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 BEDFORD HEIGHTS, Ohio, Oct. 4 /PRNewswire/ -- Waxman Industries, Inc. (NYSE: WAX), a leading supplier to the home repair and remodeling market throughout the United States and Canada, today reported results for the Company's fiscal year ended June 30, 1993.
 Sales for the year totaled $358.7 million, compared with $379.0 million in fiscal 1992, a decline of 5.4 percent. Sales from U.S. operations increased 4.1 percent over the prior year primarily as a result of the continued growth of Barnett Inc., the Company's primary mail order and telemarketing operation. The increase was offset, however, by a 15.0 percent decline in sales from the Company's Canadian operations. The Canadian operations' sales continued to be adversely affected by the weak economic conditions in Canada, as well as by a 6.8 percent decrease in the average currency exchange rate used to translate the Canadian operations revenues into U.S. dollars. When stated in Canadian dollars, sales from the Canadian operations declined 8.8 percent from fiscal 1992. Approximately 23 percent of the sales decline in Canada is attributable to branches that were closed during the prior year.
 During the fourth quarter of fiscal 1993, the Company incurred several non-cash charges and expenses, including a restructuring charge, which caused a significant reduction in operating income. In addition, the Company recognized a charge related to a change in accounting which further increased the Company's net loss for the year.
 These charges and expenses included an increase to bad debt expense of $3.8 million from 1992 to 1993, to fully reserve for estimated bad debt losses in Canada. In addition, depreciation and amortization expense increased by $2.0 million, the majority of which was a result of accelerated amortization of certain warehouse start-up and catalog costs. This change in amortization was made during the fourth quarter and applied retroactively to July 1, 1992. The cumulative effect of this change on prior years totaled $2.1 million and is reported separately in the 1993 results, without any tax benefit, as a change in accounting.
 During the fourth quarter of fiscal 1993, the Company also recorded a restructuring charge of $8.9 million as a result of actions taken to refocus and build on its existing core businesses in the U.S. and to improve the profitability of its Canadian operations. Approximately $4.6 million of this charge represents the expected loss to be incurred upon the sale of three operating entities, which is expected to occur during the second quarter of fiscal 1994 and is expected to generate cash proceeds of approximately $8.5 million. An additional $2.1 million of the ru?cturing charge relates to the closing of certain unprofitable Canadian branches. Most of the remainder of the restructuring charge represents costs incurred to consolidate administrative functions in the U.S. and to transfer two of the Company's domestic packaging operations to Mexico.
 As a result of these additional charges and expenses, as well as the lower sales levels and lower gross margins, especially in Canada, the Company incurred an operating loss of $1.4 million in fiscal 1993 compared with operating income of $23.4 million in fiscal 1992. Operating cash flow (operating income before depreciation and amortization) for fiscal 1993 was $9.0 million, as compared to $31.1 million in the prior year. The net loss for the year was $29.2 million, or $2.51 per share, compared to a loss of $4.4 million, or $.45 per share, for fiscal 1992.
 The Company announced that it has suspended the payment of cash dividends on its shares of Common Stock and Class B Common Stock. The Company previously had been paying a quarterly dividend of $.02 per share on both classes of stock. In addition, the Company announced that, as a result of its fiscal 1993 operating results, the Company was not in compliance, as of June 30, 1993, with certain financial covenants contained in its domestic and Canadian bank credit agreements and in the indenture governing its Senior Secured Notes due 1998. The Company has entered into an amendment to its domestic bank credit agreement and has obtained waivers from its Canadian lenders, and each of the banks is continuing to provide funds in accordance with the terms of those agreements.
 The Company is current in its payment obligations under all of its debt instruments. However, the Company continues to be in noncompliance with one of the financial covenants in the Senior Secured Note indenture. As a result, the holders of the Senior Secured Notes have the right, after notice and applicable cure periods, to accelerate the maturity of the Notes. In addition, the Company's consolidated net worth has decreased to a level that is expected to obligate the Company to offer to repurchase a portion of the Senior Secured Notes commencing May 30, 1994 and a portion of its 13-3/4 percent Senior Subordinated Notes due 1999 commencing Dec. 31, 1993. As a result of these circumstances, the Company is required under generally accepted accounting principles to classify all of its long-term debt as current and the Company's auditors, Arthur Andersen & Co., are required to issue a qualified opinion with respect to the Company's audited consolidated financial statements for fiscal 1993.
