Variflex Posts Drop in Quarterly Earnings
Profits at Variflex Inc., a fast-growing Moorpark producer of in-line skates and protective equipment, fell sharply in the quarter ended July 31, though sales for the fiscal year set a new record.
Variflex had net income in its latest quarter of $546,000, or 9 cents a share, on sales of $18.5 million. This compared to a year-earlier net income of $2 million, or 38 cents a share, on sales of $24.9 million.
Variflex said the recent decline in profits was due mainly to extraordinarily strong sales during the earlier period. The May-July quarter winds up Variflex’s fiscal year.
For fiscal 1995 as a whole, the company said sales grew 25%, reaching record levels and surpassing $100 million for the first time.
Net income in the fiscal year was $6.9 million, or $1.15 a share, on sales of $100.3 million. In the previous year, net income was $6.6 million, or $1.40 per share, on sales of $80 million. Per-share profits fell this year because of an increase in the number of shares issued to the public.
Operating income in fiscal 1995 was down slightly--to $10.9 million from $11.3 million the previous year. The company said it improved its profits by cutting such expenses as excess inventories.
“Our core business is performing well, as indicated by the growth in our primary product lines,” said Raymond H. Losi II, president and chief operating officer.
He said the company is positioning itself for further growth by improving existing products and introducing the new Static brand of high-quality in-line skates, skateboards and snowboards.
These, he said, “are natural extensions to our current product offerings.” In the past, Variflex has concentrated on lower-priced skates that are marketed mostly through discount retailers. The company’s top three customers are K mart, Target and Toys R Us.
Losi said Variflex has increased its sales to Sears in the past year and hopes to continue strengthening its relationship with the retailer.
Riding the boom in in-line skating, sales at Variflex have grown at a compound annual rate of more than 43% in the past five years.
But the introduction of new products and improvements in existing products have boosted costs in the past year, Losi said. “Operating income for the year would have exceeded last year’s number if we had not incurred these expenses.”
With Static, “we are entering growing markets with very competitive offerings,” he maintained.
In its first full year of offering bicycle safety helmets, Variflex sold more than 825,000 helmets, making it the second-largest supplier of the items to the mass market, Losi said.
