Morrison Knudsen Posts $5.6 Million Fourth Quarter Profit
BOISE, Idaho, Jan. 24, 1997 - Morrison Knudsen Corporation
(NYSE: MK) today announced its operating results for the fourth
quarter ended November 30, 1996. On September 11, 1996
Morrison Knudsen and Washington Construction Group, Inc.
merged and the combined company was renamed Morrison
Knudsen Corporation. The results announced today combine those
of the former Washington Construction Group from December 1,
1995 to November 30, 1996 and those of Morrison Knudsen from
September 12, 1996 to November 30, 1996.
For the quarter ended November 30, 1996, MK posted net income
of $5.6 million, $.11 per share, on revenue of $416.7 million
compared to net income of $2.9 million, $.10 per share, on
revenue of $68.3 million for the fourth quarter of 1995. Operating
income in the fourth quarter was $9.8 million compared to
operating income of $3.2 million for the fourth quarter of 1995.
"We are very pleased with our operating results in the fourth
quarter," said Robert A. Tinstman, MK president and chief
executive officer. "We ended the year in a strong financial position
and with our recent major new work bookings, we are well
positioned for the future."
Tinstman noted that Morrison Knudsen ended its fiscal year debt
free and with a net worth in excess of $300 million, unlimited
bonding capacity and a $200 million line of credit. Backlog of
uncompleted contracts at November 30, 1996 was $3.5 billion. In
addition to $200 million in new work booked in the fourth quarter
of the company's fiscal year, major new contracts in the first month
of the new fiscal year include two awards anticipated to provide
approximately $500 million in revenue: the Idaho National
Engineering Laboratory's Advanced Mixed Waste Treatment
Facility and a chemical demilitarization project in Russia.
The Company said that after-tax adjustments of $11.4 million in
the third quarter for write-downs on certain real estate properties
and other non-core assets held for sale resulted in a net loss for the
twelve months ended November 30, 1996 of $4.8 million, $.14 per
share, on revenue of $659.1 million compared to net income of
$8.2 million, $.28 per share, on revenue of $228.5 million for
1995.
MK also announced that the Company's annual meeting of
shareholders will be held on April 11, 1997 at 10:00 a.m. at MK's
world headquarters in Boise, Idaho.
Morrison Knudsen Corporation, founded in 1912, serves the
world's environmental, industrial, mining, operations and
maintenance, process, power, transportation and heavy
construction markets as an engineer and constructor.
MORRISON KNUDSEN CORPORATION
(formerly Washington Construction Group, Inc.)
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS THREE
AND TWELVE MONTH PERIODS ENDED NOVEMBER 30, 1996 AND 1995
(UNAUDITED)
(In thousands except per share data)
Three Months Ended Twelve
Months Ended
November 30, November 30,
1996 1995 1996 1995
Revenue $416,651 $68,275 $659,100 $228,537
Cost of revenue (397,617) (61,040) (625,756)
(204,424)
Gross profit 19,034 7,235 33,344 24,113
General and administrative
expenses (8,421) (3,974) (21,074)
(15,767)
Losses for impairment of
long-lived assets -- -- (18,200) --
Reorganization expense -- -- (1,500) --
Goodwill amortization (769) (105) (1,164)
(420)
Operating income (loss) 9,844 3,156 (8,594) 7,926
Investment income 1,467 979 3,679 4,061
Interest expense (429) (124) (993)
(189)
Other income, net 562 106 634 389
Income (loss) before income
taxes 11,444 4,117 (5,274) 12,187
Income tax (expense)
benefit (5,828) (1,197) 494
(4,022)
Net income (loss) $ 5,616 $ 2,920 $ (4,780) $ 8,165
Income (loss) per share
of common stock $.11 $.10 $(.14) $.28
Common shares used to
compute income (loss) per
share 50,889 29,478 34,821 29,478
November 30,
1996 1995
Backlog $3,519,700 $286,400
SOURCE Morrison Knudsen Corp./CONTACT: Brent D.
Brandon, V.P. Corporate Communications of Morrison Knudsen
Corp., 208-386-6611, or fax, 208-386-5065/
Advanced Promotion Technologies secures short-term financing
POMPANO BEACH, Fla.--Jan. 24, 1997--Advanced Promotion
Technologies Inc. (NASDAQ:APTV), developer and marketer of
the Vision Value(tm) electronic marketing and financial services
network, Friday confirmed that it has secured its first external
funding since it filed Chapter 11 on Aug. 15, 1996.
Advanced Promotion Technologies Inc. received approval from its
Official Committee of Unsecured Creditors and the Bankruptcy
Court to accept post-petition financing from a group of existing
investors. The company has received financing of $200,000 with
the potential of an additional $200,000 within the next 15 days.
