O'Sullivan Reports Q2 and 6 Months Earnings Results and Changes in Control
30 July 1999
O'Sullivan Corporation Reports Second Quarter and Six Months Earnings Results and Changes in Control
WINCHESTER, Va.--July 29, 1999--O'Sullivan Corporation (ASE: OSL) today reported consolidated sales and earnings results for the three and six months ended June 30, 1999.For continuing operations, net sales in the quarter increased 11.6 percent verses the same quarter last year and net income per share from continuing operations increased 27.3 percent to $0.28 per share before pre-tax charges of $1.7 million for special non-recurring items and reduced earnings due to a production outage and lost sales. These events resulted in reduced earnings per share of $0.11 for the quarter and six months ended June 30, 1999.
Pursuant to the tender offer commenced on June 8, 1999, The Geon Company offered to purchase for cash, at a price of $12.25 per share, all outstanding shares of the common stock, of O'Sullivan.
At the close of the tender period on July 7, 1999, The Geon Company was the holder of record of 87.9 percent of the shares of common stock outstanding at the date of the tender offer. A Special Meeting of Stockholders is scheduled for August 23, 1999 to vote on the approval of the Merger Agreement. Geon has control of a sufficient number of the outstanding shares to insure that the agreement will be approved.
Net sales from continuing operations for the three months ended June 30, 1999 were $47.1 million, an increase of 11.6 percent, compared with sales of $42.1 million, for the three months ended June 30, 1998.
Net income from continuing operations for the three months ended June 30, 1999, including the non-recurring costs, was $2.7 million or $0.17 per share compared with net income of $3.5 million from continuing operations or $0.22 per share for the three months ended June 30, 1998. Total net income for the second quarter of 1999 was $2.2 million, or $0.14 per share. The total net income reflects a loss of $0.5 million, or $0.03 per share resulting from a charge recorded in connection with activities of the lawn and garden operations disposed of in 1997.
The sales increase experienced during the quarter reflects continued strong demand for the products manufactured for O'Sullivan's automotive-related customer base. Sales of automotive products increased $6.5 million or 29.8 percent for the second quarter compared to the same period last year. The increased sales occurred primarily in the area of door panel material and laminated products, and were the result of new programs coming on line and continued strong demand for current ongoing programs. Sales of industrial products declined by $1.6 million, or 7.8 percent compared to the second quarter of 1998 with a slowing of demand in several industrial product lines.
Net income from continuing operations for the second quarter of 1999 was negatively affected by several events that reduced earnings. During the quarter, one manufacturing facility suffered a major mechanical breakdown, resulting in a loss of approximately one-week of production. Management estimates that this breakdown resulted in lower earnings of $0.03 for the quarter. Additionally, several non-recurring charges were incurred during the quarter that reduced earnings for the quarter by an additional $0.08 per share. These charges included estimated costs for environmental rehabilitation issues, additions to the allowance for doubtful accounts and expenses related to the tender offer by The Geon Company for the stock of O'Sullivan Corporation.
Gross profit margins improved from 18.5 percent in 1998 to 18.8 percent in 1999 for the second quarter. The rate for the quarter would have been 20.5 percent for the second quarter had the charge for environmental rehabilitation not been taken. Although prices for primary raw materials began increasing during the quarter, the Company was able to reduce its effective raw material costs through other manufacturing efficiency measures.
For the six months ended June 30, 1999, net sales from continuing operations were $89.9 million, up seven percent compared to $84.1 million for the six months ended June 30, 1998. The sales increase for the first half reflects the previously described continued strong demand for the products manufactured for automotive-related customers. Sales of automotive-related products in the first half of 1999 increased $9.5 million over the same period last year, an increase of 19.8 percent. As with the second quarter, the increased sales were primarily in the areas of door panel material and laminated products and were the result of new programs coming on line and continued strong demand for ongoing automotive programs. Sales of industrial products declined by $3.2 million, or 8.5 percent when compared to the first half of 1998.
Net income for the first half of 1999 from continuing operations was $0.48 per share before the second quarter non-recurring charges or an increase of 17 percent over last year. Including the non-recurring charges net income from continuing operations was $5.8 million, or $0.37 per share compared to $6.4 million or $0.41 per share for the first half of 1998. Total net income for the first half of 1999 was $5.3 million, or $0.34 per share. The total net income for the six months ended June 30, 1999 reflects a loss of $0.5 million resulting from a charge recorded in connection with activities of the lawn and garden operations disposed of in 1997.
Net income for the first six months of 1999 was reduced by the same events described in the discussion of the second quarter results. The mechanical breakdown and the other non-recurring charges resulted in reduced earnings of $0.03 and $0.08 per share, respectively.
For the first six months, the gross profit margin improved from 17.4 percent in 1998 to 18.6 percent in 1999. The rate for 1999 would have been 19.5 percent had the charge for environmental rehabilitation not been taken. Overall, during the first half of 1999, the Company was able to reduce its effective raw material costs through a combination of stable raw material prices and manufacturing efficiencies achieved through process improvements and improved material utilization. As with the second quarter results, the reduction in the rate of material costs committed were marginally offset by increased costs for labor and employee benefits.
