L.L. Knickerbocker Reports $.04 Profit for the Fourth
Quarter of Fiscal 1997 and $.24 Loss for the Year
$5 Million in Noncash Charges Impact Year-End Results
LAKE FOREST, Calif.--(BUSINESS WIRE)--March 26, 1998--The L.L. Knickerbocker Co.
Inc. (Nasdaq/NMS:KNIC - news) Thursday reported results of operations for its fourth quarter and
fiscal year ended Dec. 31, 1997.
Revenues for fiscal year ended 1997 were $68,290,000, up from $42,095,000 in 1996. Gross profit
increased to $37,500,000, up from $20,644,000 in 1996. Advertising expenses were $10,926,000,
as compared with $4,882,000 last year.
The increase in revenues and advertising in 1997 was due primarily to the inclusion of a full year of
activity of the company's direct response lines and jewelry lines. The comparative 1996 year included
approximately two and one-half months and six months, respectively, of activity from these lines.
Selling, general and administrative expenses were $28,616,000, as compared with $11,912,000 in
1996. Net loss for the year was $4,377,000, or 24 cents per share.
Revenues for the fourth quarter of fiscal 1997 were $23,128,000, as compared with $23,243,000 in
1996. Gross profit was $14,603,000, up from $11,480,000. Advertising expenses were
$5,538,000, as compared with $4,882,000 in 1996. Selling, general and administrative expenses
were $9,422,000, as compared with $5,104,000 in 1996. Net profit for the quarter was $609,000,
or 4 cents per diluted share.
Equity in loss of investee companies represents the company's percentage share of losses, accounted
for under the equity method of accounting incurred by entities in which the company has a greater
than 20 percent ownership, including Pure Energy Corp., Ontro Inc. and Arkenol Asia Inc.
These are primarily noncash charges. For the year 1997, the company reported $1,857,000 in these
noncash charges, compared with $629,000 in 1996. The fourth quarter of fiscal 1997 included a
noncash charge of $513,000 in this category.
Other income/expense for the year end and fourth quarter was $3,316,000 and $2,790,000,
respectively. Other income is primarily composed of net gains realized by the Thailand-based
subsidiaries in foreign currency exchanges and $1,710,000 from the sale of 1.25 percent of shares in
Pure Energy.
Interest expense for 1997 was $4,831,000, which included noncash charges of $3,099,000 in the
form of conversion discounts associated with the company's convertible debenture financings which
occurred in September of 1996 and 1997, and a noncash restructuring charge of $1,899,000 in
February 1997, incurred to refinance the remaining convertible debentures completed in the
September 1996 offering.
This compared with $1,205,000 of similar noncash charges in 1996. The remaining balance of
interest expense includes $1,732,000 of interest on borrowings from working capital lines of credit,
mortgages on buildings owned by the company and interest paid in cash on the remaining balance of
the September 1996 convertible debenture.
''I am not pleased with our 1997 financial performance,'' Chief Executive Officer Louis
Knickerbocker explained. ''The consolidation of the six acquisitions made in late 1996 took longer
and cost more than we anticipated.
''Additionally, the consolidation of the acquisitions took management's focus away from such
important functions as sales and marketing of the company's many brands, and focused more on the
administrative and cultural aspects during each company's transition.''
Knickerbocker further explained, ''Although our projected revenues did not meet expectations,
particularly in the fourth quarter, we achieved a great deal of improvement in the majority of the
acquisitions during 1997.
''For example, combined 1996 operating losses sustained by the companies acquired in 1996
totaled $8 million. I am pleased to report that those same companies posted operating profits of
more than $1.2 million in 1997.''
He added: ''The L.L. Knickerbocker Co. has matured considerably in 1997 and is poised for
continued growth in brand development and related sales and marketing efforts. Our creative team
continues to win awards for excellence in product design and development. With our focus on sales
and marketing in 1998, we expect to capitalize on these achievements.
''It is important not to forget that our bottom line was impacted by noncash charges,'' said
Knickerbocker, ''and these results do not include the value added to shareholders with our
investments in Pure Energy Corp., Ontro Inc. and Arkenol Asia Inc.''
Robert West, L.L. Knickerbocker's newly appointed chief operating officer, said: ''Our
consolidation pace has accelerated in the first quarter. Marketing and sales, along with a continuous
streamlining in our operations, has already provided the company with $1 million in annualized
savings in 1998. These savings efforts will continue while we focus on building sales and marketing of
our many branded products.''
The L.L. Knickerbocker Co. is a diverse international company with operations in three strategic
divisions: collectibles, jewelry and investments. The company markets all of its products worldwide.
Through its investments division, it has a 50 percent equity interest in Arkenol Asia, a 35 percent
interest in Pure Energy, and a 28 percent interest in Ontro.
For more information, visit the L.L. Knickerbocker Web site at www.knickerbocker.com.
This news release contains forward-looking statements within the meaning of the Securities Act of
1933, as amended, and the Securities Exchange Act of 1934, as amended, which involve risks and
uncertainties, including, but not limited to, economic, competitive, governmental and technological
factors affecting the company's operations, markets, products, services and prices, and other factors.
The company's actual results could differ materially from those projected in the forward-looking
statements as a result of the factors described herein.
THE L.L. KNICKERBOCKER CO. INC.
STATEMENT OF OPERATIONS
Year Ended
Dec. 31,
1997 1996
Revenues $68,290,000 $42,095,000
Cost of sales 30,790,000 21,451,000
Gross profit 37,500,000 20,644,000
Advertising expense 10,926,000 4,882,000
Selling, G & A expenses 28,616,000 11,912,000 (a)
Operating income (2,042,000) 3,850,000
Equity in loss of investee
companies (1,857,000) (629,000)
Other income (expense), net 3,316,000 (62,000)
Interest expense (4,831,000) (1,205,000)
Income (loss) before income
taxes and minority interest (5,414,000) 1,954,000
Minority interest (10,000) (132,000)
Income tax (expense) benefit 1,047,000 (450,000)
Net income (4,377,000) 1,372,000
Basic earnings per share $ (0.24) 0.09
Basic weighted average shares
outstanding 18,052,081 14,713,903
Diluted earnings per share N/A 0.09
Diluted weighted average
shares outstanding N/A 16,470,624
Quarter Ended
Dec. 31,
1997 1996
Revenues $23,128,000 23,243,000
Cost of sales 8,525,000 11,480,000
Gross profit 14,603,000 11,763,000
Advertising expense 5,538,000 4,882,000
Selling, G & A expenses 9,422,000 5,104,000
Operating income (357,000) 1,777,000
Equity in loss of investee
companies (513,000) (629,000)
Other income (expense), net 2,790,000 (296,000)
Interest expense (834,000) (1,155,000)
Income (loss) before income
taxes and minority interest 1,086,000 (303,000)
Minority interest (229,000) (132,000)
Income tax (expense) benefit (248,000) 343,000
Net income 609,000 (92,000)
Basic earnings per share $ 0.03 (.01)
Basic weighted average shares
outstanding 18,734,061 15,420,686
Diluted earnings per share .04 N/A
Diluted weighted average
shares outstanding 20,636,457 N/A
(a) In 1996, the company reported selling, general and administrative
expenses of $16,953,000. This amount included approximately
$4.9 million of advertising expenses which were broken out in 1997.
_________________________________________________________
....................... Bob |