The loan allows the company to continue operations in the near
term while it pursues additional financing and develops its plan of
reorganization.
The company, the Creditor's Committee and the lender have also
reached an agreement in principle relative to the terms of the
reorganization plan. The plan of reorganization is not finalized,
although the parties foresee that the interests of existing common
shareholders will, in all likelihood, be extinguished if the
proposed plan is confirmed. Preferred shareholders may retain an
interest in the company if the plan is approved although the terms
of their participation, if any, have not been finalized.
Advanced Promotion Technologies provides merchandising
software and services to supermarkets for in-store promotion,
financial services and target marketing through its Vision Value
Network. The Vision Value Network is an interactive on-line
electronic loyalty marketing network linked to existing
point-of-sale scanning equipment in the supermarket checkout lane.
Shopper data is collected and analyzed so that future shopping
behavior may be changed based upon reward during and after the
shopping experience. The ability to change shopping behavior
offers a dramatic improvement to profits through increased
purchase of high margin products and greater shopper loyalty to
the retailer.
CONTACT: Advanced Promotion Technologies Inc., Pompano
Beach Mike Shanahan, 954/969-3000 http://www.apt.com
In-Flight Phone Corporation Files Petition to Reorganize Under
Chapter 11 of the U.S. Bankruptcy Code
OAKBROOK TERRACE, Ill., Jan. 24, 1997 - In-Flight Phone
Corporation ("IFPC"), a wholly-owned subsidiary of IFP
Holdings, Inc., today filed a petition to reorganize under chapter
11 of the United States Bankruptcy Code in the United States
Bankruptcy Court for the District of Delaware. IFPC has also
entered into an interim Service Agreement with MCI
Telecommunications Corporation ("MCI") under which IFPC will
receive sufficient funds from MCI to continue its normal
operations for 45 days. IFPC anticipates that post- interim funding
will be available and IFPC is in discussions to conclude the
necessary arrangements for the post-interim period. MCI, the
nation's second largest long distance carrier, through its interests
in IFP Holdings, Inc., owns approximately 66% of IFPC on a fully
diluted basis.
IFPC, founded in 1990, is headquartered in Oakbrook Terrace,
Illinois, and is a leading supplier and developer of air-to-ground
telecommunications, information and entertainment systems. IFPC
pioneered and developed "FlightLink," the first airborne system to
combine digital phone service with an interactive screen-based
information and entertainment system.
FlightLink comes with a video display monitor, individual
controls and a telephone at each seat, in both coach and first class.
With FlightLink you can do anything from checking your e- mail to
playing video games. This system allows you to check stock
quotes, access AccuWeather; play video games; make plane and
limo reservations; or even send flowers.
IFPC is in the final stages of development of its LiveTV system,
which would provide 12 to 24 channels of live television
programming to every seat on each airplane installed with this
modified FlightLink system.
SOURCE In-Flight Phone Corporation /CONTACT: Neal Meehan
of In-Flight Phone Corporation, 630-573-2660/
MCI Statement on In-Flight Filing Chapter 11
WASHINGTON, DC - Jan. 24, 1997 - The following is a
statement by MCI on In-Flight filing Chapter 11:
MCI, which is a minority shareholder of In-Flight Phone
Corporation's parent, confirms In-Flight's filing for relief under
Chapter 11 today. Since its initial investments, MCI has not
invested nor does it intend to invest further equity or debt in In-
Flight.
SOURCE MCI Communications /CONTACT: MCI News Bureau,
800-644-NEWS/
Wellspring Associates Will Acquire SLM International,
Manufacturer of CCM Hockey Equipment
NEW YORK, NY - Jan. 24, 1997 - Wellspring Associates L.L.C.
today announced that it will acquire a majority of the equity of
SLM International, Inc., a leading manufacturer and marketer of ice
and roller hockey equipment, primarily under the CCM brand
name. The acquisition follows the confirmation late yesterday of
SLM's Chapter 11 plan of reorganization. Financial terms of the
transaction were not disclosed.
Greg S. Feldman, a managing partner of Wellspring Associates,
said: "SLM International is an outstanding acquisition for
Wellspring. Its CCM brand is the most widely-recognized name in
hockey equipment. Ice and roller hockey are two of the fastest
growing sports in North America. The Company's potential to
appreciate dramatically as a result of new management is
consistent with our investment strategy. We look forward to
working closely with the new management team headed by Gerry
Wasserman to rebuild the Company and grow the CCM brand in
order to realize its full potential as an industry leader."
Gerald B. Wasserman was recruited as chief executive officer of
SLM during the Company's Chapter 11 proceedings. Mr.
Wasserman was most recently chief executive officer of Weider
Health and Fitness. Prior to that, he served as chief executive
officer of Canstar Sports, a competitor of SLM, which was
purchased by Nike Inc. in 1994.