 In order to cure the remaining covenant violations and provide greater financial and operating flexibility, the Company intends to undertake a financial restructuring. This restructuring may include one or more of the following: additional amendments to its bank credit agreements, redemptions and/or repurchases of its public debt and amendments to the terms of its public debt. The first step in the restructuring is likely to be the solicitation of consents to waivers or indenture modifications from the holders of the Senior Secured Notes and the Senior Subordinated Notes. In August 1993, prior to becoming aware of the covenant violations, the Company filed with the Securities and Exchange Commission a registration statement relating to a proposed offering of Senior Subordinated Discount Notes due 2003. As part of the financial restructuring, the Company will consider proceeding with this offering, although its terms and structure will likely be modified as a result of the current situation. There can be no assurance that the Company will be able to complete this or any similar offering or that it will be able to successfully consummate a financial restructuring.
 First Quarter Outlook
 Sales from the Company's U.S. operations were up slightly for the quarter ended September 30, 1993. However, this increase was more than offset by lower sales from the Company's Canadian operations. The Company expects to report consolidated sales of approximately $91 million for the first quarter, compared to $101 million in the prior year. Armond Waxman, president and co-chief executive officer stated, "Our core U.S. businesses, Barnett Inc. and our Consumer Products Group, remain solid. Barnett's first quarter sales were up nearly 12 percent, while the Consumer Group's sales were essentially equal to the prior year period. The net increase in sales from these core units was offset by a net decrease in sales from our smaller U.S. operations, as well as the decrease in sales from our Canadian operations. Although we expect sales to be lower in the first quarter, we expect to report a profit for the quarter. We have taken various actions to reduce operating costs and we expect operating income for the quarter will more than cover interest expense. Additionally, we will benefit from significantly lower income taxes due to tax loss carryforwards and we expect first quarter net income will compare favorably with the prior year".
 Waxman Industries, Inc. is a leading supplier to the home repair and remodeling market in the United States and Canada. In the U.S., the Company's plumbing, electrical and hardware products are sold primarily to home improvement centers, warehouse home centers, mass merchandisers, hardware stores, lumber yards and, through its mail order and telemarketing operations, to approximately 45,000 independent retailers, repair and remodeling contractors, property managers and locksmiths. The Company assembles, packages and markets many of these products under its proprietary trade names. In Canada, the Company is one of the largest suppliers of plumbing and heating products, serving approximately 10,000 customers across Canada, including repair and remodeling contractors, residential and commercial contractors and retailers.
 (In Thousands, Except Per Share Data)
 Twelve Months Three Months
 Period Ended June 30, 1993 1992 1993 1992
 Net sales $358,653 $379,042 $ 86,300 $ 98,120
 Cost of sales 258,160 262,843 67,689 67,457
 Gross profit 100,493 116,199 18,611 30,663
 Selling, general and
 administrative expenses
 excluding: 79,359 79,762 22,137 21,615
 Bad debt expense 5,131 1,320 4,104 225
 Depreciation and
 amortization 8,600 6,591 3,324 1,853
 Restructuring and other
 nonrecurring charges 8,852 5,100 8,852 5,100
 Operating income (loss) (1,449) 23,426 (19,806) 1,870
 Interest expense, net 25,034 25,788 6,123 6,464
 Loss before income taxes,
 extraordinary charge and
 cumulative effect of accounting
 change (26,483) (2,362) (25,929) (4,594)
 Provision for income taxes 647 850 881 (26)
 Loss before extraordinary
 charge and cumulative effect of
 accounting change (27,130) (3,212) (26,810) (4,568)
 Extraordinary charge, early
 repayment of debt -- (1,186) -- (1,186)
 Cumulative effect of change in
 accounting (2,110) -- -- --
 Net loss $(29,240) $ (4,398) $(26,810) $(5,754)
 Primary and fully diluted loss per share:
 Loss before extraordinary charge and
 cumulative effect of
 accounting change $(2.33) $(.33) $(2.30) $(.43)
 Extraordinary charge -- (.12) -- (.11)
 Cumulative effect of accounting
 change (.18) -- -- --
 Net loss $(2.51) $(.45) $(2.30) $(.54)
 Average shares outstanding (A) 11,662 9,794 11,662 10,578
 (A)-- Average shares outstanding reflect the issuance of approximately 2.2 million shares in May 1992.
 June 30, 1993 and 1992
 (In Thousands)
 1993 1992
 Current Assets:
 Cash $ 2,001 $ 3,841
 Accounts receivable, net 58,435 72,955
 Inventories 96,941 120,875
 Prepaid expenses 7,089 9,378
 Net assets held for sale 10,266 --
 Total current assets 174,732 207,049
 Property and equipment, net 31,631 33,789
 Cost of Businesses in Excess of
 Net Assets Acquired, net and
 Other Assets 74,320 88,142
 Total $280,683 $328,980
 Current Liabilities:
 Current portion of long-term debt $ -- $ 5,254
 Bank debt 38,671 --
 Long-term debt classified as current 184,761 --
 Accounts payable 40,277 54,600
 Accrued liabilities 9,478 11,310
 Total current liabilities 273,187 71,164
 Long-Term Debt, net of current portion -- 77,758
 Senior Secured Notes -- 38,451
 Subordinated Debt -- 100,780
 Stockholders' equity before cumulative
 currency translation adjustments 12,147 42,319
 Cumulative currency translation
 adjustments (4,651) (1,492)
 Total Stockholders' Equity 7,496 40,827
 Total $280,683 $328,980
 -0- 10/4/93
 /CONTACT: Jerome C. Jacques of Waxman Industries, 216-439-1830/

CO: Waxman Industries ST: Ohio IN: CST SU: ERN

BM -- CL011 -- 8144 10/04/93 08:09 EDT
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Publication:PR Newswire
Date:Oct 4, 1993

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