Egghead.com Announces First Quarter Earnings; 41 Percent Increase In On-line Revenues
Over Prior Quarter
Business Wire - July 30, 1998 16:44
SPOKANE, Wash.--(BUSINESS WIRE)--July 30, 1998--Egghead.com, Inc. (NASDAQ:EGGS), today released financial results for the fiscal 1999 first quarter
ended June 27, 1998. The company's total revenues were $29.5 million. Orders placed on-line grew to $21.1 million compared to $15.0 million for the fourth
quarter of fiscal 1998, an increase of 41 percent. Revenue from other sources, including telephone orders placed as a result of website promotions were $8.4 million
compared to $15.5 million; the change due primarily to a managed reduction in catalog and call center operations.
George Orban, Chairman and CEO, said the company's revenues were on plan, and that the migration from catalog and call center operations was part of the
change to a new business model.
The company also reported:
-- Sequential quarterly growth in the number of registered
auction bidders from 96,000 to 168,000;
-- Expansion of its e-mail database to 2.0 million;
-- Sequential quarterly growth in the number of visits to the
company's websites from 14 million to 21 million;
-- Strong performance compared with other commerce sites.
Egghead's sites, in the aggregate, ranked 7th overall among
at-home visitors and 6th among at-work visitors when compared
to all shopping sites on the web, according to Media Metrix, a
leading independent market research firm.
-- Cash balances of $67 million and no debt.
Egghead operates three websites: www.egghead.com, www.surplusdirect.com and www.surplusauction.com.
"We created strong growth in our core Internet business during the quarter by focusing on Egghead's auction site, which has been the most scalable of our three
sites," Orban said.
"With each passing quarter, we leave more of our legacy issues behind. During the next two quarters, we shall be executing a plan to consolidate and integrate our
sites on a common technology platform as the first phase of a project to entirely redesign the company's three web sites," Orban added.
The objectives of the redesign project include improved functionality and navigation incorporating features which dramatically improve the customer shopping
experience, scalability and performance of the sites, and will allow the company to lower its operating expense ratios.
"Egghead.com's long-term strategy is to create a major on-line retail enterprise with computers and software representing only the beginning." Orban added.
Financial Results
The company's total revenues for the first quarter of fiscal 1999 were $29.5 million, compared to $56.2 million for the same period in fiscal 1998. The decrease is
primarily attributable to the previously announced closure of all retail store operations on February 28, 1998. However, excluding the retail stores, sales from
ongoing operations in the first quarter increased $11.4 million, a 63% increase from $18.1 million for the comparable period last year which includes $14.0 million of
Surplus Direct revenue not reported in the historical Egghead.com financials.
Gross margin from ongoing operations was 10.4% for the first quarter of fiscal 1999, an increase of 40 basis points over the fourth quarter of fiscal 1998.
Operating expenses, excluding depreciation and amortization declined $9.7 million from $18.5 million in the fourth quarter of fiscal 1998 to $8.8 million for the first
quarter of fiscal 1999. Management attributed the improvement to the elimination of retail operations expense of $7.0 million and reduction in administrative and
corporate headquarters expense of $2.0 million.
The first quarter pre-tax loss from ongoing operations was $5.5 million, or $0.24 per share compared to $3.7 million or $0.21 per share for the comparable period
last year.
This announcement contains forward-looking statements based on current expectations, estimates and projections about the Company's industry, management's
beliefs and certain assumptions made by management. These forward-looking statements are not guarantees of future performance and are subject to certain risks
and uncertainties that are difficult to predict. Accordingly, actual results may differ materially from those anticipated or expressed in such statements. Potential risks
and uncertainties include, among others, the Company's limited Internet operating history, the rapid evolution of Internet commerce and related technology,
management of potential growth, the intensely competitive nature of the business of selling PC software, hardware and related products and of the electronic
commerce business, Egghead's dependence on vendors, distributors and certain supply sources and risks associated with the closing of the Company's retail store
network and the combination of the management and operations of the Company with those of Surplus Direct. Readers are cautioned not to place undue reliance on
the forward-looking statements, which speak only as of the date made. More information about these and other factors that potentially could affect the Company's
financial condition and results is included in the Company's Form 10-K for the fiscal year ended March 28, 1998 filed with the Securities and Exchange
Commission.
