Grossman's reports profitable third quarter with 16 percent sales increase; nine months sales show 11 percent increase

Business Wire, Nov 6, 1996

CANTON, Mass.--(BUSINESS WIRE)--Nov. 6, 1996--Grossman's Inc. (Nasdaq-GROS) today reported its first profitable quarter in a year.

Third quarter net income was $1.6 million, or 5 cents per share, on sales from continuing operations of $96.0 million, a 16.1 percent increase. Comparable store sales for the third quarter of 1996 were 2.0 percent below the 1995 level.

This compares with net income of $15.3 million, or 59 cents per share, on sales from continuing operations of $82.8 million during the comparable quarter a year ago. Last year's third quarter results included an $18.1 million gain on the sale of the company's former headquarters and establishment of a $4.5 million reserve for store closing expenses.

Since September 1995, the company has opened two Contractors' Warehouses and six Mr. 2nd's Bargain Outlets for a total of 42 stores throughout the United States.

For the first nine months of 1996, sales from continuing operations totalled $248.7 million as compared to $223.9 million for the same period in 1995, an 11.0 percent increase. Comparable store sales for the first nine months of 1996 were 4.9 percent below the 1995 level.

For 1996, the company reported a nine month net loss of $56.1 million, or $2.11 per share. These results include a first quarter restructuring charge of $40.2 million.

This compares with 1995 net income of $5.7 million, or 22 cents per share.

The company's September 30, 1996 balance sheet improved, reflecting a $6.9 million increase in stockholders' equity and a corresponding decrease occurred in pension liability, due to a revaluation of its defined benefit pension plan. The revaluation reflects the company's earlier downsizing and an increase in the assumed discount rate used to value pension liability.

Chairman's Comments

Robert K. Swanson, chairman of the board and chief executive officer since October 4, said the company plans to grow and improve its profitability. "We have been and will continue to be more aggressive and efficient."

"To date, we have sold 26 of our 55 properties, generating net proceeds of about $22 million, which has been used to pay down the original $33 million mortgage debt," Swanson said.

"We are aggressively marketing the remaining properties and hope to pay off our remaining mortgage debt during the first quarter of 1997," he said. "Once this debt is repaid, further proceeds will be retained by the company."

Swanson said board action last week included the hiring of TM Capital Corp., New York City based investment bankers and financial advisors, to assist in forming strategies and capital generation options.

The board also retained Joanne Ralston & Associates, Inc., a Scottsdale, Arizona based investor and public relations firm. "We intend to be more open in our communications with employees, lenders, vendors, shareholders and investors," he said.

"I have worked with key people at both firms previously and have the utmost confidence they can contribute significantly to our future successes," Swanson said.

"By September 1997, we intend to relocate our headquarters to California or Ohio to allow us to manage more efficiently the company's growth," he said. "We will also seek shareholder approval at our September Annual Meeting to change the company's name and trading symbol."

Swanson said that while he is pleased with recent progress, "more needs to be done to increase sales and improve earnings growth."

Fourth Quarter

He said the company will take additional charges in the fourth quarter due to the more aggressive approach to selling the remaining eastern properties, the headquarters moving costs and further corporate staff reductions.

"By December 31, 1996, we will have these costs behind us," he said.

Grossman's Inc. operates 42 retail stores - 16 Contractors' Warehouse facilities in California, Indiana, Kentucky, Nevada and Ohio, and 26 Grossman's Mr. 2nd's Bargain Outlets in Massachusetts, New York and Rhode Island.

Contractors' Warehouse stores cater to area remodelers, independent contractors, homebuilders and other professionals. These stores, which range in size from 80,000 to 110,000 square feet, provide value-added specialized services, including 40,000 to 55,000 square foot covered drive-thru lumber yards; multiple grades, sizes and quantities of lumber and building materials; special order showrooms, computer estimating services, preparation of material lists and prices from blueprints, quick bid job quotes, professional tool rental, specialized delivery services, early opening hours and architectural services at some locations.

Mr. 2nd's Bargain Outlet stores cater to do-it-yourself and professional customers who seek cost effective alternatives to traditional home improvement centers. These stores offer steep discount pricing on close-outs, seconds and over-stocks in a broad range of building materials, building-related merchandise and non- repeat merchandise in limited quantities. -0-

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