Message 12709099
Creative Computers, Inc. Achieves Record Fourth Quarter Sales of $222 Million and Reports Strong eCOST.com Growth
Creative Computers, Inc. Achieves Record Fourth Quarter Sales of $222
Million and Reports Strong eCOST.com Growth
TORRANCE, Calif., Jan 25, 2000 (BUSINESS WIRE) -- Creative Computers,
Inc. (Nasdaq:MALL):
Highlights:
-- Reports Q4 sales of $222 million -- a 33% increase from fourth
quarter of 1998
-- Internet revenues increase 398% to $60 million, outbound
business-to-business sales increase 108% during the fourth
quarter of 1999 compared with the previous year
-- eCOST.com reports Q4 sales of $27 million -- a 236% sequential
growth rate from the third quarter of 1999
-- Company intensifies focus on Internet business ventures
-- Announces launch of eLinux.com as a new subsidiary
-- Company seeks shareholder approval of name change to IdeaMall
Creative Computers, Inc. (Nasdaq:MALL), which is changing its name to
IdeaMall ("Creative / IdeaMall"), made several significant new
announcements today along with fourth quarter and year-end results that
further demonstrate an intensified focus on opportunities on the
Internet.
Creative / IdeaMall's fourth quarter sales were positively impacted by
a four-fold increase in total Internet revenues, as well as a 108%
increase in business-to-business sales over the prior year. Creative /
IdeaMall's overall revenues for the fourth quarter increased 33% over
the previous year to $222 million. Investments in eCOST.com, Inc.
(http://www.eCOST.com), a wholly-owned subsidiary and online
multi-category retailer launched in Q2, yielded a 236% sequential
increase in sales during the fourth quarter over the third quarter to
$27 million. Revenues for the quarter, excluding eCOST.com, increased
17% from the prior year to $195 million. Fourth quarter earnings,
excluding eCOST.com, were $0.12 per share. With the invested costs in
eCOST.com included, Creative / IdeaMall incurred a loss per share of
$0.22. This is a 60% improvement over last year's $0.55 per share
fourth quarter loss on total sales of $190 million (including financial
results from the company's former subsidiary, uBid.com (Nasdaq:UBID)).
Except where noted otherwise, all comparisons are of results from
ongoing operations which exclude sales of uBid.com and of the
discontinued retail stores that were closed in the first quarter of
1998.
Internet and Business to Business Growth
During the fourth quarter of 1999, Creative / IdeaMall experienced
vigorous growth in Internet and outbound sales within its core
operations. Consolidated Internet sales for the quarter rose 398% to
$60 million from $12 million last year, an 85% increase from $32
million in the third quarter of 1999.
Creative / IdeaMall also achieved significant growth in its outbound
business-to-business sales in 1999. Fourth quarter outbound sales grew
108% from a year ago, reflecting significant investments made in
Creative / IdeaMall's business-to-business efforts throughout 1999.
Aggressive recruiting and training efforts over the course of the year
resulted in an increase in sales executives of 60% from last year.
Creative / IdeaMall's outbound business market penetration was
reflected by the rise in average order value witnessed throughout 1999.
By year-end, the Company's average order value, excluding eCOST.com,
reached $680, a 34% increase over 1998.
"We're pleased that our results validate our growth strategy, and we've
set aggressive goals for 2000," remarked Khulusi. "We're becoming even
smarter and more creative with how we sell and serve businesses and
retail consumers. The result is higher B-to-B market share and rapid
growth of our Internet businesses without the significant costs to the
bottom line experienced by most other Internet businesses."
Scott Klein, President of Creative / IdeaMall, reiterated, saying,
"Creative / IdeaMall has begun to realize the benefits of our sales
recruiting and training initiatives. The greater technical knowledge
and growing maturity of our account executives is helping us grow and
maintain our enterprise business customer base. Features like our
client access pages provide web-customized reports on pricing, tracking
and purchasing."
eCOST.com, Inc.
After less than a year in operation, eCOST.com showed significant
sequential sales growth in the fourth quarter of 1999, up 236% to $27
million. During the fourth quarter eCOST.com added consumer electronics
to its product offerings and was identified by the Nielsen / Net
Ratings Service as one of the fastest-growing sites during the November
- December timeframe.
