2008-08-05 15:01:00
Entertainment Distribution Company Announces Second Quarter 2008 Results
- Commences Search for Permanent Chief Executive Officer -
NEW YORK, Aug. 5 /EMWNews/ -- Entertainment Distribution
Company, Inc. (Nasdaq: EDCI) ("EDCI"), the majority shareholder of
Entertainment Distribution Company, LLC ("EDC, LLC") a global and
independent provider of supply chain services to the home entertainment
market, today reported second quarter financial results for the period
ending June 30, 2008. EDCI also announced today that as part of its plan to
explore strategic opportunities for its cash and net operating loss
carryforwards, it has commenced an executive search for a permanent Chief
Executive Officer with a strong background in acquisitions and mergers.
Heidrick and Struggles, a world leader in senior executive search, has been
chosen to lead the recruiting effort and will work with EDCI's Governance
and Nominating Committee.
Highlights (for EDCI and its subsidiaries (the "Company") on a
consolidated basis unless noted):
-- Revenue of $79.4 million for the second quarter compared to $80.2
million for the same quarter last year.
-- Revenue of $162.5 million for the first six months compared to
$164.2 million for the same period last year.
-- Net loss from continuing operations of $(5.3) million, or $(0.08)
per diluted share, for the second quarter compared to net loss from
continuing operations of $(4.7) million, or $(0.07) per diluted share, for
the same quarter last year.
-- Net loss from continuing operations of $(12.7) million, or $(0.18)
per diluted share, for the first six months of 2008 compared to net loss
from continuing operations of $(11.4) million, or $(0.16) per diluted
share, for the same period last year.
-- Second quarter EBITDA from continuing operations of $0.7 million,
compared to EBITDA from continuing operations of $0.9 million for the same
quarter last year.
-- First six months EBITDA from continuing operations of $2.9 million,
compared to EBITDA loss from continuing operations of $(0.3) million for
the same period last year.
-- As of June 30, 2008, total unrestricted cash and short-term
investments of $78.0 million, of which $53.8 million is held at EDCI and
$24.2 million is held at EDC, LLC.
-- As of June 30, 2008, total long-term debt of $39.1 million, net of
unamortized discount.
Jordan M. Copland, Interim Chief Executive Officer and Chief Financial
Officer of EDCI, stated, "Overall results at EDC, LLC for the second
quarter were in line with our internal plan and operating trends were
similar to the first quarter of the year. We continue to face a difficult
industry and economic environment. However, we have made significant
progress in our efforts to control costs and right-size our business to
ensure we are fully utilizing our assets and maximizing cash flows. As a
result of these efforts, we generated EBITDA of $2.9 million in the first
six months of 2008, compared to an EBITDA loss in the first half of 2007.
We believe we are well positioned as we enter the second half of the year,
which is historically our most active and profitable period. EDCI continues
its search for a new business to utilize its $53.8 million in cash and
short-term investments and $278 million in net operating loss
carryforwards. At our annual meeting on August 22, 2008, we are proposing a
plan of reorganization which, if approved by shareholders, will protect
EDCI's net operating loss carryforwards and bring the Company into
compliance with NASDAQ's continued listing requirements."
Conference Call
The Company will host a conference call to discuss its second quarter
2008 financial results today at 4:30 p.m. ET. To access the conference
call, please dial 973-582-2854 and reference pass code 57941470. A live
webcast of the conference call will also be available on the Company's
corporate Web site, located at http://www.edcllc.com. A replay of the conference
call will be available through midnight ET on Tuesday, August 12, 2008. The
replay can be accessed by dialing 706-645-9291. The pass code for the
replay is 57941470.
Summary of Second Quarter 2008
For the second quarter of 2008, the Company reported revenue of $79.4
million compared to $80.2 million for the second quarter of 2007. The
decrease is primarily attributable to a decrease in volumes from our U.S.
operations, offset by the impact of favorable exchange rate fluctuations.
The Company had EBITDA from continuing operations of $0.7 million in
the second quarter of 2008, as compared to EBITDA from continuing
operations of $0.9 million in the second quarter of 2007. EBITDA is a
non-GAAP financial measure. A reconciliation between EBITDA and the most
directly comparable GAAP financial measure is provided following the
Consolidated Financial Statements included in this release. The
reconciliation also includes a description of how the Company calculates
EBITDA.
