Closes on Sale of Selected Assets and Operations in the United Kingdom TROY, Mich., Sept. 16
TROY, Mich., Sept. 16 /PRNewswire-FirstCall/ -- Handleman Company
(Pink Sheets: HDLM), www.handleman.com, today announced results for its first
quarter ended August 2, 2008. In addition, the Company also announced the
completion of the sale of selected assets and operations in the United Kingdom
(UK). The Company's results for the quarter ended August 2, 2008 reflect the
impact on Handleman of its decision to exit the North American music business,
sell selected assets and operations in the UK and maximize the value of its
other businesses.
Handleman Company sold a majority of its assets and operations in the UK
to a subsidiary of Tesco PLC. The assets sold included substantially all the
fixed assets located in Handleman's Tesco-dedicated distribution center in the
UK and certain licensed and proprietary computer software held by the
Company's corporate subsidiary. The total received by Handleman was
approximately 9.4 million pounds Sterling. Tesco also retained a substantial
portion of Handleman's UK workforce.
In June 2008 Handleman announced its decision to exit the North American
music business and entered into a definitive agreement pursuant to which it
sold music inventory and selected other assets related to its Wal-Mart
business in the United States to Anderson Merchandisers, L.P. ("Anderson").
Handleman also announced in July 2008 that it sold its Canadian operations to
Anderson and sold its Artist to Market Distribution unit ("A2M") to Eurpac
Service, Inc.
Handleman is continuing to explore opportunities to maximize the value of
its other businesses and how best to maximize the economic return to its
shareholders. These other businesses include Crave Entertainment Group, Inc.
("Crave"), a leading full-service distributor of video game software,
hardware, and related accessories and a specialty video game publisher, and
REPS LLC ("REPS"), a national in-store merchandiser.
In accordance with generally accepted accounting principles, Handleman's
music category management and distribution operations in the U.S. and Canada,
as well as its A2M, UK and Crave operations, have been classified as
discontinued operations for financial reporting purposes. The Company's
continuing operations primarily consist of REPS and corporate support
services. A thorough discussion of the Company's financial results for its
first quarter of fiscal 2009 is contained in Handleman's Form 10-Q, filed
today with the Securities and Exchange Commission.
First Quarter of Fiscal 2009
Revenues from continuing operations for the first quarter of fiscal 2009
were $3.5 million, compared to $3.7 million for the first quarter of fiscal
2008. Net loss for the first quarter of fiscal 2009 was $46.5 million or
$2.28 per diluted share, compared to net loss of $17.7 million or $.88 per
diluted share for the first quarter of fiscal 2008. The first quarter of
fiscal 2009 includes a net loss on disposal of $11.2 million from operations
of discontinued subsidiaries.
Handleman filed a preliminary proxy statement on August 15, 2008 with the
Securities and Exchange Commission ("SEC") in connection with its proposed
Plan of Final Liquidation and Dissolution of the Company. The Plan of
Liquidation must be approved by a majority of the Company's shareholders in
order to be implemented.
While the Company believes that a cash distribution is a possibility, no
assurance can be given to investors that any distribution will occur. If the
Plan of Liquidation is approved by the shareholders whether there will be any
excess cash proceeds for distribution to shareholders is subject to a number
of material risks and uncertainties that may prevent any such distribution
from occurring. The Company will provide information about future cash
distributions, if any, at such time as it believes that they are reasonably
estimable.
Additional Information and Where to Find It
In connection with the proposed Plan of Liquidation, Handleman Company has
filed a proxy statement with the Securities and Exchange Commission ("SEC").
SHAREHOLDERS ARE URGED TO READ THE PROXY STATEMENT FILED WITH THE SEC
CAREFULLY AND IN ITS ENTIRETY WHEN IT BECOMES AVAILABLE BECAUSE IT WILL
CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED PLAN OF LIQUIDATION. The
definitive proxy statement will be mailed to the Company's shareholders. In
addition, shareholders will be able to obtain the proxy statement and all
other relevant documents filed by the Company with the SEC free of charge at
the SEC's Web site www.sec.gov or from Handleman Company, Attn: Corporate
Secretary, 500 Kirts Blvd., Troy, Michigan 48084, 248-362-4400.