The subsidiary reported a loss for the quarter of $3.6 million or $0.34
per share, primarily due to advertising expenditures to establish the
brand. However, as a percentage of sales, eCOST.com operating losses
for the quarter declined by 42% to 13.3% of sales from 23.1% of sales
in the third quarter of 1999.
As a result of higher margins from consumer electronics products,
increased freight margin and vendor discounts, gross profit grew for
the quarter 612% to $235,000 from $33,000 in the third quarter of 1999.
Gross profit as a percentage of sales more than doubled to 0.9% from
0.4% in Q3, exiting the quarter at 1.4%. As eCOST.com expands its
product offering, margins are expected to improve on a long-term basis.
As a percentage of sales, SG&A expenses for the quarter declined 40% to
14.2% from 23.5% in Q3, based on a spending increase of $1.9 million to
$3.8 million in the fourth quarter of 1999. Most of the spending
increase resulted from increased advertising, credit card fees and
customer service personnel. Over time, SG&A spending as a percentage of
sales is expected to decline as the number of repeat buyers continues
to grow.
eCOST.com's sales growth was driven by significantly higher customer
traffic. Average daily unique visitors more than doubled during the
quarter from 20,000 per day in the third quarter to 50,000 per day in
fourth quarter 1999, exiting the quarter at 70,000 unique visitors per
day. Average order size for the quarter increased, approaching $500 as
eCOST.com targeted its promotions to encourage larger purchases.
"We are pleased that we are able to maintain our high standard of
customer service while experiencing phenomenal growth during the
holiday season," said Scott Klein, President of Creative / IdeaMall and
Chief Executive Officer of eCOST.com. "We took orders up until the
evening of December 23rd, and successfully delivered them before
Christmas. As we continue to enhance our product assortment in the
coming months, we are confident that buyers will return more often to
take advantage of our excellent pricing and service."
"We are excited about the strong quarter-to-quarter performance trend
we have witnessed in eCOST.com," remarked Frank Khulusi, "and continue
to carefully examine our long-term growth strategy for that business."
Fourth-Quarter and Twelve-Month Financial Summary
During the three months ended December 31, 1999, net sales from
continuing operations grew to $222 million, up 33% over the fourth
quarter of 1998. The increase in net sales for the quarter is
attributable primarily to record Internet and outbound
business-to-business revenues.
Gross profit for the fourth quarter of 1999 increased by $2.7 million
over the fourth quarter of 1998 to $22.3 million. This increase
resulted primarily from outbound business-to-business sales growth.
Gross profit margin for the fourth quarter decreased to 10.1% compared
to a fourth quarter 1998 gross profit margin of 11.8%, primarily as a
result of the lower eCOST.com margin. Gross profit was 11.3%, excluding
eCOST.com.
SG&A for the quarter was $24.0 million, or 10.8% of sales. Excluding
SG&A expenses for eCOST.com, SG&A expenses for the fourth quarter of
1999 increased by 21% to $20.2 million over the fourth quarter of 1998
due largely to investments in the outbound business-to-business sales
force. During this same period, SG&A expenses as a percentage of net
sales, excluding eCOST.com, increased to 10.3%, versus 10.0% during
fourth quarter 1998.
Income from continuing operations during the fourth quarter 1999
resulted in a loss of $2.3 million, or $0.22 per share, compared with
income from continuing operations in the fourth quarter of 1998
totaling $1.5 million, or $0.14 per diluted share. This decrease
occurred as a result of a $3.6 million loss incurred by eCOST.com
during the fourth quarter of 1999. Absent eCOST.com's losses for the
quarter, diluted earnings per share was $0.12.
Consolidated net losses during the fourth quarter were $2.3 million or
$0.22 per share, which include eCOST.com's loss of $3.6 million, or
$0.34 per share. This was an improvement compared to a net loss of $5.6
million or $0.55 per share (which included a loss from discontinued
operations) during the fourth quarter of 1998.
