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Subject: 2nd Quarter Results :) Date: 11/3/2000 11:07 AM
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Thursday November 2, 4:00 pm Eastern Time
Press Release
Image Entertainment Inc. Reports Results for Fiscal Year 2001 Second Quarter Ended Sept. 30, 2000
Second Quarter Net Earnings Rise to $1,753,000, or $.10 Per Diluted Share, Versus Net Loss Per Share of $.05 for Year-Ago Quarter
CHATSWORTH, Calif.--(BUSINESS WIRE)--Nov. 2, 2000-- Net Revenues up 42% to a Second Quarter Record $25.4 Million

Second Quarter Gross Profit Margins Increase to 32.5%

from 25.5% in 1999

Image Entertainment Inc. (Nasdaq:DISK - news), a leading DVD licensee and distributor, today reported financial results for its fiscal year 2001 second quarter and six months ended Sept. 30, 2000.

Net revenues for the second quarter of fiscal 2001 increased 42.4% to a second quarter record of $25,368,000, from $17,817,000 for the second quarter of fiscal 2000. Net revenues of DVD programming for the September 2000 quarter increased approximately 71% to $24.0 million from $14.0 million for the September 1999 quarter. The September 2000 quarter's net revenues included approximately $4 million from a successful sales re-promotion program covering certain of the company's exclusive catalogue DVD titles.

The company continues to experience growth in its exclusive DVD revenues. Rapid growth in the DVD player installed household base contributed to the growth in the company's DVD revenues. Additionally, international distribution and broadcast of the company's licensed entertainment programming contributed approximately $1.3 million in net revenues for the September 2000 quarter, the second full quarter of international revenue generating operations. The company did not recognize any revenues related to international distribution during the September 1999 quarter.

Gross profit margins for the September 2000 quarter grew to 32.5% from 25.5% for the September 1999 quarter. Operating income for the September 2000 quarter was $1,749,000 compared with an operating loss of $527,000 for the year-ago quarter. Net income rose to $1,753,000, or $.10 per diluted share, compared with a net loss of $842,000, or $.05 per diluted share, for the September 1999 quarter.

Net income for the September 2000 quarter includes a net gain on sale of land of $484,000, or $.03 per diluted share, net of related income tax benefit. EBITDA (earnings before interest, taxes, depreciation and amortization), a measure of cash flow, for the September 2000 quarter increased substantially to $2.4 million from $85,000 for the September 1999 quarter.

Net revenues for the first six months of fiscal 2001 increased 37.0% to a record $49,090,000 for the period from $35,837,000 for the six months ended Sept. 30, 1999. Net revenues of DVD programming for the six months ended Sept. 30, 2000 increased approximately 63% to $46.1 million from $28.3 million for the year-ago six-month period.

Gross profit margins for the six months ended Sept. 30, 2000 grew to 32.2% from 25.0% for the year-ago six-month period. Operating income for the six months ended Sept. 30, 2000 was $3,548,000 compared with an operating loss of $1,160,000 for the year-ago six-month period. Net income for the six months ended Sept. 30, 2000 rose to $3,068,000, or $.18 per diluted share, compared with a net loss of $1,556,000, or $.09 per diluted share, for the year-ago six-month period.

Net income for the six months ended Sept. 30, 2000 includes a net gain on sale of land of $484,000, or $.03 per diluted share, net of related income tax benefit. EBITDA (earnings before interest, taxes, depreciation and amortization), a measure of cash flow, for the six months ended Sept. 30, 2000 increased substantially to $4.9 million from a negative $36,000 for the six months ended Sept. 30, 1999.

The company will file its Form 10-Q for its second quarter ended Sept. 30, 2000 with the Securities and Exchange Commission on or about Nov. 14, 2000.

Martin W. Greenwald, Image's president and chief executive officer, commented: ``We are pleased by the company's second quarter performance. DVD software sales continue to rise and demand for our product has also been fueled by the continued growth in the installed base of DVD hardware. Our focus on licensing highly commercial product for DVD is continuing to pay off and acceptance of our programming domestically and internationally is a key to our success. We believe this strategy should continue to place us in the forefront of exclusive independent programming.'

About the Company

Image Entertainment Inc. is a leading aggregator of content for DVD. The company also has exclusive videocassette, broadcast, streaming video and downloading rights for certain properties. With nearly 1,200 Image-exclusive DVD titles in domestic release, Image is one of the largest content providers of DVD programming in North America. Additionally, Image distributes a broad range of its programming internationally through its joint venture Aviva International LLC. The company also owns and operates an e-commerce subsidiary, DVDPlanet.com.

Forward-Looking Statements: This release contains ``forward-looking statements' under the Private Securities Litigation Reform Act of 1995 concerning: the company's licensing strategy and continued acceptance of its titles in the consumer marketplace will continue to place it in the forefront of exclusive independent programming. Actual results may differ materially from the expectations contained herein. Detailed information concerning a number of factors that could cause the company's actual results to differ materially from the expectations contained herein is available in the company's reports filed or to be filed with the SEC, including its Annual Report on Form 10-K for the fiscal year ended March 31, 2000 and its Form 10-Qs for the periods ended June 30, 2000 and Sept. 30, 2000 (to be filed on or before Nov. 14, 2000).