The SLM transaction is Wellspring's second acquisition. In
October 1995, Wellspring acquired Lionel, the world's leading
manufacturer and marketer of model electric trains.
Wellspring was instrumental in facilitating SLM's plan of
reorganization in conjunction with the Company's unsecured
creditors, who will now become minority shareholders.
Wellspring Associates L.L.C. is a privately-held investment firm
founded by Martin S. Davis and Greg S. Feldman with the
objective of acquiring controlling interests in undermanaged or
underperforming companies that present opportunity for substantial
long-term capital gains.
SLM International, Inc. manufactures and markets hockey products,
including skates, uniforms, protective equipment and licensed
apparel, primarily under the CCM brand name.
SOURCE Wellspring Associates /CONTACT: Mark A. Semer of
Kekst and Company, 212-593-2655/
Black & Decker Reports Record Results in 1996
TOWSON, Md., Jan. 24, 1997 - The Black & Decker Corporation
(NYSE: BDK) today announced record sales and earnings for
1996. Sales increased 3 percent (4 percent, excluding the effects
of foreign currency translation) to $4.91 billion from $4.77 billion
in 1995. Excluding non-recurring items, net earnings for the year
were $223.4 million compared to $189.9 million in 1995, and
earnings per share rose 15 percent to $2.32 from $2.01 in 1995.
On a fully comparable basis, i.e., excluding net results from the
discontinued PRC segment, earnings per share, excluding non-
recurring items, increased more than 20%.
Net debt decreased $653.3 million in 1996, reflecting the
proceeds from the sale of PRC Inc. and $235 million of free cash
flow. This debt reduction, coupled with the earnings improvement,
resulted in an eleven percentage-point reduction in debt to total
capitalization from 62 percent at the end of 1995 to 51 percent at
the end of 1996.
For the fourth quarter of 1996, sales increased 1 percent (2
percent, excluding the effects of foreign currency translation) to
$1.45 billion from $1.44 billion in the same period last year.
Excluding non-recurring items, net income was $87.8 million or
91 cents per share compared to $85.9 million or 90 cents per share
in 1995.
Including both non-recurring credits and charges and the results of
discontinued operations, net earnings for the full year were $229.6
million or $2.38 per share compared to $224.0 million or $2.37
per share in 1995. On the same basis, fourth quarter net earnings
were $90.6 million or 94 cents per share compared to $120.0
million or $1.26 per share in 1995. Non-recurring credits and
charges that affected 1996 income include:
- Net gain on the sale of PRC Inc. of $70.4 million (73 cents per
share), recorded in the first quarter;
- After-tax restructuring charges of $67.0 million (70 cents per
share) recorded in the first quarter, and $7.8 million (8 cents per
share) recorded in the fourth quarter (the full-year impact of
restructuring charges was 78 cents per share); and
- A non-cash tax credit of $10.6 million (11 cents per share for the
full year), recorded in the fourth quarter, associated with an
adjustment of the corporation's deferred tax asset valuation
allowance.
Commenting on the results, Nolan D. Archibald, chairman and
chief executive officer, said, "Sales for 1996 reached a record
level, reflecting more new product introductions than ever before.
As a result, most of our businesses strengthened their market
positions during the year. Earnings per share, excluding
non-recurring items, also set a new high, increasing 15 percent
over 1995, or more than 20 percent if the net contribution of PRC,
which has been sold, is excluded from 1995 results. Security
Hardware achieved record sales and profits for the year. Plumbing
Products, Fastening and Assembly Systems, Glass
Container-Forming and Inspection Equipment, and Recreational
Products also reported excellent results.
"While the combined Power Tools and Accessories business
achieved record sales, profitability declined, largely because of
manufacturing start-up costs, aggressive inventory reduction,
higher transportation costs, and selective price reductions.
Household Products reported a decline in sales and profits
compared to a very strong 1995, when the supply of
SnakeLight(TM) flexible flashlights still trailed the enormous
demand for this product line. SnakeLight price reductions in the
second half of 1996 had a significant impact on these declines.
Lower profitability in Power Tools and Accessories and in
Household Products was more than offset by the excellent
performance of all of our other businesses. In addition, both lower
interest expense, reflecting reduced debt, and a lower tax rate
improved our earnings.
"Excluding restructuring charges, operating income increased 5
percent for the year, reflecting lower selling, general and
administrative expense that more than offset a decline in gross
margin as a percentage of sales. Our return on sales, which
improved modestly over 1995, was affected by the issues that we
encountered in Power Tools and Accessories and in Household
Products.
"While manufacturing start-up costs and production delays
penalized us in 1996, manufacturing is now running much more
smoothly. Our cost base is significantly improved, and in 1997 we
expect to realize $30 million in benefits from restructuring actions
that we have taken in addition to the $10 million realized in 1996.
