Image Entertainment, Inc. Reports Results of Fourth Quarter and Fiscal Year Ended March 31, 1999
CHATSWORTH, Calif.--(BUSINESS WIRE)--June 15, 1999--
Fourth Quarter 1999 Earnings Reach $.06 per Share Versus a Loss of $.76 per Share in 1998
1999 Fiscal Year Earnings are $.12 per Share Compared to a Loss of $.71 per Share in 1998
-- DVD Revenues up 192% for the Fiscal Year -- Gross Profit Margins
Expand to 24.8% for the Fourth Quarter and 23.9% for the Fiscal Year -- Las Vegas Facility Update
Image Entertainment, Inc. (NASDAQ NM: DISK - news), one of the
leading licensees and distributors of optical disc programming (DVD
and laserdisc) in North America, today reported financial results for
its fourth quarter and fiscal year ended March 31, 1999.
Net sales for its fourth quarter ended March 31, 1999 were
$23,037,000, an increase of 45% from net sales of $15,905,000 for the
prior-year fourth quarter ended March 31, 1998, and an increase of 1%
compared to December 1998 quarter revenues of $22,715,000. Gross
profit margins for the March quarter expanded to 24.8%, up from 23.8%
for the December 1998 quarter. Operating income for the March 1999
quarter was $1,369,000 compared to an operating loss of $10,454,000
for the March 1998 quarter, and compared to an operating profit of
$1,474,000 for the December 1998 quarter. Net income for the March
1999 quarter was $1,059,000, or $.07 per basic and $.06 per diluted
share, compared to a net loss of $10,293,000, or $.76 per basic and
diluted share, for the March 1998 quarter, and net income of
$1,129,000, or $.08 per basic and diluted share, for the third
quarter ended December 31, 1998. Net sales for the March 1999 quarter
include 79 days of net sales (since the January 11, 1999 acquisition
date) of the Company's subsidiary Ken Crane's.
Fiscal 1998 results included fourth quarter charges of $11,334,000,
or $.84 per share, to write-down the carrying value of laserdisc-
related assets to net realizable value and record costs associated
with the closure of its subsidiary U.S. Laser Video Distributors.
Net sales for the fiscal year ended March 31, 1999 were $76,726,000,
compared to net sales of $75,516,000 for the fiscal year ended March
31, 1998. Operating income for the fiscal year ended March 31, 1999
was $2,678,000 compared to an operating loss of $9,089,000 for the
year ago period. Net income for the fiscal year ended March 31, 1999
was $1,706,000, or $.12 per basic and diluted share, compared to a
net loss of $9,581,000 for the year ago period, or $.71 per basic and
diluted share. Net sales of DVD programming for the year ended March
31, 1999 increased 192% to $45,911,000, or 59.8% of net sales, up
from $15,700,000, or 20.8% of net sales for fiscal 1998. For the year
ended March 31, 1999, gross profit margin was 23.9%. Gross profit
margin for fiscal 1998 was not meaningful due to significant
laserdisc-related asset write-downs.
Martin W. Greenwald, Image's President and CEO said, ''I believe we
have successfully positioned ourselves as one of the leading
suppliers of DVD programming. There are approximately 3,000 DVD
titles currently available and we distribute all of them. Of the
3,000 titles, 400 (or approximately 13%) of them are Image exclusive
releases. We released 260 exclusive DVD titles in fiscal 1999 versus
91 in fiscal 1998 (the first full fiscal year since DVD's March 1997
introduction). Further, we continue to aggressively pursue exclusive
license rights. Our exclusive titles, together with our comprehensive
catalogue of non-exclusive titles, make us a major ''one stop''
source for DVD programming.''
Image also reported that after opening its new Las Vegas warehouse
and distribution facility in May 1999, the warehouse management
software implementation has proceeded slower than anticipated and the
Company has experienced certain related operational inefficiencies.
For these reasons, the new facility is currently functioning below
its planned operational efficiency level and below the efficiency
level of the closed Chatsworth facility. Despite the fact that
product demand remains robust, these transitional problems resulted
in a shortfall in order fulfillment for the month of May 1999 and may
result in a shortfall for the month of June 1999. While the situation
has improved in the month of June (due in part to temporary labor-
intensive shipment efforts), the May shortfall and potential June
shortfall may prove significant enough to result in a net loss for
the June 1999 quarter. The Company presently anticipates that the
software implementation problems will be corrected and that the
facility will reach the efficiency level of the Chatsworth facility
(which generally shipped within 48 hours after receipt of an order)
during July 1999 and its projected operating efficiency level
(shipping within 24 hours) during August 1999.
Greenwald continued, ''The transition from our Chatsworth, California
warehouse and distribution facility to our new Las Vegas facility,
although slower and more costly than anticipated, nevertheless
represents a crucial part of our long-term strategy. I am confident
that when Las Vegas is operating at its planned level of efficiency
it will allow us to take advantage of the continued growth I foresee
in the DVD market.''
Greenwald concluded, ''Image is extremely well-positioned to
capitalize on the continued growth and acceptance of the DVD format.
In the short time that the DVD format has been available, Image has
dramatically expanded its sales base from laserdisc retailers to
include thousands of additional outlets carrying DVD programming.''
Image Entertainment, Inc. has exclusive DVD license and distribution
agreements with a number of program suppliers, including Universal,
Orion and Playboy. The Company is also the largest licensee and
distributor of laserdiscs with the most extensive library of
laserdisc titles in the industry.
Visit Image on-line at image-entertainment.com for
corporate and marketing information, DTS information and the latest
in DVD and laserdisc releases. Also visit Ken Crane's DVD and
Laserdisc Superstore on-line at kencranes.com for consumer
direct sales.