The Company reported a net loss from continuing operations of $(5.3)
million for the second quarter of 2008, or $(0.08) per diluted share. This
compares to a net loss from continuing operations of $(4.7) million, or
$(0.07) per diluted share, for the second quarter of 2007.
For the second quarter, the Company reported a net loss of $(5.5)
million, or ($0.08) per diluted share, which compares to a net loss of
$(4.1) million, or $(0.06) per diluted share, for the second quarter of
2007.
Six Months Ended June 30, 2008
For the six months ended June 30, 2008, the Company reported revenue of
$162.5 million compared to $164.2 million for the first six months of 2007.
The decrease is primarily attributable to a decrease in volumes from our
U.S. operations, offset by the impact of favorable exchange rates.
The Company had EBITDA from continuing operations of $2.9 million in
the first six months of 2008, as compared to an EBITDA loss from continuing
operations of $(0.3) million in the first six months of 2007. EBITDA from
continuing operations in the first six months of 2007 included
approximately $2.3 million of non-recurring costs associated with stock
option investigation and litigation legal expenses and consulting costs.
The Company reported a net loss from continuing operations of $(12.7)
million for the first six months of 2008, or $(0.18) per diluted share.
This compares to a net loss from continuing operations of $(11.4) million,
or $(0.16) per diluted share, for the first six months of 2007.
For the first six months of 2008, the Company reported a net loss of
$(11.7) million, or ($0.17) per diluted share, which compares to a net loss
of $(10.0) million, or $(0.14) per diluted share, for the first six months
of 2007.
Guidance
The Company is reconfirming its previously issued guidance for the
full-year 2008. For 2008 the Company expects EBITDA to be at the same level
or slightly higher than 2007 Adjusted EBITDA. The Company's guidance
assumes global industry decline rates for the full-year to be approximately
10%-12%. In addition, this guidance is largely based on the current release
schedules from customers and the Company's expectation that current cost
initiatives will deliver savings of approximately $10 million in 2008. Any
changes in these assumptions could materially impact the Company's ability
to achieve its expectations.
About Entertainment Distribution Company
Entertainment Distribution Company, Inc. (Nasdaq: EDCI) is the majority
shareholder of Entertainment Distribution Company, LLC ("EDC, LLC"), a
global and independent provider of supply chain services to the home
entertainment market. EDC, LLC serves every aspect of the manufacturing and
distribution process and is one of the largest providers in the industry.
Its clients include some of the world's best-known music, movies and gaming
companies. Headquartered in New York, EDC, LLC's operations include
manufacturing and distribution facilities throughout North America and in
Hannover, Germany, and a manufacturing facility in Blackburn, UK. For more
information, please visit http://www.edcllc.com.
Safe Harbor Statement
This news release contains statements that may be forward looking
within the meaning of applicable securities laws. The statements may
include projections regarding future revenues and earnings results, and are
based upon the Company's current forecasts, expectations and assumptions,
which are subject to a number of risks and uncertainties that could cause
the actual outcomes and results to differ materially. Some of these results
and uncertainties are discussed in the Company's most recently filed Annual
Report on Form 10-K, as amended. These factors include, but are not limited
to restructuring activities; potential intellectual property infringement
claims; potential acquisitions and strategic investments; volatility of
stock price; ability to attract and retain key personnel; competition;
variability of quarterly results and dependence on key customers; potential
market changes resulting from rapid technological advances; proprietary
technology; potential changes in government regulation; international
business risks; continuation and expansion of third party agreements;
sensitivity to economic trends and customer preferences; increased costs or
shortages of raw materials or energy; dependence on Universal Music Group;
potential inability to manage successful production; advances in technology
and changes in customer demands; variability in production levels; and
development of digital distribution alternatives including copying and
distribution of music and video files. The Company assumes no obligation to
update any forward-looking statements and does not intend to do so except
where legally required.