During the twelve months ended December 31, 1999, net sales grew to
$732 million, up 14% when compared with the twelve months ended
December 31, 1998. Enhanced training and expansion of outbound sales
force executives in 1999 is expected to yield continued sales increases
through 2000.
Gross profit for the year ended December 31, 1999, increased by $5.1
million to $79.6 million (excluding closed stores), compared with gross
profit of $74.5 million at year end 1998. Gross profit as a percentage
of net sales for the year ended December 31, 1999, was 10.9%, down from
11.9% in the prior year. The Company's gross profit margin in 1999 was
negatively affected by eCOST.com and other factors including outbound
sales initiatives and fluctuations in key vendor support programs,
including price protections, rebates and return policies.
SG&A expenses for the year ended December 31, 1999, excluding
eCOST.com, were 11.1%, a 0.4% improvement over the year prior.
Consolidated SG&A expenses, including eCOST.com, the spun-off uBid.com,
and the closed retail stores, decreased 21% over the fourth quarter and
19% for the year, compared with 1998.
Continuing operations yielded a net loss of $4.7 million, or $0.45 per
share during 1999, a 47% reduction in losses compared to a net loss
from continuing operations of $8.8 million, or $.87 per share in 1998.
Income from continuing operations in 1999 was negatively impacted by
the Company's $6.2 million investment in eCOST.com. Excluding that
investment, Creative / IdeaMall would report income from continuing
operations of $1.5 million or $.14 per share for the year ended 1999.
Including discontinued operations, consolidated net loss was $10.9
million, or $1.05 per share for the twelve months ended December 31,
1999. This marked a nearly 40% reduction in losses as compared to a
consolidated net loss of $17.8 million or $1.75 for the twelve months
ended December 31, 1998. The loss for the year ended December 31, 1998,
included pretax restructuring and other write-offs of $17.3 million.
Creative / IdeaMall's December 31, 1998, balance sheet, and comparisons
thereto, have been restated to reflect the spin-off of uBid.com as if
it had taken place as of the date presented. The Company ended the
quarter with $24.3 million of cash, up from $6.4 million at December
31, 1998. Receivables increased by $7.2 million from December 31, 1998,
on higher business-to-business sales, and inventory was reduced by $1.1
million. Inventory turns for the quarter improved by 15 turns to 29
turns, from 14 turns in 1998.
eLinux.com
Pursuant to its new strategic focus, the Company also announced today
the formation of a new Internet venture, eLinux.com. Scheduled for
launch in early February 2000, eLinux.com is positioned to become a
leading provider serving the escalating demand for Linux-based systems
and services. eLinux.com will offer users complete multi-vendor Linux
solutions including products, consulting and support services, and
community. The company announced further details of this important
announcement in a separate press release.
Intensified Focus on Internet Ventures and New Corporate Identity
Creative / IdeaMall also today announced that it plans to intensify
its focus on the Internet and business-to-business markets. The
strategy involves the following:
-- Focusing its existing core business around three separate
business units - PC Mall.com (including MacMall.com), PCM.com
Business Solutions and CCIT - to better align these significant
businesses on their target markets;
-- Exploring new Internet opportunities - as evidenced by the
announcement of eLinux.com, launched on the heels of the success
of eCOST.com and uBid.com;
-- Changing the company name to IdeaMall to better reflect the
company's new direction and its ability to transform ideas into
new businesses.
Creative / IdeaMall seeks to build on its success in launching and
building Internet ventures including uBid.com, which was spun-off as an
independent public company in June 1999, and eCOST.com, which has grown
significantly since its March 1999 inception. Creative / IdeaMall's
ability to leverage existing competitive strengths and capabilities
enabled these new ventures to accelerate past the start-up phase and
capture market advantage.
"As a result of these changes and exciting new Internet ventures, the
company has developed a growing portfolio of Web site properties:
eLinux.com, eCOST.com, PCM.com Business Solutions, PCMall.com and
MacMall.com," said Khulusi.
In describing the proposed change in corporate identity, Klein stated,
"Because of the revolutionary changes taking place in our business, the
name Creative Computers no longer captures the essence of our
organization. The new name, IdeaMall, should demonstrate to the world
that we are an organization dedicated to taking great ideas and turning
them into business realities."