"With our businesses continuing to introduce a large number of
new products and operating at higher efficiency levels, we hope to
achieve a significant increase in pre-tax earnings in 1997. Having
used substantially all remaining benefits of our deferred tax assets,
however, our tax rate will rise from the mid-20 percent range in
1996 to the high-30 percent range. As a result, earnings per share
are likely to increase at a lower rate during this 'transition' year.
"Looking ahead, we remain confident about the fundamental
strength of each of our businesses and optimistic about the
prospects for a substantial growth in operating profitability over
the next several years."
Black & Decker is a global marketer and manufacturer of quality
products used in and around the home and for commercial
applications.
THE BLACK & DECKER CORPORATION AND
SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
(Unaudited) (Dollars in Millions Except
Per Share Amounts)
Three Months
Ended
Dec. 31,
Dec. 31,
1996
1995
SALES $1,454.8
$1,440.4
Cost of goods sold 947.1
913.2 Selling, general, and
administrative expenses 366.1
378.7
Restructuring costs 9.7
-
OPERATING INCOME 131.9
148.5
Interest expense
(net of interest income) 29.1
42.4
Other expense 4.3
3.8
EARNINGS FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES 98.5
102.3
Income tax expense (benefit) 7.9
(34.7)
EARNINGS FROM CONTINUING
OPERATIONS 90.6
137.0
Earnings from discontinued
operations (net of income taxes of
$.6 for 1995) -
13.9
EARNINGS BEFORE EXTRAORDINARY
ITEM 90.6
150.9
Extraordinary loss from early
extinguishment of debt
(net of income
tax benefit of $2.6) -
(30.9)
NET EARNINGS $90.6
$120.0
NET EARNINGS APPLICABLE
TO COMMON SHARES $90.2
$117.1
NET EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARE:
PRIMARY:
Earnings from continuing
operations $.94
$1.51
Earnings from discontinued
operations -
0.16
Extraordinary loss from early
extinguishment of debt -
(0.35)
PRIMARY EARNINGS PER SHARE $.94
$1.32
Shares Used in Computing
Primary Earnings
Per Share (in Millions) 95.5
89.0
ASSUMING FULL DILUTION:
Earnings from continuing
operations $.94
$1.43
Earnings from discontinued
operations -
0.15
Extraordinary loss from early
extinguishment of debt -
(0.32)
FULLY DILUTED EARNINGS
PER SHARE $.94
$1.26
Shares Used in Computing Fully
Diluted Earnings Per Share
(in Millions) 96.5
95.4
THE BLACK & DECKER CORPORATION AND
SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
(Dollars in Millions Except Per Share
Amounts)
Year Ended
Dec. 31,
Dec. 31,
1996
1995
SALES $4,914.4
$4,766.1
Cost of goods sold 3,156.6
3,016.7 Selling, general, and
administrative expenses 1,309.6
1,323.3
Restructuring costs 91.3
-
OPERATING INCOME 356.9
426.1
Interest expense
(net of interest income) 135.4
184.4
Other expense 18.8
16.2
EARNINGS FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES 202.7
225.5
Income taxes 43.5
9.0
EARNINGS FROM CONTINUING
OPERATIONS 159.2
216.5
Earnings from discontinued
operations (net of income
taxes of $55.6 for 1996
and $8.7 for 1995) 70.4
38.4
EARNINGS BEFORE EXTRAORDINARY
ITEM 229.6
254.9 Extraordinary loss from early
extinguishment of debt
(net of income tax
benefit of $2.6) -
(30.9)
NET EARNINGS $229.6
$224.0
NET EARNINGS APPLICABLE
TO COMMON SHARES $220.5
$212.4
NET EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARE:
PRIMARY:
Earnings from continuing
operations $1.64
$2.33
Earnings from discontinued
operations 0.77
0.44
Extraordinary loss from early
extinguishment of debt -
(0.35)
PRIMARY EARNINGS PER SHARE $2.41
$2.42
Shares Used in Computing
Primary Earnings Per Share
(in Millions) 91.3
87.9
ASSUMING FULL DILUTION:
Earnings from continuing
operations $1.65
$2.29
Earnings from discontinued
operations 0.73
0.41
Extraordinary loss from early
extinguishment of debt -
(0.33)
FULLY DILUTED EARNINGS
PER SHARE $2.38
$2.37
Shares Used in Computing Fully
Diluted Earnings Per Share
(in Millions) 96.3
94.7
THE BLACK & DECKER CORPORATION AND
SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Millions of Dollars)
Dec. 31,
Dec. 31,
1996
1995
ASSETS
Cash and cash equivalents $141.8
$131.6 Trade receivables 672.4
651.3 Inventories
747.8 855.7 Net assets of
discontinued operations -
302.4
Other current assets 242.2
165.6
TOTAL CURRENT ASSETS 1,804.2
2,106.6
PROPERTY, PLANT AND EQUIPMENT 905.8
866.8 GOODWILL 2,012.2
2,142.0 OTHER ASSETS
431.3 429.9
$5,153.5
$5,545.3
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term borrowings $235.9
$599.2 Current maturities
of long-term debt 54.1
48.0
Trade accounts payable 380.7
396.7 Other accrued liabilities 835.9
743.0
TOTAL CURRENT LIABILITIES 1,506.6
1,786.9
LONG-TERM DEBT 1,415.8
1,704.5 DEFERRED INCOME TAXES 67.5
52.8 POSTRETIREMENT BENEFITS
310.3 307.8 OTHER LONG-TERM LIABILITIES
220.9 270.1 STOCKHOLDERS' EQUITY
1,632.4 1,423.2
$5,153.5
$5,545.3
SUPPLEMENTAL FINANCIAL INFORMATION
(Millions of Dollars)
Year Ended Dec.
