Friday, August 13, 1999
Gibson news as advertised: quarterly loss
BY LISA BIANK FASIG
The Cincinnati Enquirer
Gibson Greetings Inc. Thursday delivered on its warning and reported a loss in the second quarter, but its chief executive pledged that the card company is dedicated to reducing costs and completing a reorganization plan.
The company posted a net loss of $24.4 million, or $1.54 a share. That compares with net income of $5.6 million, or 33 cents a share, in the same quarter last year. Revenues declined more than 40 percent, to $61 million from $105 million last year, when its Paper Factory retail chain — since sold — generated $18 million.
“We've got a fundamental issue that we're dealing with. We've got a fixed-cost base that's too high for the volume base,” Gibson CEO Frank O'Connell said Thursday.
Gibson has been trying to cut expenses. Since the spring, it eliminated 110 local and national jobs and put its Silly Slammers business on the market. Mr. O'Connell said a new management information system expected to be running in 2000 will further cut costs and reduce payroll by 65 jobs.
Gibson is refocusing on its core card business after virtually abandoning toy making. But the company's new organization plan to build its card business is still in development and won't be detailed until after the Aug. 26 shareholders meeting, Mr. O'Connell said.
“It's no question the card business is the most profitable part of the business,” he said.
That said, Gibson does intend to get out of some card categories and streamline others.
While Gibson refocuses on cards, the CEO acknowledges that the company has to convert more assets to cash. From 1997 to 1998, cash and cash equivalents dropped to $44.3 million from $114.3 million, while receivables and inventory rocketed.
Inventory climbed to $84.5 million in 1998 from $59.4 million in 1997. More than $21 million of that involves stockpiled Silly Slammers and was written off as a charge in the second quarter. Receivables more than doubled to $71.4 million from $30.3 million, the result of products ordered late in 1998 that weren't paid for until 1999. “We're focused now on collecting the cash and getting the cash out of the inventory,” he said.
Asked why he does not own shares in Gibson outside of his stock options, Mr. O'Connell said the reorganization subjected him to insider information that makes investing in the company “too sensitive.”
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