Participants in the Solicitation
Handleman Company's directors, executive officers and other members of
management and employees may be deemed to be participants in the solicitation
of proxies from the shareholders of the Company in favor of the Plan of
Liquidation. INFORMATION ABOUT HANDLEMAN COMPANY AND ITS DIRECTORS AND
EXECUTIVE OFFICERS, AND THEIR OWNERSHIP OF THE COMPANY'S SECURITIES AND
INTERESTS IN THE PLAN OF LIQUIDATION, WILL BE SET FORTH IN THE AFOREMENTIONED
PROXY STATEMENT. Additional information regarding the interests of those
persons may be obtained by reading the proxy statement when it becomes
available.
Forward-Looking and Cautionary Statements
This press release contains forward-looking statements, which are not
historical facts. These statements involve risks and uncertainties and are
made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Actual results, events and performance could
differ materially from those contemplated by these forward-looking statements
because of factors affecting any of a number of critical objectives,
including, without limitation, obtaining all required regulatory approvals to
sell the assets and operations of our Canadian subsidiary to Anderson, the
completion of an agreement to sell a substantial portion of the Company's UK
assets to Tesco, our ability to transition our U.S. music customers other than
Wal-Mart to other vendors smoothly, maintaining satisfactory working
relationships with our lenders, customers and vendors, maintaining sufficient
liquidity to fund our day-to-day operations, retaining key personnel,
satisfactory resolution of any outstanding claims or claims which may arise,
finding and capitalizing on opportunities to maximize the value of the
Company's non-music operations, selling certain of the Company's assets in a
timely manner and for amounts reasonably consistent with the Company's
valuation of those assets, and other factors discussed in this press release
and those detailed from time to time in the Company's filings with the
Securities and Exchange Commission. Handleman Company notes that the preceding
conditions are not a complete list of risks and uncertainties. The Company
undertakes no obligation to update any forward-looking statement to reflect
events or circumstances after the date of this press release.
- Tables Follow -
CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands, except per share data)
(unaudited)
Three Months
(13 Weeks) Ended
August 2, July 28,
2008 2007
Revenues $3,534 $3,699
Costs and expenses:
Direct product costs(1,845)(2,071)
Selling, general and
administrative expenses (22,265) (21,823)
Impairment of goodwill
Impairment of subsidiary assets
Operating loss (20,576) (20,195)
Interest expense(357) (919)
Investment income104 1,261
Loss from continuing operations
before income taxes (20,829) (19,853)
Income tax benefit 602 2,204
Loss from continuing operations (20,227) (17,649)
Loss from discontinued operations(26,318) (67)
Net loss$(46,545) $ (17,716)
Basic net loss per share:
- From continuing operations$ (.99) $(.88)
- From discontinued operations (1.29)--
Total basic net loss per share$(2.28) $(.88)
Diluted net loss per share
- From continuing operations$ (.99) $(.88)
- From discontinued operations (1.29)--
Total diluted net loss per share $(2.28) $(.88)
Weighted average number of
shares outstanding - basic 20,419 20,195
- diluted 20,419 20,195
CONSOLIDATED CONDENSED BALANCE SHEETS
(amounts in thousands)
(unaudited)
August 2, 2008 May 3, 2008
Assets
Cash and cash equivalents $1,927 $1,043
Accounts receivable3,671 62,479
Merchandise inventories -- 29,404
Other current assets 5,064 10,221
Assets held for sale 138,924139,943
Total current assets 149,586243,090
Property and equipment, net of
depreciation and amortization 9,160 28,870
Other assets, net 26,014 56,744
Total assets $184,760 $328,704
Liabilities
Debt, current $ 11,767$63,706
Accounts payable 5,409 31,023
Other current liabilities 15,600 23,548
Liabilities for sale 50,690 62,298
Total current liabilities 83,466180,575
Other liabilities 6,343 6,456
Shareholders' equity94,951141,673
Total liabilities and
shareholders' equity $184,760 $328,704
SOURCE Handleman Company