EGGHEAD.COM, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollars in thousands)
ASSETS Jun 27, Jun 28, Mar 28,
1998 1997 1998
Current assets:
Cash and cash equivalents $67,034 $74,176 $67,381
Accounts receivable, net 5,134 14,503 5,670
Receivable from Joint Venture -- 4,000 --
Merchandise inventories, net 10,896 42,894 12,923
Prepaid expenses and other current
assets 561 3,703 999
Property held for sale 1,224 7,574 8,047
------ ------- ------
Total current assets 84,849 146,850 95,020
------ ------- ------
Property and equipment, net 2,524 11,524 2,806
Goodwill, net 32,920 -- 33,225
Other assets 320 692 336
-------- -------- --------
$120,613 $159,066 $131,387
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $16,869 $36,479 $ 15,834
Accrued liabilities 10,694 10,738 12,002
Liabilities related to disposition
of CGE division -- 6,219 --
Reserves and liabilities related
to restructuring 11,589 8,953 17,461
------ ------ ------
Total current liabilities 39,152 62,389 45,297
------ ------ ------
Other long-term liabilities -- 288 3
------ ------ ------
Total liabilities 39,152 62,677 45,300
------ ------ ------
Commitments and contingencies
Shareholders' equity:
Preferred stock, $.01 par value:
10,000,000 authorized
no shares issued and outstanding -- -- --
Common stock, $.01 par value:
50,000,000 shares authorized;
23,570,032, 17,591,087,
and 23,492,502 shares issued and
outstanding, respectively 236 176 235
Additional paid-in capital 161,591 124,457 160,669
Retained earnings (deficit) (80,366) (28,244) (74,817)
------- ------- -------
Total shareholders' equity 81,461 96,389 86,087
------- ------- -------
$120,613 $159,066 $131,387
======= ======= =======
EGGHEAD.COM, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Amounts in thousands, except per share data)
13 Weeks Ended
Jun 27, Jun 28, Mar 28,
1998 1997 1998
Net Sales:
Retail -- $52,067 $44,059
Ongoing $29,520 4,093 30,450
----------- ------------ -------------
29,520 56,160 74,509
Cost of sales
Retail -- 43,503 47,355
Ongoing 26,463 3,419 27,410
----------- ------------ -------------
26,463 46,922 74,765
Gross margin 3,057 9,238 ( 256)
----------- ------------ -------------
Selling and market-
ing expense 5,768 9,000 12,945
General and
administrative 3,068 3,668 5,560
Depreciation 365 1,254 432
Amortization of
goodwill 419 -- 1,091
Restructure costs -- -- 19,500
-------------- ------------ -------------
Operating loss (6,563) (4,684) (39,784)
Other (expense)
income 1,014 1,026 443
-------------- ------------ -------------
Loss from continuing
operations before
income taxes (5,549) (3,658) (39,341)
-------------- ------------ -------------
Before income taxes
Income tax (expense)
benefit -- -- --
-------------- ------------ -------------
Net loss from continuing
operations before dis-
continued
operations (5,549) (3,658) (39,341)
Discontinued operations:
Income from dis-
continued operations -- -- 4,300
-------------- ------------ -------------
Net loss $(5,549) $(3,658) $(35,041)
============== ============ =============
Loss per share:
Continuing
operations $(0.24) $(0.21) $(1.70)
Discontinued operations:
Income (loss) from
discontinued operation 0.19
-------------- ------------ -------------
Earnings (loss)
per share $(0.24) $(0.21) $(1.51)
============== ============ =============
Weighted average common
shares outstand-
ing 23,570 17,591 23,144
============== ============ =============
CONTACT: Egghead.com, Inc.
Brian Bender, Chief Financial Officer, 509/891-4851
or
The Rockey Company
John Hough, 503/248-9468
jhough@rockey-seattle.com
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