YSI loses 17 cents a share Bleak 2nd quarter sends shares diving to 52-week low

Major talks under way

August 15, 1998|By Shanon D. Murray | Shanon D. Murray,SUN STAFF

Youth Services International Inc. posted a net loss of 17 cents a share for the second quarter yesterday, sending its stock price plummeting 19.6 percent to a 52-week low.

The decline of $1.3125 a share to $5.375 comes as YSI is in discussions with several parties regarding its possible acquisition, or a joint venture, merger or strategic alliance, the Owings Mills-based company said yesterday. The company, which operates juvenile-offender facilities in 12 states, said the talks have moved past the preliminary phases, but officials declined to release details.

"It's too sensitive a time," said Mark Demilio, YSI's acting chief financial officer.

In June, the company hired SunTrust Equitable Securities to evaluate financial and strategic alternatives to improve shareholder value.

YSI's stock has undergone price gyrations recently. Yesterday's closing price supplanted the previous 52-week low of $7.50. The stock hit a 52-week high of $20.375 on April 3, and its all-time high came in May 1996, at $29.25 a share. The company went public in 1994.

For the quarter that ended June 30, YSI reported a net loss of $1.9 million, or 17 cents a share, on revenue of $21.9 million. For the comparable quarter of 1997, the company reported net income of $890,000, or 9 cents a share, on revenue of $29.1 million.

Included in the second-quarter results are the effects of $2.8 million in adjustments to the company's reserves and accruals "in connection with our efforts to explore strategic alternatives," Demilio said. The results also include $306,000 in transaction costs associated with the acquisition of Texas-based Community Corrections Inc., Demilio said. Excluding those costs, YSI would have reported net income of $153,000, or 1 cent a share, on revenue of $22.7 million.

For the six months that ended June 30, YSI reported a net loss of $693,000, or 6 cents a share, on revenue of $44.9 million.

The company announced May 28 that it expected earnings to be substantially below expectations of 12 cents a share for the quarter and below expectations of 53 cents a share for the year.

After the announcement, Wall Street adjusted those expectations to 6 cents a share for the quarter and 31 cents a share for the year, according to a survey of analysts by Zacks Investment Research.

Since it was founded by W. James Hindman in 1991, YSI has undergone several reinventions. Hindman had made a fortune by founding and building Jiffy Lube, a quick-oil-change retail chain. But the company loaded up on debt and was eventually sold.

In 1996, Hindman was replaced by Timothy P. Cole as chief executive officer and, eventually, as chairman. Hindman had said he would leave the positions when the company grew large enough to be turned over to someone with more experience in running a big corporation.

Cole is a former chairman of Wackenhut Corrections Corp., a developer and manager of private prisons and jails.

Under Cole's leadership, YSI sold off seven behavioral health businesses in October 1997 and refocused its core business on juvenile justice programs.

Since then, the company has been on an acquisition spree, acquiring new facilities and building others. But it has run into problems putting them into operation.

Pub Date: 8/15/98

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