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Strategic Distribution, Inc., Bensalem, PA, reported financial results for the third quarter ended Sept. 30, 2002.
Revenues for the third quarter of 2002 were $47.7 million, compared to $81.4 million reported in the same quarter of the prior year. The decline in revenues reflects the termination of certain services agreements, including the previously announced termination of the Kraft Foods North America, Inc. (Kraft) industrial supply services agreement, as well as general economic weakness within the manufacturing and energy sectors. These factors were partially offset by revenues from new stores added during the past twelve months. In the 2002 third quarter, revenues from Kraft were $6.7 million compared to $23.4 million in the same quarter of the prior year. The termination of the Kraft agreement was nearly complete at the end of the 2002 third quarter and no significant additional revenues, expenses or cash flows, related to the Kraft agreement, are expected in future quarters.
The company reported net income of $0.6 million in the 2002 third quarter compared to a net loss of $3.4 million in the same quarter of 2001. Included in the 2002 third quarter net income is a $0.9 million benefit related to a more favorable conclusion of previously estimated contract termination matters and a $0.2 million charge for an uncollectible account with a bankrupt customer. The 2001 third quarter net loss includes a charge of $0.8 million for an uncollectible account with a bankrupt customer and a $1.6 million tax provision. Excluding these items in both quarters, there was a $0.9 million year over year improvement in third quarter results attributable to eliminating unprofitable contracts, increasing discipline throughout the organization and reducing administrative costs. Unfortunately, the weakened U.S. economy has reduced same store revenues by approximately $5 million in the 2002 third quarter compared to the same period of the prior year, for stores opened at least a year. We currently expect this weakness to continue through the next two quarters. Additionally, despite a significant number of new business opportunities, the economic downturn has delayed prospective customers' decisions.
Revenues for the nine month period ended Sept. 30, 2002 were $212.7 million, including the previously disclosed 2002 second quarter $26.2 million Kraft inventory sale, compared to $248.3 million for the same period in the prior year. The decline in 2002 nine month revenues, excluding the Kraft inventory sale, is attributable to the termination of certain services agreements, including Kraft, and economic weakness within the manufacturing and energy sectors, partially offset by new contracts added in the past twelve months. Nine month revenues from Kraft, excluding the second quarter Kraft inventory sale, were $50.8 million, compared to $63.0 million for the same period of the prior year.
The company reported a net loss of $3.3 million or $1.07 per share for the 2002 nine month period, which includes $4.5 million of Kraft termination severance and long-lived asset impairment expenses, profit of $1.7 million on the $26.2 million Kraft inventory sale, a $0.9 million benefit related to a more favorable conclusion of previously estimated contract termination matters, a $0.2 million charge for an uncollectible account with a bankrupt customer and a $1.9 million non-cash charge related to the first quarter adoption of the new accounting standard for goodwill. This compares to a net loss of $6.4 million for the same period of 2001, which included $1.3 million of charges for uncollectible accounts. Excluding these items, there was a $5.8 million improvement in year over year results for the nine month period, attributable to eliminating unprofitable contracts, adding profitable new contracts, increasing discipline throughout the organization and cost reductions.
The company ended the quarter with $45.7 million of cash and equivalents, a $6.2 million increase during the quarter that is attributable to the reduction in Kraft related working capital and third quarter operating results.
Strategic Distribution's President and CEO, Ron Whitaker, commented on the results stating, ``We are gratified that all of our hard work to smoothly transition out of the Kraft contract and properly size our support staff, has yielded these favorable operating results. Efforts to promote our value proposition through both on-site presence and web-based initiatives are ongoing and are expected to benefit us in future quarters.''