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CNNfn after the bell
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August 30, 1999: 9:28 p.m. ET
Office Depot slowed by sluggish sales; U.S. Liquids facing some hot water
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NEW YORK (CNNfn) - A major retailer warned that sluggish sales would hurt second-half earnings after the bell rang Monday, while a liquid-waste company warned of earnings losses amid a government probe.
Office Depot Inc.
Shares of office supply retailer Office Depot Inc. (ODP), the largest office supply store chain, fell in after hours trading after the company warned that it expected sluggish sales to clip second half earnings.
The Delray Beach, Fla.-based company said it expects earnings per share in the second half to range from 30 cents to 40 cents per share, compared to expectations of 50 cents to 52 cents per share.
"We have not seen the level of improvement we need to reach our earnings targets," said David I. Fuente, chairman and chief executive officer, in a statement.
Office Depot also said it will take a total charge of $62.5 million, net of income taxes, or 16 cents per share against third-quarter earnings.
The company said it would take a $28.3 million charge, net of income taxes, to reflect the decision to accelerate its store relocation and closing program for older and under-performing stores and a write-down of certain assets. Fuente said the company has targeted 41 stores to be relocated or closed.
The retailing giant also plans to take a $34.2 million write-down, net of income taxes, of slow moving inventories in its warehouses and stores.
Separately, the board of directors authorized a $500 million stock repurchase program.
"Despite the fact that our second-half results will not meet our expectations or the expectations of the investment community," Fuente said, "we remain very confident in our longer term prospects and our ability to grow earnings and shareholder value."
Readers Digest
Reader's Digest Association Inc. (RDA), publisher of the world's most widely read magazine, delivered the news that it agreed to buy privately held Books Are Fun Ltd., which sells discounted books and gifts at special events, for $380 million.
Reader's Digest said the acquisition of the Fairfield, Iowa-based franchising company, the nation's leading display marketer of books and gifts, would add to its line of products and provide a new distribution channel for its own publications.
Reader's Digest currently markets its products through direct mail. The deal is expected to contribute significantly in the near term to Reader's Digest's revenue and operating cash flow and slightly raise earnings per share in fiscal year 2000, the company said.
Reader's Digest said it would finance the acquisition from a combination of cash on hand and bank debt. It expected to close on the deal about Oct. 1.
U.S. Liquids
U.S. Liquids Inc. (USL) was dealing with some potential hot water. The company said it expected its 1999 third- and fourth-quarter earnings to fall well short of analysts' current estimates, amid an FBI investigation alleging the company had illegally dumped hazardous material at its Detroit plant.
Recent FBI allegations have led to a temporary shutdown of the Detroit waste-treatment facility, which had been generating about 10 percent of U.S. Liquids' revenues, according to Chief Executive Officer Mike Lawlor.
The Houston-based company said it now expected third-quarter earnings of 21 cents to 23 cents a share, well below First Call/Thomson Financial consensus estimates of 33 cents. For the fourth quarter, U.S. Liquids sees profits of 19 cents to 21 cents, far below the 36 cents analysts had forecast.
Revenues for the third quarter are expected to be between $60 million and $61 million, and for the fourth quarter in the $66 million to $67 million range. The company expects earnings for the year to come in at between $16 million and $17 million, or 97 cents to 99 cents per share, on revenues of $241 million to $242 million.
"We anticipate that the facts, when they are brought to light, will justify our faith in our policies and our personnel. We hope to reopen the Detroit facility within seven to 10 days," Lawlor said.
Oshman's Sporting Goods
Houston-based Oshman's Sporting Goods Inc. (OSH) wasn't feeling very sporty after reporting the results of the second quarter and first six months of fiscal 1999.
The company had a net loss of $1 million or 17 cents per diluted share compared to a net profit of $3.4 million or 57 cents per share during the prior year's second quarter. Last year's second quarter included a pretax gain on property sales of $3.5 million and a non-recurring income item of $500,000 from a reduction of store closing reserves. Last year's results before the unusual items were a loss of $601,000.
Total sales for the second quarter were $76.3 million compared to $79 million in the year ago period. Comparable sales were down 1.5 percent.
For the first six months of the year, Oshman's had a net loss of $1.5 million, or 26 cents per share, compared to a net profit of $2.3 million or 39 cents per share in the prior year's first six months. Without unusual items, the company's results for the first six months last year would have been a loss of $1.7 million.
Total sales for the first six months of the year were $147.6 million, compared to $151.2 million for the year-ago period. The decline in sales was due primarily to lost sales from closed stores. Comparable-store sales for the first six months were down 0.8 percent.
Guidant Corp.
Medical device maker Guidant Corp. (GDT) knew how to operate Monday as it agreed to acquire cardiac surgery instrument and systems company CardioThoracic Corp. (CTSI).
Guidant said it will pay $19.50 a share for Cupertino, Calif.-based CardioThoracic in a deal valued at around $313 million.
"The acquisition of CTS, its innovative products and strong pipeline, will provide a platform for Guidant's growth in cardiac surgery," said Guidant president and chief executive officer Ronald Dollens.
CardioThoracic shares closed on Monday up 1/16 at 19. Guidant said the acquisition is expected to close in the fourth quarter of 1999 but is not expected to impact earnings in 2000. It is expected, however, to boost earnings in 2001.
Guidant shares closed on Monday down 11/16 at 58-13/16.
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Fruit of the Loom Ltd. (FTL) announced a management shake-up and warned that earnings for the rest of the year will fall short of expectations.
Also, CompUSA (CPU) reported a narrower fourth-quarter loss than expected and announced it will cut 50 percent of its sales force as it restructures its sales operations.
Meanwhile, Microsoft (MSFT) had to contend with a breach in its Hotmail Web-based e-mail service.
On the economic side, the August consumer confidence report is scheduled to be released Tuesday. The consensus estimate calls for 133.5, while the prior report was 135.6.
--from staff and wire reports.
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