thomson had est of .02, comes in at .04
News November 3, 17:21 Eastern Time
Valley Media Reports Fiscal 2000 Second Quarter Results; Sales Increased 9%, Internet Sales Rose 92% and DVD Sales Up 209%
WOODLAND, Calif., Nov 3, 1999 (BUSINESS WIRE) -- Valley Media, Inc.
(Nasdaq: VMIX), a recognized leader in the full-line distribution of
music and video entertainment products, today announced its financial
results for the quarter ending October 2, 1999.
Valley Media reported that net income for its second fiscal quarter was
$335,000 or $0.04 per share versus $415,000 or $0.07 per share over the
same period one year ago. Net sales for the quarter increased by 8.6%
from $189.0 million to $205.2 million compared to the same period in
fiscal 1999. Full-line Distribution sales decreased 11.8% from $150.1
million to $132.4 million, New Media sales increased 92.2% from $29.5
million to $56.7 million and Independent Distribution sales increased
45.9% from $13.3 million to $19.4 million over last year's second
quarter.
The company reported a net loss for the six months ended October 2,
1999 of $464,000 or $0.05 per share versus a loss before an
extraordinary item of $847,000 or $0.17 per share over the same period
one year ago. Net sales for these six months increased by 13.9% from
$343.4 million to $391.0 million compared to the same period in fiscal
1999.
Sales growth in the second quarter of fiscal 2000 was primarily driven
by increased sales to New Media customers (Internet retailers) and by
increased DVD sales, offset partially by decreased full-line VHS sales.
Full-line VHS sales decreased by $32 million versus the second quarter
of fiscal 1999. Video sales during last year's second quarter were
bolstered by a strong release schedule that included the video release
of Titanic, which generated $21 million in sales. Gross margins
increased to 12.0% versus 11.1% during the same period a year ago,
primarily due to a shift in sales mix away from relatively low margin
video sell-through titles towards higher margin catalog titles, as well
as proportionately more New Media and Independent Distribution sales.
SG&A and interest costs were negatively impacted by costs associated
with the relocation of Valley Media's Woodland Distribution Center to a
new 260,000 square foot facility as well as by the changes in sales
mix.
"We are pleased that the financial impact associated with our recent
warehouse move is now behind us," commented CEO Rob Cain. "While the
move has increased our fixed costs, we believe we are now better
positioned to handle large volumes more efficiently. Our new Woodland
distribution facility will allow us to streamline our operations and
gives us the capacity to aggressively pursue the growth opportunities
we see. The significant costs associated with the move were an
investment in our future. Between the addition of our Louisville
facility last year and the relocation of our Woodland facility, we have
more than tripled our capacity."
Mr. Cain continued: "Our core businesses are well positioned for the
months ahead. We believe we continue to be the supplier of choice for
e-commerce in music and video. Our New Media group has, over the last
six months, solidified our role with CDNOW and Amazon, with two-year
contracts as primary supplier, albeit at lower margins than we
experienced last year. We are particularly excited about the sales
growth we are experiencing with a number of newer New Media accounts.
Recent and ongoing relationships, including our seasonal replenishment
agreement with Wherehouse, reinforce our leadership position in
full-line distribution. We are once again demonstrating our value as an
outsourcing partner to retail. Our DVD sales last quarter were 209%
ahead of last year and we anticipate continued growth in the months
ahead. Finally, our Independent Distribution group had a record quarter
thanks to strong releases and the addition of a number of significant
new labels. Big releases last quarter included albums from Stevie Ray
Vaughn and Albert King, John Prine and Loreena McKennitt. During the
December quarter we expect to benefit from the releases from Cowboy
Junkies and Dolly Parton.
"We are actively positioning ourselves for a blended age in which we
achieve revenue streams from both physical and digital distribution,"
continued Mr. Cain. "We are working to enhance revenues through the
development of new data products and content offerings. We anticipate
developing revenues through new digital distribution and streaming
technology initiatives as well. For example, we recently structured a
deal with amplified.com which we expect to provide new revenue streams
through the expansion of our product lines to include digital downloads
and custom compilation services."
Valley Media is a distributor of music, video and DVD product offering
Internet fulfillment, full-line distribution, independent distribution,
publications, and proprietary database products. Valley Media operates
facilities in seven states with primary distribution centers in
Louisville, KY and Woodland, CA, where its corporate headquarters are
located. Additional information regarding Valley Media is available at
www.valley-media.com.
This press release contains forward-looking statements made pursuant to
the "safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995. These statements are identified by words such as
"will," "expects," "anticipates," "plans," or "intends" and by other
descriptions of future circumstances or conditions. Actual results may
differ materially from those projected in these forward-looking
statements. Factors that could affect Valley Media's actual results
include, without limitation, risks and uncertainties related to the
following factors: intense competition, customers' ability or
preference to buy product direct, new product delivery technologies and
copyright or royalty disputes. More information about these and other
factors that could negatively affect Valley Media's financial
performance and the value of its common stock is contained in Valley
Media's filings with the Securities and Exchange Commission, including
its Annual Report on Form 10-K. Readers of the 10-K should pay
particular attention to the sections entitled "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and
"Factors Affecting Operating Results."
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