31,
1996
1995
Depreciation and amortization $214.6
$206.7
Capital expenditures --
cash spending $196.3
$203.1
THE BLACK & DECKER CORPORATION AND
SUBSIDIARIES
THREE MONTHS ENDED DECEMBER 31, 1996
ANALYSIS OF CHANGES IN SALES OF CONTINUING
OPERATIONS
(in millions of dollars)
United
CONSUMER States Europe
Other Total
Total Sales $767.9 $319.6
$185.2 $1,272.7 Unit Volume 5 %
3 % 2 % 4 % Price
(3)% (1)% 2 % (1)%
Currency - % (3)%
(1)% (1)%
2 % (1)%
3 % 2 %
------------------------------------------------------
---------- COMMERCIAL
Total Sales $70.4 $80.7
$31.0 $182.1 Unit Volume 11 %
(11)% (4)% (2)% Price
1 % 2 % - % 1 %
Currency - % (3)%
(6)% (3)%
12 % (12)%
(10)% (4)%
------------------------------------------------------
---------- CONSOLIDATED
Total Sales $838.3 $400.3
$216.2 $1,454.8 Unit Volume 6 %
- % 1 % 3 % Price
(3)% - % 2 % (1)%
Currency - % (3)%
(2)% (1)%
3 % (3)%
1 % 1 %
------------------------------------------------------
----------
THE BLACK & DECKER CORPORATION AND
SUBSIDIARIES
YEAR ENDED DECEMBER 31, 1996
ANALYSIS OF CHANGES IN SALES OF CONTINUING
OPERATIONS
(in millions of dollars)
United
CONSUMER States Europe
Other Total
Total Sales $2,458.9 $ 1,158.2
$594.9 $4,212.0 Unit Volume 8 %
- % - % 5 % Price
(1)% (1)% 3 % (1)%
Currency - % (2)%
(1)% (1)%
7 % (3)%
2 % 3 %
------------------------------------------------------
---------- COMMERCIAL
Total Sales $267.2 $308.6
$126.6 $702.4 Unit Volume 4 %
2 % 10 % 4 % Price
1 % 1 % - % 1 %
Currency - % (3)%
(11)% (3)%
5 % - %
(1)% 2 %
------------------------------------------------------
---------- CONSOLIDATED
Total Sales $2,726.1 $1,466.8
$721.5 $4,914.4 Unit Volume 8 %
- % 2 % 5 % Price
(1)% - % 3 % (1)%
Currency - % (2)%
(3)% (1)%
7 % (2)%
2 % 3 %
SOURCE Black & Decker Corporation/CONTACT: Barbara B.
Lucas, senior v.p.-public affairs, 410-716-2980, or F. Robert
Hunter, director-investor relations, 410-716-3979, both of Black
& Decker/ /Black & Decker press releases available through
Company News On-Call by fax, 800-758-5804, ext. BDKFAX or
235329, or at http://www.prnewswire.com/
KinderCare Announces Second Quarter Results
MONTGOMERY, Ala., Jan. 24, 1997 - KinderCare Learning
Centers, Inc. (Nasdaq: KCLC), the nation's largest child care
company, announced that operating revenues increased $4.2
million, or 3.4%, to $128.3 million second quarter 1997 and $14.4
million, or 5.0%, to $299.8 million year-to-date 1997 versus the
comparable periods in 1996. The increase in revenues is
attributable to 4.7% and 4.2% weighted average tuition increases
implemented during the second quarter of fiscal 1997 and 1996,
respectively, and new centers opened or acquired during fiscal
1996 and first quarter 1997. These revenue increases were
partially offset by center closings during fiscal 1996 and first
quarter 1997 and declines in total company average occupancy in
second quarter 1997 and year-to- date 1997. Same center
revenues, defined as revenues from centers in operation during
both full periods, were up 1.2% over second quarter 1996, and up
2.9% over year-to-date 1996. Same center revenue increases
associated with the tuition increases for both second quarter 1997
and year-to-date 1997 were partially offset by same center
occupancy declines during second quarter 1997.
