EXHIBIT 99.1
CONTACT: RIA MARIE CARLSON
VP, CORPORATE COMMUNICATIONS
AND INVESTOR RELATIONS
(323) 932-4096
FOR IMMEDIATE RELEASE
EQUITY MARKETING REPORTS RECORD RESULTS
BEFORE CHARGES FOR 2000
ANNUAL INCOME BEFORE CHARGES GROWS OVER 30%
LOS ANGELES, CA, FEBRUARY 22, 2001 --- Equity Marketing, Inc. (Nasdaq: EMAK)
announced today that sales, income (before impairment and other charges) and
earnings per share (before impairment and other charges) for the fiscal year
ending December 31, 2000 hit record levels.
"We are very pleased with our performance in 2000," said Don Kurz,
Equity's Chairman and Chief Executive Officer. "We were able to beat an
extremely strong 1999 in a more challenging economic environment and close our
best year yet."
FULL-YEAR HIGHLIGHTS (EXCLUDING IMPAIRMENT AND OTHER CHARGES DESCRIBED BELOW)
- - Revenues were $232.3 million, surpassing 1999 revenues of $227.1
million.
- - Net income increased 33% -- to $12.8 million in 2000 from $9.7 million
in 1999.
- - Diluted earnings per share were $1.69, 13% higher than the $1.50
reported in 1999. Earnings per share were affected by a private equity
transaction that closed in the second quarter of 2000; without this
investment, fully diluted earnings per share would have been $1.86.
- - Earnings before interest, taxes, depreciation and amortization (EBITDA)
grew 15%, to $22 million versus $19.2 million in 1999.
- - Return on equity at the end of 2000 was 21.6%, compared to 19.7% at the
end of 1999. Return on equity has averaged 29% since the company's
initial public offering in 1994.
FOURTH QUARTER HIGHLIGHTS (EXCLUDING IMPAIRMENT AND OTHER CHARGES DESCRIBED
BELOW)
- - Revenues were $77.5 million, the second largest quarter in our history.
This compares to 1999 fourth-quarter revenues of $90.3 million, which
were affected by an extraordinarily large promotion during the 1999
holiday season.
- - Net income was $4.7 million, compared to $4.7 million in 1999.
- - Diluted earnings per share were $0.57 versus $0.70 in 1999. Without the
private equity transaction, fully diluted earnings per share would have
been $0.69.
- - EBITDA was $7.2 million, compared to $8.2 million in 1999.
Recorded in the fourth quarter of 2000 was a non-cash charge totaling
$8.5 million ($7.5 million net of tax effects) for the write-down of goodwill
and other intangibles associated with the 1998 acquisition of Corinthian
Marketing, Inc. This was partially offset by $418,000 ($252,000 net of tax
effects) in restructuring gains related to a partial reversal of a 1998
restructuring charge. Including the charge and restructuring gain, the fourth
quarter closed with a net loss of $2.5 million or $0.46 per diluted share.
"Corinthian founded the Headliners(R) brand of retail sports
collectibles," explained Mr. Kurz. "The sports collectibles market has slowed
considerably in recent years. We plan to decrease the marketing of the
Headliners(R) brand in the future and have decided not to pursue new
Headliners(R) licenses or renew expiring licenses, consistent with our corporate
strategy of focusing primarily on marketing services."
Full-year results were also affected by a charge of $200,000 (net of
tax effects) to reflect a discount for the time value of money relating to the
sale of receivables owed to the company by AmeriServe Food Distribution, Inc.,
which filed for bankruptcy on January 31, 2000. The 1999 comparative results
exclude a similar AmeriServe charge of $614,000 (net of tax effects), taken in
the fourth quarter and restructuring gains (totaling $365,000 net of tax
effects) posted in the second and third quarters.
Including the gains and charges taken in 2000, net income for the full
year was $5.3 million and diluted earnings per share were $0.68.
"Our promotions business did extremely well in 2000," said Mr. Kurz.
"We were able to surpass the promotions revenue posted in the prior year, a
significant accomplishment considering that 1999 ended with one of the largest
promotional programs in history. We generated record sales from Burger King
Corporation, our largest client, and sales from other clients increased 31% in
the fourth quarter and 13% for the year. This top-line growth, combined with
gross margins that increased 90 basis points and good expense management,
contributed to strong earnings increases for the year. Importantly, our
performance generated more than $22 million in cash from operations in 2000."