ENTERTAINMENT DISTRIBUTION COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, December 31,
2008 2007
(unaudited)
ASSETS (In thousands, except share data)
Current Assets:
Cash and cash equivalents $62,629 $63,850
Restricted cash 2,003 1,940
Investments 15,365 29,589
Accounts receivable, net of
allowances for doubtful accounts
of $3,725 and $3,328 for 2008
and 2007, respectively 28,697 35,577
Current portion of long-term receivable 403 515
Inventories, net 7,400 9,111
Prepaid expenses and other current assets 17,586 16,180
Deferred income taxes 268 277
Total Current Assets 134,351 157,039
Restricted cash 28,232 26,015
Property, plant and equipment, net 51,718 55,245
Long-term receivable 4,385 4,244
Intangible assets 42,217 44,604
Deferred income taxes 1,724 1,934
Other assets 7,311 6,940
TOTAL ASSETS $269,938 $296,021
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $24,928 $33,287
Accrued expenses and other liabilities 34,165 37,503
Income taxes payable 129 3,697
Deferred income taxes - 126
Loans from employees 1,281 1,267
Current portion of long-term debt 18,711 24,364
Total Current Liabilities 79,214 100,244
Other non-current liabilities 13,886 12,185
Loans from employees 2,625 3,646
Long-term debt 20,390 21,589
Pension and other defined benefit obligations 40,160 36,155
Deferred income taxes 10,815 10,195
Total Liabilities 167,090 184,014
Minority interest in subsidiary company 5,528 5,771
Commitments and contingencies
Stockholders' Equity:
Preferred stock, $.01 par value;
authorized: 5,000,000 shares, no
shares issued and outstanding - -
Common stock, $.02 par value;
authorized: 200,000,000 shares,
issued: June 30, 2008 -- 70,194,358
shares; December 31, 2007 --
70,155,940 shares 1,404 1,403
Additional paid in capital 369,743 369,665
Accumulated deficit (285,037) (273,333)
Accumulated other comprehensive income 12,043 8,501
Treasury stock at cost: June 30,
2008 -- 1,811,700 shares;
December 31, 2007 -- 0 shares (833) -
Total Stockholders' Equity 97,320 106,236
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $269,938 $296,021
ENTERTAINMENT DISTRIBUTION COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended June 30,
2008 2007
(In thousands, except per share amounts)
REVENUES:
Product revenues $60,495 $62,798
Service revenues 18,921 17,358
Total Revenues 79,416 80,156
COST OF REVENUES:
Cost of product revenues 55,200 56,227
Cost of service revenues 14,675 14,112
Total Cost of Revenues 69,875 70,339
GROSS PROFIT 9,541 9,817
OPERATING EXPENSES:
Selling, general and administrative
expense 12,589 12,244
Amortization of intangible assets 2,455 2,080
Total Operating Expenses 15,044 14,324
OPERATING LOSS (5,503) (4,507)
OTHER INCOME (EXPENSE):
Interest income 935 1,195
Interest expense (973) (1,337)
Gain (loss) on currency swap, net 32 (391)
Gain (loss) on currency
transaction, net (33) 230
Other income (expense), net (4) 56
Total Other Expense (43) (247)
LOSS FROM CONTINUING OPERATIONS BEFORE
INCOME TAXES AND MINORITY INTEREST (5,546) (4,754)
Income tax benefit (115) (30)
Minority interest income (92) -
LOSS FROM CONTINUING OPERATIONS (5,339) (4,724)
DISCONTINUED OPERATIONS, NET OF TAX:
INCOME (LOSS) FROM DISCONTINUED
OPERATIONS (145) 554
GAIN ON SALE OF MESSAGING BUSINESS - 88
NET LOSS $(5,484) $(4,082)
LOSS PER WEIGHTED AVERAGE COMMON SHARE
(1):
Loss from continuing operations $(0.08) $(0.07)
Discontinued Operations:
Income (loss) from
discontinued operations - 0.01
Gain on sale of Messaging
business - -
Net loss per weighted average common
share $(0.08) $(0.06)
LOSS PER DILUTED COMMON SHARE:
Loss from continuing operations $(0.08) $(0.07)
Discontinued Operations:
Income (loss) from
discontinued operations - 0.01
Gain on sale of Messaging
business - -
Net loss per diluted weighted average
common share $(0.08) $(0.06)
(1) Loss per weighted average common share amounts are rounded to the
nearest $.01; therefore, such rounding may impact individual amounts
presented.
