New England Business Service Reports 2Q Results
Friday, January 25, 2002
GROTON, Mass.--Jan. 23, 2002--New England Business Service, announced higher earnings despite lower net sales for its second quarter ended December 29, 2001. Mr. Robert J. Murray, Chairman and CEO, commented, "Despite lower consolidated sales, earnings per share, excluding restructuring costs, increased almost 9% from last year's second quarter, or 3% adjusted for the change in goodwill accounting. Promotional spending by businesses continued to be soft in the quarter due to the weak economy, which adversely affected our greeting card sales during the holiday season. Lower promotional spending also had a detrimental effect on our Apparel segment, which recorded a sales decline of 2.5%. Actions taken over the past year to reduce our cost structure mitigated the impact of the sales decline.'' Revenues for the second quarter of fiscal 2002 declined to $157.5 million from the $166.5 million in the comparable quarter in the prior year. Net income of $9.3 million, or $.73 per share, compares with $8.8 million, or $.66 per share, in the year ago period. Results in the current period include $216,000 of after-tax costs related to previously announced restructuring actions (including exit costs, training costs and relocation costs), equivalent to approximately $.02 per share, versus $395,000 of such costs, equivalent to approximately $.03 per share, in the period a year ago. Excluding the impact of these items, net income was $9.6 million in the quarter, or $.75 per share, versus $9.2 million, or $.69 per share, in the prior year's second quarter. In accordance with Financial Accounting Standards Board Statement No. 142 relating to intangible assets, which the Company adopted in the first quarter of the current fiscal year, the Company has not recorded ongoing amortization expense during fiscal year 2002 on certain intangible assets with indefinite lives, such as goodwill and tradenames. Had the same accounting treatment occurred in the prior year's second quarter, amortization expense would have been $900,000 lower and earnings per share $.04 higher than reported. Second quarter results for fiscal 2002 include approximately $.11 per share of amortization expense versus $.15 per share last year. Murray added, "We continue to tightly control our costs in light of the soft U.S. economy, but not at the expense of sacrificing initiatives that we consider key to our long-term success. Additionally, significant progress in the quarter was evidenced by an $18 million reduction in our consolidated debt to $179 million as a result of our seasonally strong cash flows, restrained capital spending and aggressive inventory management.'' Murray continued, "Our current expectations for the year are for revenue to be down between 4 to 6% from a year ago. This would equate to approximately a 3 to 4% decline when adjusted for the 53 week year in fiscal 2001. That should generate earnings per share, excluding non-recurring items related to previously announced restructuring actions and a goodwill impairment recorded in the first quarter, in the range of $1.90 to $2.00. These earnings reflect the discontinuance of amortization of goodwill and certain intangibles with indefinite lives which will add approximately $.20 per share to fiscal 2002 earnings. They also reflect the full-year financing costs of approximately $.06 per share we will incur from the increase in our investment in Advantage Payroll in this year's first quarter.'' The Company did not repurchase any shares of its stock during the second quarter, leaving approximately 1.2 million shares remaining under the current authorization. The Company's Board of Directors declared a dividend of $.20 per share with a record date of February 8, 2002 and a payment date of February 22, 2002.