Total company average occupancy decreased to 72.9% second
quarter 1997 from 75.3% second quarter 1996 and to 74.2%
year-to- date 1997 from 75.6% year-to-date 1996. Same center
occupancy also decreased to 73.4% second quarter 1997 from
75.9% second quarter 1996 and to 74.8% year-to-date 1997 from
76.2% year-to-date 1996. The Company believes these declines in
occupancy were caused by a variety of factors, including in
particular, the following recently implemented initiatives: (a) a
reduced, lower cost marketing program, (b) an expanded employee
childcare discount program that may preclude the enrollment of
tuition paying children, and (c) changes in field operations
management which provide less direct center supervision. The
Company is in the process of evaluating such initiatives.
During year-to-date 1997, the Company opened 11 new centers:
ten community centers and one KinderCare at Work(R) center; and
closed 11 centers. During year-to-date 1996 (including the
conversion of one community center to a Kid's Choice(TM)
center), the Company opened 22 new centers: 11 community
centers, four KinderCare at Work(R) centers, and seven Kid's
Choice(TM) centers; and closed 17 centers. Since the end of
second quarter 1996, the Company has opened a total of 26 new
centers with an average building capacity of 177 children and has
closed 20 centers with an average building capacity of 100
children. Total center capacity has increased to approximately
142,000 at the end of second quarter 1997 from approximately
138,000 at the end of second quarter 1996.
Salaries, wages and benefits expense increased $3.9 million, or
6.0%, to $68.9 million second quarter 1997 and $11.4 million, or
7.6%, to $162.2 million year-to-date 1997 versus the comparable
periods in 1996. As a percentage of operating revenues, salaries,
wages and benefits expense increased to 53.7% second quarter
1997 from 52.4% second quarter 1996, and to 54.1% year-to-date
1997 from 52.9% year-to-date 1996. Approximately 40% and
58%, respectively, of the second quarter and year-to-date
increases are attributable to increased center staff hours. Average
hourly center staff wages increased approximately 4% for second
quarter 1997 and year-to-date 1997 versus the comparable periods
in 1996. As a percentage of operating revenues, a portion of the
increase in salaries, wages and benefits is due to an approximately
28% increase in employee- enrolled children (who are only
charged an administrative fee plus either a discounted tuition fee
or no tuition) in year-to-date 1997 versus year-to-date 1996,
which resulted in additional staffing costs without a commensurate
increase in operating revenues. The increase in employee-enrolled
children is due to an enhanced staff discount program initiated to
improve staff retention. Management has revised and continues to
evaluate this program. Further, benefit costs have increased
slightly due to the partial implementation of new employee health
insurance plans. Higher center labor costs associated with these
benefits have been partially offset by improvements in field
overhead and management reorganizations implemented during
1996.
Depreciation expense decreased to $7.4 million during second
quarter 1997 from $7.9 million second quarter 1996. This
decrease is due to certain assets reaching the end of their fully
depreciated lives during second quarter 1997, more than offsetting
the depreciation expense associated with new asset additions.
Depreciation expense increased to $19.2 million year-to-date
1997 from $18.0 million year-to-date 1996 due to asset additions
related to renovations of existing centers, purchases of short-lived
assets, and to the opening of 26 new centers, offset partially by the
closing of 20 centers since the end of second quarter 1996 and by
a reduction in depreciation expense related to the end of the
estimated depreciable lives of certain assets.
Rent expense decreased to $5.8 million second quarter 1997 from
$6.0 million second quarter 1996 and increased to $14.5 million
year- to-date 1997 from $14.4 million year-to-date 1996. Eleven
leased centers have been opened and 15 leased centers have been
closed since the end of second quarter 1996.
Other operating expenses decreased to $33.4 million second
quarter 1997 from $34.0 million second quarter 1996 and
increased to $81.2 million year-to-date 1997 from $80.8 million
year-to-date 1996. As a percentage of operating revenues, other
operating expenses decreased to 26.0% second quarter 1997 from
27.4% second quarter 1996 and to 27.1% year-to-date l997 from
28.3% year-to-date l996. These margin improvements are
principally due to a reduced, lower cost marketing program and
improved administrative and center support efficiencies from
re-engineering efforts initiated during fiscal 1996.
During first quarter 1996, the Company received the final cash
distribution of $11.3 million from The Enstar Group, Inc.