****
Creative Computers, Inc., soon to be renamed IdeaMall ("Creative /
IdeaMall"), is focused on the Internet and business-to-business
markets. Creative / IdeaMall has a growing portfolio of Web site
properties and intends to pursue additional Internet opportunities as
they arise and within its strategic focus. The company's current
portfolio includes:
eLinux.com (http://www.elinux.com) -- a new subsidiary providing
products, news, discussion groups, services and support to the Linux
community;
eCOST.com (http://www.ecost.com) -- a separate subsidiary launched in
April 1999 which is a retailer of computer products and electronics and
is one of the fastest-growing multi-category Internet retailers;
PCM.com Business Solutions -- a leading business-to-business marketer
focused on IT sales of servers, desktops and network equipment to
businesses with 100 or more employees;
PCMall.com (http://www.pcmall.com) -- a leading business-to-business
marketer of computers and related products for small businesses with
less than 100 employees, and high-end consumers;
MacMall.com (http://www.macmall.com) -- a leading marketer of Macintosh
computers, peripherals and software to the rapidly-growing Apple
community.
The company drives traffic to its Web sites and call centers via its
distinctive "clicks and catalogs" strategy, outbound telemarketing, and
marketing on the Web. Creative / IdeaMall also operates a field sales
organization under the name CCIT, which is focused on Fortune 1000
companies.
Except for historical information, all of the statements, expectations
and assumptions contained in the foregoing are forward-looking
statements. The realization of any or all of these expectations is
subject to a number of risks and uncertainties and it is possible that
the assumptions made by management may not materialize. There can be no
assurances that eLinux.com, the change in corporate strategy, the name
change to IdeaMall, the continued growth of eCOST.com, the continued
improvement in eCOST.com margin, the continued growth, recruiting and
training of outbound business-to-business sales executives, and the
continued growth in outbound sales, continued growth of the company's
Internet sales, the fourth quarter trends for Apple, Macintosh and PC /
Wintel sales will continue or remain successful, will achieve market
acceptance or become profitable. In addition to the factors set forth
above, other important factors that could cause actual results to
differ materially from our expectations include; competition from
companies either currently in the market or entering the market;
competition from other catalog and retail store resellers and price
pressures related thereto; uncertainties surrounding the supply of and
demand for products manufactured by and compatible with Linux, Apple
Computer; our reliance on Apple Computer, IBM, Hewlett-Packard, Compaq
and other vendors; and risks due to shifts in market demand and/or
price erosion of owned inventory. This list of risk factors is not
intended to be exhaustive. Reference should also be made to the risk
factors set forth from time to time in the Company's SEC reports,
including but not limited to those set forth in the section entitled
"Certain Factors Affecting Future Results" in its Annual Report on Form
10-K for 1998.
Linux is a registered trademark of Linus Torvalds.
Creative Computers, Inc.
CONSOLIDATED BALANCE SHEET
(in thousands except share data)
December 31, December 31,
1999 1998
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 24,326 $ 6,442
Accounts receivable, net
of allowance for
doubtful accounts 47,618 40,429
Inventories 38,068 39,158
Prepaid expenses and
other current assets 5,781 5,374
Net assets of uBid
discontinued segment -- 18,633
Income tax refund receivable 177 190
Notes receivable 3,331 --
Deferred income taxes 2,047 5,216
Total current assets 121,348 115,442
Notes receivable -- 3,331
Property, plant and equipment, net 14,569 14,391
Goodwill, net 11,836 12,318
Deferred income taxes 3,738 1,262
Other assets 42 138
$ 151,533 $ 146,882
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 86,609 $ 62,129
Accrued expenses and
other current liabilities 15,894 13,198
Capital leases - current portion 142 116
Notes payable - current portion 6 6
Total current liabilities 102,651 75,449
Capital leases 136 6
Notes payable 148 155
Total liabilities 102,935 75,610
Stockholders' equity:
Common stock, $.001 par value;
15,000,000 shares authorized;
10,404,069 and 10,264,539
shares issued 11 10
Preferred stock, $.001 par value;
5,000,000 shares authorized;
none issued and outstanding -- --
Additional paid-in capital 74,337 86,069
Treasury stock, at cost: 15,000 shares (91) (91)
Retained earnings (accumulated deficit) (25,659) (14,716)
Total stockholders' equity 48,599 71,272
$ 151,533 $ 146,882
Creative Computers, Inc.
CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited, in thousands except per share data)
For the three For the year ended
months ended
December 31, December 31,
1999 1998 1999 1998
Net sales $221,754 $166,322 $731,955 $642,006
Cost of goods sold 199,437 146,741 652,404 568,309
Retail store
closure inventory
reserves -- -- -- 3,679
Gross profit 22,317 19,581 79,551 70,018
Selling, general
and administrative
expenses 23,974 16,683 83,687 76,812
Expenses related to
retail store closures -- -- -- 6,773
Income (loss) from
operations (1,657) 2,898 (4,136) (13,567)
Interest income
(expense), net 135 (131) 245 (291)
Income (loss) before
income taxes (1,522) 2,767 (3,891) (13,858)
Income tax provision
(benefit) 759 1,277 812 (5,034)
Income (loss) before
discontinued operations (2,281) 1,490 (4,703) (8,824)
Net loss from
discontinued operations (7,123) (6,240) (8,971)
Net income (loss) $ (2,281) $ (5,633) $(10,943) $(17,795)
Earnings (loss) per share
Continuing operations $ (0.22) $ 0.15 $ (0.45) $ (0.87)
Discontinued operations (0.70) (0.60) (0.88)
$ (0.22) $ (0.55) $ (1.05) $ (1.75)
Diluted earnings
(loss) per share
Continuing operations $ (0.22) $ 0.15 $ (0.45) $ (0.87)
Discontinued operations (0.70) (0.60) (0.88)
$ (0.22) $ (0.55) $ (1.05) $ (1.75)
Basic weighted average
number of shares
outstanding 10,403 10,250 10,383 10,176
Diluted weighted average
number of shares
outstanding 10,403 10,250 10,383 10,176
Copyright (C) 2000 Business Wire. All rights reserved.
Distributed via COMTEX.
-0-
CONTACT: Creative Computers, Inc., Torrance, Calif.
Frank Khulusi/Ted Sanders, 310/354-5600
WEB PAGE: businesswire.com
GEOGRAPHY: CALIFORNIA
INDUSTRY CODE: COMPUTERS/ELECTRONICS
INTERNET
E-COMMERCE
EARNINGS
Today's News On The Net - Business Wire's full file on the Internet
with Hyperlinks to your home page.
eLinux.com: a New Internet Subsidiary Announced by Creative Computers, Inc.; eLinux.com to be Dedicated to Providing 'Everything and Anything for Linux'
eLinux.com: a New Internet Subsidiary Announced by Creative Computers,
Inc.; eLinux.com to be Dedicated to Providing 'Everything and Anything
for Linux'
TORRANCE, Calif., Jan 25, 2000 (BUSINESS WIRE) -- Creative Computers,
Inc. (Nasdaq:MALL), which is changing its name to IdeaMall ("Creative /
IdeaMall"), announced today the formation of eLinux.com
(http://www.elinux.com). The new Web site, built on the Linux platform,
will be formally launched at the Linux World Expo in New York on
February 2, 2000. eLinux.com will provide the Linux community with a
single source for products, news, discussion groups, services, support
and information. Demonstrating Creative / IdeaMall's increasing focus
on Internet opportunities, eLinux.com will provide unique multi-vendor
Linux solutions and custom configurations of Linux-based systems and
compatible products through a secure procurement Web site.
"We have seen the Linux Operating System gain tremendous momentum
within today's Information Technology sector," stated Frank Khulusi,
Chairman and Chief Executive Officer of Creative / IdeaMall. "The Linux
and Open Source movement will undoubtedly have a profound impact on
business technology, and we are positioning eLinux.com to serve the
rapidly growing Linux community."
