Laserdisc Sales Drop Hurts Image - -July 21, 1997
Citing a combination of highly adverse factors, including the financial difficulty of some key customers, the drastic drop in sales of new laserdisc players, and related charges against receivables and inventory, Image Entertainment reported a loss for the quarter ended March 31 and a 99% drop in earnings for its fiscal year.
For the three months Image, the largest independent replicator and marketer of optical video discs, had a loss of $415,000, against year-earlier net of $1.91 million, on essentially flat sales of $22.8 million. For the year, earnings tumbled to $845,000 from the $7.6 million of fiscal 1996, and revenue of $85.7 million was off 9.9%.
The quarter's loss included post-tax changes that included a $548,000 reserve for doubtful accounts and an $840,000 write-down of slow-moving inventory. For the year Image's post-tax charge for doubtful accounts was $1.35 million, against just $95,000 in fiscal 1996, and its net inventory write-off ballooned to $1.36 million from $232,000.
The figures show that while Image's gross margin for the year slipped to 20.1% of sales from 21.8%, in the final quarter it dropped to just 17.3% from the year-earlier 24%, reflecting the effort to move out inventory. Plus, selling expenses were slightly higher for both periods.
Image said the hefty jump in its provision for doubtful accounts primarily reflect: the impact of the Chapter 11 filing by Camelot Music, a major customer; the suspension of payments on $2.7 million of receivables by Musicland; "and the overall distressed condition of the retail entertainment software market."
The other major adverse factor affecting the industry, said Image president Martin Greenwald, is DVD."Pre-launch marketing and widespread media coverage of the DVD format created uncertainty regarding laserdisc's future, which affected both Image's laserdisc software sales and the sale of laserdisc hardware, which drives the sale of laserdisc software." |