ENTERTAINMENT DISTRIBUTION COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Six Months Ended June 30,
2008 2007
(In thousands, except per share amounts)
REVENUES:
Product revenues $122,823 $127,267
Service revenues 39,723 36,899
Total Revenues 162,546 164,166
COST OF REVENUES:
Cost of product revenues 111,403 113,990
Cost of service revenues 30,365 29,515
Total Cost of Revenues 141,768 143,505
GROSS PROFIT 20,778 20,661
OPERATING EXPENSES:
Selling, general and
administrative expense 25,316 27,476
Amortization of intangible assets 4,838 4,114
Total Operating Expenses 30,154 31,590
OPERATING LOSS (9,376) (10,929)
OTHER INCOME (EXPENSE):
Interest income 2,047 2,352
Interest expense (2,092) (2,636)
Loss on currency swap, net (2,593) (748)
Gain (loss) on currency
transaction, net (594) 339
Other income, net 8 67
Total Other Expense (3,224) (626)
LOSS FROM CONTINUING OPERATIONS
BEFORE INCOME
TAXES AND MINORITY INTEREST (12,600) (11,555)
Income tax provision (benefit) 368 (116)
Minority interest income (242) -
LOSS FROM CONTINUING OPERATIONS (12,726) (11,439)
DISCONTINUED OPERATIONS, NET OF TAX:
INCOME FROM DISCONTINUED OPERATIONS 1,022 250
GAIN ON SALE OF MESSAGING BUSINESS - 1,176
NET LOSS $(11,704) $(10,013)
LOSS PER WEIGHTED AVERAGE COMMON
SHARE (1):
Loss from continuing operations $(0.18) $(0.16)
Discontinued Operations:
Income (loss) from
discontinued operations 0.01 -
Gain on sale of Messaging
business - 0.02
Net loss per weighted average common
share $(0.17) $(0.14)
LOSS PER DILUTED COMMON SHARE:
Loss from continuing operations $(0.18) $(0.16)
Discontinued Operations:
Income (loss) from
discontinued operations 0.01 -
Gain on sale of Messaging
business - 0.02
Net loss per diluted weighted average
common share $(0.17) $(0.14)
(1) Loss per weighted average common share amounts are rounded to the
nearest $.01; therefore, such rounding may impact individual amounts
presented.
Entertainment Distribution Company, Inc.
Summary Schedule of Non-GAAP Financial Data
(In thousands) Unaudited
The following summary of financial data shows the reconciliation of
loss from continuing operations, as determined in accordance with
accounting principles generally accepted in the United States (GAAP), to
EBITDA from continuing operations, a non-GAAP measure.
EBITDA is income (loss) from continuing operations before interest
expense (income), net, income taxes, and depreciation and amortization and
is presented because the Company believes that such information is commonly
used in the entertainment industry as one measure of a company's operating
performance. EBITDA from continuing operations is not determined in
accordance with generally accepted accounting principles, it is not
indicative of cash provided by operating activities, should not be used as
a measure of operating income and cash flows from operations as determined
under GAAP, and should not be considered in isolation or as an alternative
to, or to be more meaningful than, measures of performance determined in
accordance with GAAP. EBITDA, as calculated by the Company, may not be
comparable to similarly titled measures reported by other companies and
could be misleading unless all companies and analysts calculated EBITDA in
the same manner.
Three Months
Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
Loss from continuing operations (5,339) (4,724) (12,726) (11,439)
Income tax provision (benefit) (115) (30) 368 (116)
(Gain) loss on currency swap, net (32) 391 2,593 748
(Gain) loss on currency transaction, net 33 (230) 594 (339)
Interest expense, net 38 142 45 284
Depreciation and amortization 6,104 5,385 11,986 10,653
Other income, net 4 (56) (8) (67)
EBITDA from continuing operations $693 $878 $2,852 $(276)
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