("Enstar"), the Company's former parent, in settlement of the
Company's $12.0 million claim against Enstar in U.S. Bankruptcy
Court in Montgomery, Alabama. During second quarter 1997, the
Company received a $1.5 million interest payment from Enstar in
connection with this claim.
On June 15, 1995, the Board of Directors appointed Dr. Sandra
Scarr, Chairman of the Board, to be Chief Executive Officer
("CEO"), replacing the former CEO whose resignation was
effective on the same date. Subsequent to this appointment, the
Company made substantial changes to its field operations
management and support functions. As a result of these changes,
the Company charged $4.0 million of restructuring costs, primarily
severance agreements, against fiscal 1996 earnings during first
quarter 1996.
Although substantial reorganization changes were implemented
during fiscal 1996, the Company continues to evaluate certain
other support functions and systems in an effort to improve future
operating effectiveness and efficiencies, as well as to improve the
quality of services.
During first quarter 1996, management limited Kid's Choice(TM)
development to contracts in process until the concept is more fully
developed, and recorded an impairment loss of $6.3 million,
consisting of a writedown of $5.3 million for the recoverability of
long lived assets, primarily leasehold improvements, and $1.0
million for anticipated lease termination costs.
Operating income increased $3.1 million, or 28.0%, to $14.4
million second quarter 1997 as compared to second quarter 1996
and increased $1.8 million, or 7.8% to $24.1 million year-to-date
1997 as compared to year-to-date 1996. Operating income before
litigation settlements and restructuring costs increased $1.6
million, or 14.4%, to $12.8 million as compared to second quarter
1996 and increased $1.2 million, or 5.8%, to $22.6 million
year-to- date 1997 as compared to year-to-date 1996 for the
reasons discussed above.
Second quarter 1997 EBITDA, defined as earnings before interest
expense, income taxes, depreciation, and amortization, of $16.5
million, was $2.6 million below second quarter 1996, and year-to-
date 1997 EBITDA of $36.9 million was $3.6 million below
year-to- date 1996. As a percentage of operating revenues,
EBITDA for second quarter 1997 was 12.8% versus 15.4% for
second quarter 1996 and EBITDA for year-to-date 1997 was
12.3% versus 14.2% for year-to-date 1996. Adjusted EBITDA,
defined as EBITDA excluding the effects of investment income;
litigation settlements and restructuring costs (income), net; and
extraordinary items, was $20.2 million second quarter 1997, an
increase of $1.1 million over second quarter 1996, and $41.8
million year-to-date 1997, an increase of $2.4 million over
year-to-date 1996. As a percentage of operating revenues,
Adjusted EBITDA improved to 15.7% second quarter 1997 from
15.4% second quarter 1996 and improved to 13.9% year-to-date
1997 from 13.8% year-to-date 1996. Neither EBITDA nor
Adjusted EBITDA is intended to indicate that cash flow is
sufficient to fund all of the Company's cash needs or represent cash
flow from operations as defined by generally accepted accounting
principles.
KinderCare is the largest preschool and child care provider in the
United States. At the end of the second quarter of fiscal 1997,
under the banners of KinderCare Learning Centers, Inc.,
KinderCare at Work(R) and Kid's Choice(TM) the Company
operated 1,148 centers in 38 states and the United Kingdom with
an enrollment of approximately 125,000 full-time and part-time
children and employed approximately 22,000 people. Children's
education programs include: toddler programs Look at Me(R) and
Let Me Do It(R); preschool programs My Window on the
World(R) and Once Upon a Time...(R); and the schoolage program
KC Imagination Highway(TM). The Company was founded in
1969 and is headquartered in Montgomery, Alabama.
KINDERCARE LEARNING CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in
thousands except per share amounts) (Unaudited)
Twelve Weeks Ended
Twenty-eight
Weeks Ended
Dec. 13 Dec. 15
Dec. 13 Dec 15
1996 1995
1996 1995
Operating revenues $128,324 $124,079
$299,751 $285,392 Operating expenses:
Salaries, wages
and benefits 68,875 65,003
162,215 150,814
Depreciation 7,351 7,864
19,208 18,053 Rent 5,857
6,032 14,507 14,367 Provision for
allowance
for doubtful accounts 811 1,030
1,851 1,792
Other 32,591 32,928
79,380 79,022 Litigation settlements
and restructuring
costs (income), net (1,527) ---
(1,527)
(1,019)
Total operating
expenses 113,958 112,857
275,634 263,029
Operating income 14,366 11,222
24,117 22,363 Net investment income 15
50 86 161 Interest expense
3,201 3,811 8,141 9,219
Income before income
taxes and extraordinary
item 11,180 7,461
16,062 13,305
Income tax expense 4,360 2,910
6,264 5,189 Income before
extraordinary item 6,820 4,551
9,798 8,116
Extraordinary item
-- loss on early
extinguishment of debt,
net of income tax benefit 5,251 ---
6,480
---
Net income $1,569 $4,551
$3,318
$8,116
Income per share:
Income before
extraordinary item $0.33 $0.23
$0.48
$0.40
Extraordinary item
-- loss on early
extinguishment of debt (0.25) ---
(0.32)
---
Net income $0.08 $0.23
$0.16
$0.40
Weighted average common
shares and share
equivalents 20,599 19,939
20,334
20,285
See notes to unaudited consolidated Form 1O-Q.
