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Handleman Company Reports First-Quarter Pre-Tax Income Surge

21 Aug, 2001 By: Hive News


Troy, Mich.-based Handleman Company announced improved operating results for the first quarter of fiscal 2002, which ended on July 28, 2001.

The company earned $2.0 million or $.08 per diluted share for the first quarter of fiscal 2002, compared to $1.7 million or $.06 per diluted share for the first quarter of fiscal 2001. Sales increased 13% to $261.1 million for the first quarter of this year, from $231.4 million for the first quarter of last year.

Stephen Strome, chairman and c.e.o., commented, "We are pleased with our overall results for the first quarter, which historically has been the company's lowest quarter for both sales and earnings. Pre-tax incomeincreased 87% to $5.6 million, up from $3.0 million last year. We achievedimproved quarterly earnings per share, compared to the prior year, for thetwentieth consecutive period, despite general weakness in both the music industry and overall economy.

"During the quarter, we continued to invest inour United Kingdom operation. We also began providing fulfillment of music and movies for JCPenney.com. These and other initiatives position the companyfor continued growth, both domestically and internationally."

For the first quarter of fiscal 2002, Handleman Entertainment Resources (HER), the larger of the company's two operating units, had net sales of$239.4 million, compared to $207.7 million in the first quarter of last year, an increase of 15%. The increase in HER sales for the quarter was generated by Handleman UK Limited, as well as HER's United States operations. HER's first-quarter operating income (i.e., income beforeinterest, income taxes and minority interest), was $10.2 million, up 70% from $6.0 million last year.

The company's North Coast Entertainment (NCE) operating unit had net sales for the first quarter of fiscal 2002 of $25.4 million, compared to $24.2 million for the first quarter of fiscal 2001, an increase of 5%. The highersales this year were primarily due to the Madacy unit. Sales at the AnchorBay Entertainment unit were up slightly over the prior year, while sales at The itsy bitsy Entertainment Company (TibECo) were lower. NCE's operating loss for the first quarter of fiscal 2002 was $4.0 million, compared to anoperating loss of $2.4 million last year. The increase in the NCE operatingloss for the first quarter of this year was due to a higher operating loss at TibECo, where several one-time costs were incurred. During the first quarter of this fiscal year, Handleman Company began taking an active role in managing the day-to-day operations at TibECo and has implemented expense controls.

Consolidated gross margin was 23.2% for the first quarter of this year, compared to 25.1% for the first quarter of last year. The gross marginpercentage this year was more in line with the gross margin percentage achieved during the last half of fiscal 2001, said the company.


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