Building on Creative / IdeaMall's strong commitment to supporting the
Linux Open Source movement, eLinux.com will offer the latest
distributions of Linux products from providers including Red Hat
(Nasdaq:RHAT), Caldera (Nasdaq:CRD.TO), and Corel (Nasdaq:CORL).
eLinux.com will also provide its own brand of Linux-based eLinux.com
OpenServe Servers, eLinux.com OpenPro Systems, and eLinux.com OpenBook
Notebooks custom configured with Red Hat Linux.
In addition to having its separate dedicated staff, eLinux.com will
also be able to leverage Creative / IdeaMall's existing infrastructure
and operational competencies, including marketing and product
fulfillment. eLinux.com will take Linux community support one step
further by compiling its online product offering into a printed Linux
product guide. Complete with the latest in Linux OS distributions and
office suites, Linux based Web servers, and Linux compatible hardware
and peripherals, this product guide will be mailed to hundreds of
thousands of Linux users and also distributed at the Linux World Expo
next week. A specialized Linux-trained and dedicated sales and services
staff will support this subsidiary.
"The success of our Internet ventures, including uBid.com (Nasdaq:UBID)
-- which was spun-off in 1999 -- and eCOST.com, are a testament to
Creative / IdeaMall's ability to create, grow and support businesses on
the Web," said Khulusi. "With the introduction of eLinux.com, we
further demonstrate our increasing focus on Internet opportunities that
will serve a new generation of enterprises and consumers."
Creative Computers, Inc., soon to be renamed IdeaMall ("Creative /
IdeaMall"), is focused on the Internet and business-to-business
markets. Creative / IdeaMall has a growing portfolio of Web site
properties and intends to pursue additional Internet opportunities as
they arise and within its strategic focus. The company's current
portfolio includes:
eLinux.com (http://www.elinux.com) -- a new subsidiary providing
products, news, discussion groups, services and support to the Linux
community;
eCOST.com (http://www.ecost.com) -- a separate subsidiary launched in
April 1999 which is a retailer of computer products and electronics and
is one of the fastest-growing multi-category Internet retailers;
PCM.com Business Solutions -- a leading business-to-business marketer
focused on IT sales of servers, desktops and network equipment to
businesses with 100 or more employees;
PCMall.com (http://www.pcmall.com) -- a leading business-to-business
marketer of computers and related products for small businesses with
less than 100 employees, and high-end consumers;
MacMall.com (http://www.macmall.com) - a leading marketer of Macintosh
computers, peripherals and software to the rapidly-growing Apple
community.
The company drives traffic to its Web sites and call centers via its
distinctive "clicks and catalogs" strategy, outbound telemarketing, and
marketing on the Web. Creative / IdeaMall also operates a field sales
organization under the name CCIT, which is focused on Fortune 1000
companies.
All of the statements, expectations and assumptions contained in the
above are forward-looking statements. The realization of any or all of
these expectations is subject to a number of risks and uncertainties
and it is possible that the assumptions made by management may not
materialize. There can be no assurances that eLinux.com will be
successful, will achieve market acceptance or become profitable, or
that the momentum of the Linux OS will continue. In addition to the
factors set forth above, other important factors that could cause
actual results to differ materially from our expectations include;
competition from companies either currently in the market or entering
the market; competition from other catalog and retail store resellers
and price pressures related thereto; uncertainties surrounding the
supply of and demand for products manufactured by and compatible with
Linux; and risks due to shifts in market demand and/or price erosion of
owned inventory. This list of risk factors is not intended to be
exhaustive. Reference should also be made to the risk factors set forth
from time to time in the Company's SEC reports, including but not
limited to those set forth in the section entitled "Certain Factors
Affecting Future Results" in its Annual Report on Form 10-K for 1998.
Linux is a registered trademark of Linus Torvalds.
Copyright (C) 2000 Business Wire. All rights reserved.
Distributed via COMTEX.
-0-
CONTACT: Creative Computers Inc.
Frank Khulusi/Ted Sanders, 310/354-5600
WEB PAGE: businesswire.com
GEOGRAPHY: CALIFORNIA
INDUSTRY CODE: INTERNET
COMPUTERS/ELECTRONICS
E-COMMERCE
Today's News On The Net - Business Wire's full file on the Internet
with Hyperlinks to your home page. |
