Suffering from a shortage of capital and healthy customers, Schwartz Brothers Inc. said yesterday that it lost $1.7 million during the second quarter as the company's revenue fell nearly 30 percent.
The three-month loss, amounting to 96 cents a share, continued a string of troublesome quarters at the Lanham-based concern, the nation's largest independent distributor of audio and video products, according to the company. This year's second-quarter results compared with income of $52,000, or 3 cents a share, a year ago. Sales fell to $18.7 million in the quarter, which ended July 31, from $26.3 million during the year-ago period.
Patrick A. Labriola, chief financial officer of Schwartz Brothers, said that the company was still feeling the aftermath of last year's decision to write off $3.9 million in bad debt, leading to a $4.3 million loss for the fiscal year and severely cutting into the company's operating capital during the current period.
The charge to earnings last year came after many of Schwartz Brothers' customers -- suffering from recession, competition and lack of blockbuster audio recordings -- were unable to make debt payments to the company, Mr. Labriola said.
"It's tough to do business in the situation we're in right now," he said.
As a result of last year's loss, the company's credit at Signet Bank/Maryland was extended on a month-to-month basis. Since last year, Schwartz Brothers has been attempting to complete an $18-million refinancing plan that includes a new $12 million loan package, a $2 million revenue bond and $4 million in fresh equity, Mr. Labriola said.
The company said in a statement yesterday that future profitable operations would "depend upon the arrangement of sufficient working capital and the continued forbearance by the bank."
Since the start of this year, the company has cut the number of its employees to 200 from 280 and pared its annual expenses by $2.5 million, Mr. Labriola said.