KINDERCARE LEARNING CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (in thousands, except per
share amounts) (Unaudited)
December 13
May 31
ASSETS 1996
1996 Current assets:
Cash and cash equivalents $ 10,426
$ 15,597 Receivables:
Tuition (net of allowance
for doubtful accounts
of $2,234 and $1,884 at
December 13, 1996 and
May 31, 1996, respectively) 14,728
14,566
Other 439
563
Prepaid expenses and supplies 10,240
9,116 Deferred income taxes
4,664 4,664
Total current assets 40,497
44,506
Property and equipment, at cost 580,349
561,189
Less accumulated depreciation
and amortization 103,803
92,664 Net property and equipment
476,546 468,525
Deferred income taxes 4,454
4,422
Other assets 7,941
8,023
Total $529,438
$525,476
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 9,221
$ 14,330 Bank overdrafts
11,328 9,768 Current portion of
long-term debt 1,095 853
Accrued expenses and
other liabilities 40,482
51,163
Total current liabilities 62,126
76,114
Long-term debt 167,668
145,764 Self-insurance liabilities
20,210 17,652 Other noncurrent liabilities
23,983 20,488
Total liabilities 273,987
260,018
Shareholders' equity:
Preferred stock, $.01 par value;
authorized 10,000,000 shares;
none outstanding ---
---
Common stock, $.01 par value;
authorized 40,000,000 shares;
issued 19,414,367 and 19,981,807
shares at December 13, 1996 and
May 31, 1996, respectively;
outstanding 19,414,367 and
19,946,807 at December 13, 1996
and May 31, 1996, respectively 191
199
Additional paid-in capital 190,119
204,003 Retained earnings
65,117 61,799 Cumulative translation
adjustment 24 (20) Less
treasury stock, at cost
(35,000 shares at May 31, 1996) ---
(523)
Total shareholders' equity 255,451
265,458
Total $529,438
$525,476
See notes to unaudited consolidated Form 10-Q.
KINDERCARE LEARNING CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in
thousands) (Unaudited)
Twenty-eigbt
Weeks Ended
December 13
December
15
1996
1995
Cash flows from operations:
Net income $ 3,318
$ 8,116 Operating activities not
requiring (providing) cash:
Depreciation 19,208
18,053 Amortization of intangibles
and other assets 783
734
Writedown of Kid's Choice(TM)
property and equipment ---
5,312
Gain on sales and disposals
of property and equipment (34)
(1,178)
Extraordinary item - loss on
early extinguishment of debt 6,480
---
Changes in operating assets
and liabilities:
Receivables 97
(2,446) Prepaid expenses and supplies
(1,124) (2,388) Other assets
(2,393) (166) Accounts
payable, accrued expenses
and other liabilities (9,676)
1,393
Other, net (48)
(603)
Net cash provided by operating
activities $ 16,611
$ 26,827
Cash flows from investing activities:
Purchases of property and equipment $(27,849)
$(38,933) Proceeds from sales of property
and equipment 518
3,366
Proceeds from collection of
notes receivable 12
2,029
Proceeds from sale of investment ---
3,396 Other, net
(22) ---
Net cash used by investing activities (27,341)
(30,142)
Cash flows from financing activities:
Borrowings on revolving
credit facility 122,500
---
Payments on long-term borrowings (105,133)
(538) Purchase and retirement of
treasury stock (14,251)
(10,000)
Bank overdrafts 1,560
8,970 Exercise of stock options
and warrants 883
1,207
Net cash provided (used)
by financing activities 5,559
(361)
Decrease in cash and cash equivalents (5,171)
(3,676) Cash and cash equivalents at
the beginning of the period 15,597
14,237
Cash and cash equivalents at
the end of the period $ 10,426
$ 10,561
Supplemental cash flow information:
Interest paid $ 11,774
$ 7,601 Income taxes paid
$ 920 $ 2,134
See notes to unaudited consolidated Form 10-Q.
SOURCE KinderCare Learning Centers, Inc./CONTACT: Philip
L. Maslowe, Executive Vice-President and Chief Financial
Officer, 334-277-5090, or Thomas D. Johnson, Jr., Director of
Marketing and Investor Relations, 334-260-7668, both of
KinderCare Learning Centers/