Regarding Equity's consumer products business, which represents
approximately 10% of total revenues, Mr. Kurz commented: "The division was
affected in the fourth quarter by the sluggish holiday retail environment. We're
pleased that the products sold-through and our retail partners are not burdened
with excess inventory, but the order volume was lower than originally
anticipated due to the cancellation of purchase orders in late November and
December. Nevertheless, annual sales for the division grew 7.7% compared to last
year, excluding 1999 close-outs, and the division's profitability increased,
with gross margins rising from 30.6% to 32.5%."
STOCK REPURCHASE AND SHARE COUNT UPDATE
On July 20, 2000, the company announced that its board of directors
authorized the expenditure of up to $10 million over 12 months to repurchase
shares of the company's common stock. As of December 31, 2000, the company had
spent approximately $3.6 million to purchase 285,784 shares at an average price
of $12.55 per share.
"We plan to continue the stock repurchase program, as market
conditions warrant, while continuing to pursue our initiatives for aggressive
growth," said Mr. Kurz.
The number of diluted weighted average shares outstanding was 6.3
million for the fourth quarter and 6.5 million for the full year. For the fourth
quarter, as a result of the net loss, the calculation of diluted weighted
average shares outstanding excludes the impact of stock options and the assumed
conversion of preferred stock, in accordance with accounting principles
generally accepted in the United States ("GAAP"). For the full year, based on
the level of net income, the calculation of diluted weighted average shares
outstanding includes the impact of dilutive stock options but excludes the
impact of the assumed conversion of preferred stock, in accordance with GAAP.
Excluding the effect of the impairment and other charges on net
income, however, the number of diluted weighted average shares outstanding would
have been 8.2 million for the fourth quarter and 7.6 million for the year. The
company expects the share-count to be approximately 8.2 million going forward.
OUTLOOK
For the first quarter of 2001, the company expects sales to range from
$27 million to $30 million, pre-tax income to be between $1.5 million and $2.0
million, and fully diluted earnings per share to be between $0.08 and $0.12.
This includes dilution resulting from the private equity investment, which was
not in place in the first quarter of last year. If the transaction had not
occurred, for comparison purposes, expected first-quarter diluted earnings per
share would be from $0.11 to $0.15.
"The first quarter of 2000 generated sales that were 58% higher than
our previous first-quarter record," said Mr. Kurz. "In 2001, we expect the first
quarter's revenues to surpass those of all previous comparable periods except
2000."
Mr. Kurz continued, "we are aggressively pursuing the growth
initiatives introduced last year and are in an excellent position to boost the
value of our franchise. We have the most active new business pipeline in our
history and have already announced three significant new clients this year.
"Our new-business efforts are being complemented by an active mergers
and acquisitions program. The balance sheet is stronger than ever, with no debt,
$37.5 million in cash and marketable securities, a current ratio of 2.3 and
working capital at $52 million, a historic high. Aided by our solid financial
position and an intense commitment to customer service, 2001 is
expected to be a transformational year for Equity Marketing."
The company will host a conference call today at 5:00 p.m. Eastern
time to discuss the financial results and 2001 outlook. All interested parties
may listen to the live call or a replay via the Internet at
www.equity-marketing.com. To listen to the live call, visit the web site at
least 15 minutes early to download any necessary software.
Equity Marketing, Inc., a leading marketing services company, designs
and produces custom promotional programs that build sales and brand value for
retailers, restaurant chains and consumer goods companies such as Burger King
Corporation, The Coca-Cola Company, CVS/pharmacy and others. The company
complements its core promotions business by developing and marketing distinctive
consumer products, based on trademarks it owns or classic licensed properties,
which are sold through specialty and mass-marketing retailers. More information
about Equity Marketing is available on the company's web site at
WWW.EQUITY-MARKETING.COM.
