Thursday November 12, 6:27 pm Eastern Time
Company Press Release
K-tel International Inc. Reports Fiscal 1999
First-Quarter Results
CALABASAS, Calif.--(BUSINESS WIRE)--Nov. 12, 1998--K-tel International Inc. (Nasdaq:KTEL - news)
Thursday reported financial results for the quarter ended Sept. 30, 1998, the first quarter of its fiscal year
ending June 30, 1999.
Net sales for the three months ended Sept. 30, 1998, were $18 million, compared with $25 million for the
comparable quarter of fiscal 1998. K-tel reported a net loss of $3.1 million for the first quarter of fiscal
1999, or a loss of 37 cents per basic and diluted share, compared with net income of $1.2 million, or 16 cents
per basic share and 15 cents per diluted share, for the first quarter of fiscal 1998.
The company attributed a significant portion of its net sales decline to its third-party media-buying
operations, which were curtailed as of June 30, 1998.
Contributing to the loss for the period was a $1.6 million charge incurred by the company when it discontinued
marketing and distribution activities of certain marginal business lines, including its retail home-video product
line, and write-offs of remaining assets from its curtailed third-party media-buying operation.
In addition, the company incurred a $600,000 loss from continued investments in its e-commerce operations.
Philip Kives, K-tel's chairman and chief executive officer, commented: ''The company continues to refocus and
position itself to be a prominent long-term strategic player in the e-commerce arena. In so doing, we are
eliminating certain marginal business lines and focusing on existing profitable business units which have natural
synergies with our e-commerce operations.
''Although discontinuing these business lines has resulted in increasing our operating loss this quarter, we
believe this decision better positions us to maximize K-tel's business opportunities across multiple distribution
platforms.
''This is an exciting and pivotal time for K-tel as we move forward in the e-commerce marketplace. In support
of expanding our online business, we continue to explore strategic alliances, as well as sources of capital to
fund the expansion of K-tel Express.''
The company's newly appointed president, Larry Kieves, added: ''In recent months, we have formed several
key relationships which we believe will enhance our long-term e-commerce operations.
''In particular, we are very excited about our partnership with Playboy Online, which is an example of the
kinds of strategic alliances we intend to pursue. This alliance will create a co-branded Playboy/K-tel music
store, which will expose our products to the nearly 60 million page views received by Playboy.com each month.
''Two other key partnerships, with Microsoft and LinkShare, are designed to drive increased traffic to K-tel
Express by allowing K-tel to become one of a select number of merchants to retail its product line through the
MSN Shopping Network, shopping.msn.com, and gain access to over 15,000 of LinkShare's affiliate
sites.''
K-tel's marketing strategy for K-tel Express is to leverage its proprietary music content, develop key
strategic alliances with partners that also offer a well-recognized brand name, and capitalize on its worldwide
television expenditures to drive traffic to the site and gain market share.
The company's brand-name recognition, along with its international presence and direct access to consumers
through alternative media channels, are expected to create strong synergies between the existing core
operations of K-tel and its expansion into the e-commerce arena.
The company noted that although it continues to pursue e-commerce opportunities, the success of online
marketing cannot be currently determined. Achieving further participation in this market will require
substantial additional financial resources, including funding from outside resources, development and
acquisition of technology, investments in marketing and contractual relationships with third parties.
Results will also be affected by current and future participants in the marketplace, who may already have the
necessary technology and expertise, many of whom may have substantially greater resources than the company.
K-tel International is a vertically integrated developer, marketer and distributor of entertainment and
consumer products worldwide. The company markets its product lines either to retailers, wholesalers,
distributors, or licensees throughout the world, or directly to the consumer via television and other forms of
direct- response media, including the Internet (www.ktel.com), which was introduced on May 1, 1998.
K-tel has active operations in the United States, Canada, the United Kingdom, Germany and Finland.
The statements in this news release may contain forward-looking statements relating to future results of the
company (including certain projections and business trends) that are ''forward-looking statements'' as defined
in the Private Securities Litigation Reform Act of 1995. Actual results and performance may differ materially
from expressed forward-looking statements because of certain risks and uncertainties, including but not
limited to changes in political and economic conditions, demand for and market acceptance of new and existing
products, the impact from competition for Internet content, merchandise and recorded music, dependence on
strategic alliance partners, suppliers and distributors, market acceptance of the Internet for commerce and as
a medium for advertising, technological changes and difficulties, availability of financing and other risks
detailed in the company's Securities and Exchange Commission filings. The company undertakes no obligation to
publicly release the result of any revisions to these forward-looking statements. |
