Loss per share
was $0.28 in the first six months of fiscal 2007 versus $0.24 in the first six
months of fiscal 2006.
Commenting on the results, Steve O’Hara, Chairman, President and Chief
Executive Officer, stated, “We are disappointed that we were unable to resolve
the operational difficulties in our Edison, New Jersey facility as we had
previously anticipated and that this facility continued to depress our overall
financial results. As announced earlier today, while we believe Edison’s
performance could improve with time and additional capital invested, we do not
think that continuing to invest in the facility is a prudent use of
shareholders’ resources given the opportunities elsewhere. Therefore, we
announced plans to sell or close Edison and consolidate into eight markets.”
Mr. O’Hara continued, “Outside of the New York City/New Jersey market area,
we are pleased that we continue to make significant progress with a gross margin
in the other eight markets of 15.5% during the first six months of fiscal 2007
versus 14.5% in the first six months of fiscal 2006. We expect to make even
more progress in the coming quarters to reach our long term gross margin goal of
20%.”
“While operations in the other eight markets are encouraging, we expect the
losses at Edison and ultimate closure costs to depress fiscal 2007 earnings from
prior projections. The final amount is yet to be determined as we evaluate
transition costs. However, even with the Edison costs, we still expect fiscal
2007 earnings to exceed fiscal 2006. As we finalize Edison’s closure costs
and/or sale, we will seek to provide clarity to investors so that they can
properly evaluate our operations going forward”, Mr. O’Hara concluded.
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 Life Uniform, the ability of the Company to execute its strategy of
providing delightful service to every customer every day pursuant to its fiscal
2005 reorganization, 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.
Link to 2nd Quarter Financials
(PDF)
For additional information contact:
JIM SHAFFER DEVLIN
LANDER
CHIEF FINANCIAL OFFICER INTEGRATED CORPORATE
RELATIONS, INC.
(314) 854-3800
(415) 292-6855
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