O'Sullivan Corporation (ASE: OSL) produces premium-quality, flexible vinyl sheeting and coverstock for the automotive, medical, swimming pool, loose-leaf, home furnishings, press polished and geomembrane markets.
O’Sullivan Corporation Earnings Summary
Three Months Ended
June 30
1999 1998
Net sales from continuing
operations $ 47,050,424 $ 42,142,539
------------ -------------
Net income from continuing
operations $ 2,713,105 $ 3,452,735
Net (loss) from discontinued
operations (483,627) --
============ =============
Net income $ 2,229,478 $ 3,452,735
============ =============
Per share information:
Net income from continuing
operations $ 0.17 $ 0.22
Net (loss) from discontinued
operations (0.03) --
============ =============
Net income Basic
and diluted $ 0.14 $ 0.22
============ =============
Average shares outstanding 15,594,759 15,718,170
============ =============
Six Months Ended
June 30
1999 1998
Net sales from continuing
operations $ 89,939,290 $ 84,088,823
------------ -------------
Net income from continuing
operations $ 5,768,563 $ 6,417,096
Net (loss) from discontinued
operations (483,627) --
============ =============
Net income $ 5,284,936 $ 6,417,096
============ =============
Per share information:
Net income from continuing
operations $ 0.37 $ 0.41
Net (loss) from discontinued
operations (0.03) --
============ =============
Net income Basic
and Diluted $ 0.34 $ 0.41
============ =============
Average shares outstanding 15,594,855 15,730,572
============ =============
O'Sullivan Corporation and Subsidiaries
Consolidated Statements of Income
(Unaudited)
For the Three Months Ended
June 30
1999 1998
Net sales $ 47,050,424 $ 42,142,539
Cost of products sold 38,185,164 34,339,421
Gross profit $ 8,865,260 $ 7,803,118
Operating expenses
Selling and warehousing $ 1,582,289 $ 1,496,314
General and administrative 1,698,029 1,672,586
Allowance for doubtful accounts 500,000 --
Transaction fees pursuant to
tender offer for O'Sullivan
common stock 385,460 --
$ 4,165,778 $ 3,168,900
Income from operations $ 4,699,482 $ 4,634,218
Other income
Interest income $ 399,953 $ 528,778
Other, net (2,724) 239,323
$ 397,229 $ 768,101
Income from continuing
operations before income taxes $ 5,096,711 $ 5,402,319
Income taxes 2,383,606 1,949,584
Income from continuing
operations $ 2,713,105 $ 3,452,735
Loss from discontinued
operations, net of taxes (483,627) --
Net income $ 2,229,478 $ 3,452,735
O'Sullivan Corporation and Subsidiaries
Consolidated Statements of Income
(Unaudited)
For the Three Months Ended
June 30
1999 1998
Net income (loss) per common
share, basic and diluted:
Net income per common share
from continuing operations $ .17 $ .22
Net loss per common share
from discontinued operations (.03) --
Net income per common share $ .14 $ .22
Dividends per common share $ .08 $ .08
Average shares outstanding 15,594,759 15,718,170
O'Sullivan Corporation and Subsidiaries
Consolidated Statements of Income
(Unaudited)
For the Six Months Ended June 30
1999 1998
--------- ---------
Net sales $ 89,939,290 $ 84,088,823
Cost of products sold 73,226,713 69,421,260
------------- -------------
Gross profit $ 16,712,577 $ 14,667,563
------------- -------------
Operating expenses
Selling and warehousing $ 3,200,519 $ 2,923,976
General and administrative 3,409,614 3,205,761
Allowance for doubtful
accounts 500,000 --
Transaction fees pursuant
to tender offer for O'Sullivan
common stock 385,460 --
------------- -------------
$ 7,495,593 $ 6,129,737
------------- -------------
Income from operations $ 9,216,984 $ 8,537,826
------------- -------------
Other income
Interest income $ 803,297 $ 1,037,313
Other, net 39,636 518,810
------------- -------------
$ 842,933 $ 1,556,123
------------- -------------
Income from continuing
operations before income taxes $ 10,059,917 $ 10,093,949
Income taxes 4,291,354 3,676,853
------------- -------------
Income from continuing
operations $ 5,768,563 $ 6,417,096
Loss from discontinued
operations, net of taxes (483,627) --
------------- -------------
Net income $ 5,284,936 $ 6,417,096
============= =============
O'Sullivan Corporation and Subsidiaries
Consolidated Statements of Income
(Unaudited)
For the Six Months Ended June 30
1999 1998
Net income (loss) per common
share, basic and diluted:
Net income per common share from
continuing operations $ .37 $ .41
Net loss per common share from
discontinued operations (.03) --
------------- -------------
Net income per common share $ .34 $ .41
============= =============
Dividends per common share $ .16 $ .16
============= =============
Average shares outstanding 15,594,855 15,730,572
============= =============