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MEI DIVERSIFIED INC. REPORTS THIRD QUARTER RESULTS

 MINNEAPOLIS, Nov. 17 ~PRNewswire~ -- MEI Diversified Inc. (NYSE: MEI) reported a third quarter 1992 loss of $8,660,000 or $.47 per share compared with a 1991 third quarter loss of $3,937,000 or $.21 per share. Operating results of the snack food segment have been classified as discontinued operations reflecting the May 1992 asset sale of remaining snack food subsidiaries. The net loss from continuing operations was $8,647,000 or $.46 per share for the 1992 quarter compared to a net loss of $1,977,000 or $.10 per share for the comparable 1991 period. Revenues for the 1992 quarter were $80,846,000 compared to $87,357,000 in the 1991 quarter. The nine-month 1992 period had a net loss of $18,085,000 or $.97 per share compared to a net loss of $9,960,000 or $.53 per share for the comparable 1991 first nine months. The 1992 nine-month period includes the $1,534,000 gain on the May 1992 sale of the snack food subsidiaries. Net loss from continuing operations was $19,128,000 or $1.02 per share for the 1992 nine-month period compared to a loss of $6,057,000 or $.32 per share for the comparable 1991 period. Revenues for the nine months were $253,473,000 in 1992 and $277,051,000 in 1991.
 Loss from operations was $6,357,000 for the third quarter 1992 compared to $841,000 of operating income for the third quarter 1991. The nine-month 1992 operating loss was $13,425,000 compared to $727,000 of operating income for the 1991 first nine months.
 Donald E. Benson, president of MEI Diversified Inc. stated, "Although it has been a long and painful transition period, MEI's professional beauty salon segment, under the leadership of its president Gary L. Hollister, has made significant improvement so as to make the future increasingly optimistic. Despite the substantial operating losses incurred in the third quarter which historically is the salon's slowest quarter, we look forward to much improved operating results in the fourth quarter of 1992. An analysis of operations indicates that MEI Salons' loss for the third quarter and year-to-date is due in large part to one-time costs incurred as a consequence of the April 1992 termination of the management agreement with Regis Corporation. MEI expects to ultimately recover a substantial part of MEI Salon's purchase price and historical losses through a favorable outcome in its pending litigation against the sellers of the Glemby Company, Inc. and Regis Corporation and its affiliates including several officers of Regis Corporation."
 The one-time costs in the form of consulting fees, legal fees, employment related expenses and reorganizational expenses, much of which relates to the disengagement from Regis, continued through the third quarter of 1992. One-time expenses for the 1992 nine-month period were approximately $9.1 million.
 Litigation related to The Glemby Company acquisition against former Glemby shareholders, which has been pending for some time, is now projected to commence in U.S. Federal Court in 1993. All three escrows established in the Glemby acquisition have been collected this year and represent recovery of approximately $4.7 million of the original purchase price.
 Mr. Benson said, "The nine-month 1992 consolidated operating results, while very disappointing, do reflect progress in the medical products segment. New Dimensions in Medicine ("NDM") continued its profit improvement through the quarter ended Sept. 30, 1992 and the current market demand for NDM's products continues strong. As a result of increased demand for NDM's electrode and wound dressing product lines, we announced earlier this month that MEI has approved a $4.5 million capital expenditure budget to increase production capacity. Expansion of the ClearSite(R) wound dressing production line will increase current capacity by approximately 300 percent in 1993. The significant capacity increase is required to meet foreign distribution agreement commitments and projected increased demand in U.S. hospital and alternate care markets for 1993."
 Mr. Benson further stated, "The company is continuing discussions with strategic investors for both its medical products and professional beauty salon subsidiaries to provide significant equity capital and augment profitability through a broader product base and greater distribution of all products. The $5.6 million regularly scheduled six- month interest payment on MEI's publicly held 12-1~2 percent senior subordinated notes and 8 percent convertible debentures will be paid effective Nov. 30, 1992."
 Mr. Benson also stated, "MEI today received a proposal from the IMR Fund, L.P., the general terms of which proposes that it and an affiliate acquire 13,340,000 shares of MEI voting stock at purchase price of $5.00 per share. The total consideration of $66,700,000 would be paid by the transfer to MEI of all the outstanding shares of stock of Brown- Minneapolis tank Company and $26,700,000 in cash. Under the proposal, voting control of MEI would be transferred to IMR Fund, L.P., and the Fund would designate MEI's board of directors. The proposal is subject to the Fund's obtaining all waivers and consents necessary for the Fund to enter into the transaction, both parties' due diligence and MEI's obtaining shareholder approval."
 The IMR Fund, L.P. is a limited partnership investment fund located in Minneapolis, managed by IMR Management Partners, L.P. and IMR General, Inc., of which Irwin L. Jacobs is president. Mr. Jacobs is also a member of the board of directors of MEI Diversified, Inc.
 After reviewing the proposal, the MEI board of directors concluded to retain an investment banker to evaluate the IMR offer proposal and to consider other alternatives which may be available to the company.
 MEI DIVERSIFIED INC. AND SUBSIDIARIES
 Statement of Consolidated Operations
 (Unaudited, In Thousands)
 Period ended Three Months Nine Months
 Sept. 30 1992 1991 1992 1991
 Revenues $80,846 $87,357 $ 253,473 $ 277,051
 Costs and expenses:
 Cost of sales 72,540 76,124 226,373 244,256
 Operating expenses 12,801 8,713 35,000 26,625
 Corporate general
 and administrative
 expenses 954 812 2,785 2,996
 Amortization of
 intangible assets 908 867 2,740 2,447
 Total costs and expenses 87,203 86,516 266,898 276,324
 Operating income (loss) (6,357) 841 (13,425) 727
 Interst expense (3,096) (3,506) (9,197) (9,944)
 Investment income 601 537 1,622 2,357
 Gain on sales of current
 marketable securities -- -- 208 195
 Other income, net 309 151 1,935 608
 Loss before income taxes (8,543) (1,977) (18,857) (6,057)
 Provision for income taxes 104 -- 271 --
 Loss from continuing
 operations (8,647) (1,977) (19,128) (8,057)
 Discontinued operations,
 net of income taxes:
 Gain on disposal of
 snack food segment -- -- 1,534 --
 Loss from operations of
 discontinued snack food
 segment (33) (1,960) (491) (3,903)
 Total discontinued
 operations (33) (1,960) 1,043 (3,903)
 Net loss (8,680) (3,937) (18,085) (9,960)
 Per common share (A):
 Loss from continuing
 operations (.46) (.10) (1.02) (.32)
 Discontinued operations,
 net of income taxes:
 Gain on disposal of
 snack food segement -- -- .08 --
 Loss from operations of
 discontinued snack
 food segment (.01) (.11) (.03) (.21)
 Total discontinued
 operations (.01) (.11) (.05) (.21)
 Net loss (.47) (.21) (.97) (.53)
 (A) Based on weighted average common shares outstanding of 18,686,399 and 18,730,409 for the quarter 18,684,598 and 18,765,712 for the nine-month period in 1992 and 1991, respectively.
 -0- 11~17~92
 ~CONTACT: James A. Cesario, vice president-controller of MEI Diversified, 612-339-8853~
 (MEI)


CO: MEI Diversified, Inc. ST: Michigan IN: SU: ERN

LD-TM -- MN023 -- 2127 11~17~92 22:18 EST
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Publication:PR Newswire
Date:Nov 17, 1992
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