IMAGE ENTERTAINMENT INC.
CONSOLIDATED BALANCE SHEETS
Sept. 30, 2000 and March 31, 2000

ASSETS

(In thousands) Sept. 30, 2000 March 31, 2000
(unaudited)

Cash and cash equivalents $ 1,203 $ 1,532
Accounts receivable, net of allowances 17,792 13,457
Inventories, inclusive of net production
costs of
$5,775 - Sept. 30, 2000;
$4,898 - March 31, 2000 19,066 17,881

Royalty and distribution fee advances 11,113 8,868
Prepaid expenses and other assets 2,732 2,576
Property, equipment and improvements, net 13,961 14,067
Goodwill, net 6,760 7,014
$ 72,627 $ 65,395
-0-

IMAGE ENTERTAINMENT INC.
CONSOLIDATED BALANCE SHEETS
Sept. 30, 2000 and March 31, 2000

LIABILITIES AND SHAREHOLDERS' EQUITY

(In thousands, except share data) Sept. 30, 2000 March 31, 2000
(unaudited)

LIABILITIES:

Accounts payable and accrued liabilities $ 20,376 $ 15,606
Accrued royalties and distribution fees 4,257 3,550
Revolving credit and term loan facility 9,540 10,790
Real estate credit facility 3,090 3,176
Distribution equipment lease facility 1,250 1,432
Equipment line of credit 411 --
Convertible subordinated note payable 5,000 5,000
Total liabilities 43,924 39,554

SHAREHOLDERS' EQUITY:

Preferred stock, $1 par value, 3,366,000
shares authorized; none issued and
outstanding -- --

Common stock, no par value, 30,000,000
shares authorized; 16,384,000 and
16,462,000 issued and outstanding at
Sept. 30, 2000 and March 31, 2000,
respectively 31,613 31,819

Additional paid-in capital 3,064 3,064
Accumulated deficit (5,974) (9,042)
Net shareholders' equity 28,703 25,841
$ 72,627 $ 65,395
-0-


IMAGE ENTERTAINMENT INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)

For the Three Months Ended Sept. 30, 2000 and 1999

(In thousands, except per share data) 2000 1999

NET REVENUES $ 25,368 100.0% $ 17,817 100.0%
OPERATING COSTS AND EXPENSES:
Cost of sales 17,118 67.5 13,267 74.5
Selling expenses 2,848 11.2 2,190 12.3
General and administrative
expenses 2,323 9.2 1,906 10.7
Amortization of production costs 1,203 4.7 856 4.8
Amortization of goodwill 127 0.5 125 0.7
23,619 93.1 18,344 103.0

OPERATING INCOME (LOSS) 1,749 6.9 (527) (3.0)

OTHER EXPENSES (INCOME):
Interest expense, net 419 1.7 402 2.3
Other (478) (1.9) (87) (0.5)
(59) (0.2) 315 1.8

INCOME (LOSS) BEFORE INCOME TAXES 1,808 7.1 (842) (4.7)

INCOME TAX EXPENSE 55 0.2 -- --

NET INCOME (LOSS) $ 1,753 6.9% $ (842) (4.7)%

NET INCOME (LOSS) PER SHARE:
Basic $ .11 $ (.05)
Diluted $ .10 $ (.05)

WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING:
Basic 16,479 16,457
Diluted 17,876 16,457

-0-

IMAGE ENTERTAINMENT INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)

For the Six Months Ended September 30, 2000 and 1999

(In thousands, except per share data) 2000 1999

NET REVENUES $ 49,090 100.0% $ 35,837 100.0%
OPERATING COSTS AND EXPENSES:
Cost of sales 33,259 67.8 26,893 75.0
Selling expenses 5,245 10.7 4,212 11.8
General and administrative
expenses 4,582 9.3 3,779 10.5
Amortization of production costs 2,202 4.5 1,864 5.2
Amortization of goodwill 254 0.5 249 0.7
45,542 92.8 36,997 103.2

OPERATING INCOME (LOSS) 3,548 7.2 (1,160) (3.2)

OTHER EXPENSES (INCOME):
Interest expense, net 849 1.7 722 2.0
Other (464) (0.9) (326) (0.9)
385 0.8 396 1.1

INCOME (LOSS) BEFORE INCOME TAXES 3,163 6.4 (1,556) (4.3)

INCOME TAX EXPENSE 95 0.2 -- --

NET INCOME (LOSS) $ 3,068 6.2% $ (1,556) (4.3)%

NET INCOME (LOSS) PER SHARE:
Basic $ .19 $ (.09)
Diluted $ .18 $ (.09)

WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING:
Basic 16,469 16,444
Diluted 17,860 16,444



--------------------------------------------------------------------------------
Contact:
Image Entertainment Inc.
Jeff M. Framer, 818/407-9100, ext. 299
818/407-9331 (fax)
jframer@image-entertainment.com
or
The Lee Strategy Group
James Lee, 310/229-5771 (investor relations)
310/229-5772 (fax)
james_lee@leestrategy.com
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