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Some Progress at Golden in '97, But More to Be Done
Jim Milliot -- 4/6/98
Golden Books Family Entertainment reported sales in 1997 of $242.5 million, compared to $254 million in the 11-month period ended December 28, 1996. The net loss in the year fell to $49.6 million from $195.6 million in 1996.
In what he termed a transition year, Golden chairman Richard Snyder noted that the company had improved its gross profit and reduced its loss before transition costs from a year ago. During 1997, the company incurred a one-time transition cost of $11.5 million, which was associated with the strategic redirection of the company, and a $10.8-million gain on the sale of two printing plants. In 1996, Golden had one-time charges of $132.3 million. According to the company's 10-k filing, Golden will incur another $13 million in transition costs in 1998, mainly due to its decision to delay the construction of its main operating facility in Racine, Wis., which is now set to open in May.

The company also said in its filing that its plan to restore the company to profitability may require "financial resources greater than the company's current cash position and future cash flow." To meet its cash needs, Golden is negotiating a three-year, $25 million line of credit. If no agreement can be reached, Golden said it is also negotiating an accounts receivable purchase program for the purchase of up to $30 million of receivables. In addition, Golden estimated that it will spend about $10 million to cure the computer-related "year 2000 problem."

In sales by segment last year, Golden reported that revenues in its consumer product group declined 19% to $171.7 million, largely due to the sale of Penn Corp., which had revenues of $40.7 million in 1996, and to declines in electronic storybooks.

Sales of Golden Classics increased in the year.

A full year of results from Broadway Video brought sales in the entertainment segment up to $29 million, compared to $4.1 million in 1996. Sales in the commercial products segment remained flat at $42.4 million.

Commenting on prospects for the future, Snyder said, "We are confident in our ability to generate improved performance in 1998." Golden, however, d s not expect to turn a profit until 1999 at the earliest. Some positive signs for 1998 include encouraging tests with Wal-Mart and the renewal of its license with Disney that runs through Dec. 31, 2001. Under that agreement, Golden will pay Disney a minimum of $53 million in royalties.

Despite Snyder's optimism about the current year, he acknowledged that the first quarter of 1998 will be down compared to last year, reflecting a shift in buying philosophy from Toys R Us, as well as difficult comparisons from a late Easter and the success of 1997's Star Wars product.
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