This release contains ''forward-looking statements'' under the
Private Securities Litigation Reform Act of 1995 concerning: (1) the
possibility of the Company recording a net loss for the June 1999
quarter; (2) the projected dates of planned operational efficiency of
the Las Vegas facility; (3) the Company's ability to correct the
software implementation and operational efficiency issues; and (4)
the Company's ability to capitalize on the continued growth and
acceptance of the DVD format. Actual results may differ materially
from the expectations contained herein. Additional detailed
information concerning a number of factors that could cause the
Company's actual results to differ materially from the expectations
contained herein is available in the Company's reports filed or to be
filed with the Securities and Exchange Commission, including its Form
10-Qs for the periods ended June 30, September 30 and December 31,
1998 and its Form 10-K for the fiscal year ended March 31, 1999 (to
be filed on or before June 29, 1999).
IMAGE ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, 1999 and 1998
(In thousands, except per share data)
1999 1998
---- ----
NET SALES $23,037 100.0% $15,905 100.0%
OPERATING COSTS AND EXPENSES:
Cost of sales 17,319 75.2 21,966 138.1
Selling expenses 1,458 6.3 1,380 8.7
General and administrative
expenses 1,821 7.9 1,208 7.6
Cost of facility closure -- -- 825 5.2
Amortization of production costs 959 4.2 971 6.1
Amortization of goodwill 111 0.5 9 0.1
------ ---- ------ -----
21,668 94.1 26,359 165.7
OPERATING INCOME (LOSS) 1,369 5.9 (10,454) (65.7)
OTHER EXPENSES (INCOME):
Interest expense 291 1.3 168 1.1
Interest income (16) (0.1) (39) (0.2)
------ ---- ------ ----
275 1.2 129 0.8
INCOME (LOSS) BEFORE INCOME
TAXES 1,094 4.7 (10,583) (66.5)
INCOME TAX EXPENSE (BENEFIT) 35 0.2 (290) (1.8)
NET INCOME (LOSS) $1,059 4.6% (10,293) (64.7)%
NET INCOME (LOSS) PER SHARE:
Basic $.07 $(.76)
Diluted $.06 $(.76)
WEIGHTED AVERAGE SHARES
OUTSTANDING:
Basic 16,196 13,493
Diluted 16,529 13,493
IMAGE ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Fiscal Year Ended March 31, 1999 and 1998
(In thousands, except per share data)
1999 1998
--------------- ---------------
NET SALES $ 76,726 100.0% $ 75,516 100.0%
OPERATING COSTS AND EXPENSES:
Cost of sales 58,425 76.1 70,256 93.0
Selling expenses 5,439 7.1 4,943 6.5
General and administrative expenses 6,016 7.8 4,832 6.4
Cost of facility closure -- -- 825 1.1
Amortization of production costs 4,057 5.3 3,740 5.0
Amortization of goodwill 111 0.1 9 0.0
----- ----- ---- ----
74,048 96.5 84,605 112.0
OPERATING INCOME (LOSS) 2,678 3.5 (9,089) (12.0)
OTHER EXPENSES (INCOME):
Interest expense 966 1.3 662 0.9
Interest income (84) (0.1) (118) (0.2)
----- ----- ----- -----
882 1.2 544 0.7
INCOME (LOSS) BEFORE INCOME TAXES 1,796 2.3 (9,633) (12.8)
INCOME TAX EXPENSE (BENEFIT) 90 0.1 (52) (0.1)
----- ----- ----- -----
NET INCOME (LOSS) $ 1,706 2.2% (9,581) (12.7)%
===== ===== ===== ===== ============= =========
NET INCOME (LOSS) PER SHARE:
Basic $ .12 $ (.71)
====== =======
Diluted $ .12 $ (.71)
====== =======
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 14,185 13,471
====== ======
Diluted 14,309 13,471
====== ======
IMAGE ENTERTAINMENT, INC.
CONSOLIDATED BALANCE SHEETS
March 31, 1999 and 1998
ASSETS
(In thousands)
1999 1998
---- ----
Cash and cash equivalents $ 1,552 $ 1,015
Accounts receivable, net of
allowances of $3,475 - 1999;
$4,604 - 1998 11,954 6,978
Inventories 16,691 11,205
Royalty and distribution fee advances 3,173 4,566
Prepaid expenses and other assets 807 1,094
Property, equipment and improvements,
net 14,494 8,923
Goodwill 7,774 --
------- --------
$ 56,445 $ 33,781
IMAGE ENTERTAINMENT, INC.
CONSOLIDATED BALANCE SHEETS (CONTINUED)
March 31, 1999 and 1998
LIABILITIES AND SHAREHOLDERS' EQUITY
(In thousands, except share data)
1999 1998
LIABILITIES:
Accounts payable and
accrued liabilities $ 16,101 $ 12,303
Accrued royalties and
distribution fees 2,665 2,003
Revolving credit facility 1,874 2,315
Construction credit facility 3,348 1,619
Distribution equipment lease facility 1,775 526
Convertible subordinated note payable 5,000 5,000
Notes payable 1,350 1,350
Total liabilities 32,113 25,116
SHAREHOLDERS' EQUITY:
Preferred stock, $1 par value,
3,366,000 shares authorized;
none issued and outstanding -- --
Common stock, no par value,
25 million shares authorized;
16,417,000 and 13,493,000 issued
and outstanding in 1999 and 1998,
respectively 31,725 17,764
Additional paid-in capital 3,064 3,064
Accumulated deficit (10,457) (12,163)
Net shareholders' equity 24,332 8,665
------ -------
$ 56,445 $ 33,781
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