CERTAIN EXPECTATIONS AND PROJECTIONS REGARDING THE FUTURE PERFORMANCE
OF EQUITY MARKETING, INC. DISCUSSED IN THIS NEWS RELEASE ARE FORWARD-LOOKING AND
ARE MADE UNDER THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995. THESE EXPECTATIONS AND PROJECTIONS ARE BASED ON CURRENTLY
AVAILABLE COMPETITIVE, FINANCIAL AND ECONOMIC DATA ALONG WITH THE COMPANY'S
OPERATING PLANS AND ARE SUBJECT TO FUTURE EVENTS AND UNCERTAINTIES. MANAGEMENT
CAUTIONS THE READER THAT THE FOLLOWING FACTORS, AMONG OTHERS, COULD CAUSE THE
COMPANY'S ACTUAL CONSOLIDATED RESULTS OF OPERATIONS AND FINANCIAL POSITION IN
2001 AND THEREAFTER TO DIFFER SIGNIFICANTLY FROM THOSE EXPRESSED IN
FORWARD-LOOKING STATEMENTS: THE COMPANY'S DEPENDENCE ON A SINGLE CUSTOMER; THE
SIGNIFICANT QUARTER-TO-QUARTER VARIABILITY IN THE COMPANY'S REVENUES AND NET
INCOME; THE COMPANY'S DEPENDENCE ON THE POPULARITY OF LICENSED ENTERTAINMENT
PROPERTIES AND THE ABILITY TO LICENSE, DEVELOP AND MARKET NEW PRODUCTS; THE
COMPANY'S DEPENDENCE ON FOREIGN MANUFACTURERS; THE COMPANY'S NEED FOR ADDITIONAL
WORKING CAPITAL; THE NEGATIVE RESULTS OF LITIGATION, GOVERNMENTAL PROCEEDINGS OR
ENVIRONMENTAL MATTERS; AND THE POTENTIAL NEGATIVE IMPACT OF PAST OR FUTURE
ACQUISITIONS. THE COMPANY UNDERTAKES NO OBLIGATION TO PUBLICLY RELEASE THE
RESULTS OF ANY REVISIONS TO FORWARD-LOOKING STATEMENTS, WHICH MAY BE MADE TO
REFLECT EVENTS OR CIRCUMSTANCES AFTER THE DATE HEREOF OR TO REFLECT THE
OCCURRENCE OF UNANTICIPATED EVENTS. THE RISKS HIGHLIGHTED HEREIN SHOULD NOT BE
ASSUMED TO BE THE ONLY ITEMS THAT COULD AFFECT THE FUTURE PERFORMANCE OF THE
COMPANY.
WHILE MANY IN THE FINANCIAL COMMUNITY CONSIDER EBITDA TO BE AN
IMPORTANT MEASURE OF COMPARATIVE OPERATING PERFORMANCE, IT SHOULD BE CONSIDERED
IN ADDITION TO, BUT NOT AS A SUBSTITUTE FOR OR SUPERIOR TO, OPERATING INCOME,
NET EARNINGS, CASH FLOW AND OTHER MEASURES OF FINANCIAL PERFORMANCE PREPARED IN
ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES.
###
(tables follow)
EQUITY MARKETING, INC.
Condensed Consolidated Statements of Income
(In thousands, except share and per share data)
THREE MONTHS ENDED TWELVE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
------------ ------------
(UNAUDITED) (UNAUDITED)
2000 1999 2000 1999
------------- ------------- ------------ -------------
Revenues $ 77,470 $ 90,261 $ 232,287 $ 227,063
Cost of sales 57,991 67,584 172,270 170,416
------------- ------------- ------------ -------------
Gross profit 19,479 22,677 60,017 56,647
Operating expenses:
Salaries, wages and benefits 4,733 6,001 17,610 17,350
Selling, general and administrative 8,263 9,109 23,075 22,829
AmeriServe bankruptcy bad debt expense -- 1,014 482 1,014
Impairment 8,504 -- 8,504 --
Restructuring (gain)/charge (418) 37 (418) (604)
------------- ------------- ------------ -------------
Total operating expenses 21,082 16,161 49,253 40,589
Income (loss) from operations (1,603) 6,516 10,764 16,058
Other income (expense) 629 80 1,375 (510)
------------- ------------- ------------ -------------
Income before provision for income taxes (974) 6,596 12,139 15,548
Provision for income taxes 1,563 2,553 6,797 6,134
------------- ------------- ------------ -------------
Net income (loss) $ (2,537) $ 4,043 $ 5,342 $ 9,414
============= ============= ============ =============
Preferred stock dividends 375 -- 956 --
------------- ------------- ------------ -------------
Net income (loss) available to common $ (2,912) $ 2,772 $ 4,386 $ 9,414
stockholders
============= ============= ============ =============
Basic earnings per share
Earnings (loss) per share $ (0.46) $ 0.65 $ 0.70 $ 1.51
============= ============= ============ =============
Weighted average shares outstanding 6,266,811 6,247,248 6,275,590 6,227,842
============= ============= ============ =============
Diluted earnings per share
Earnings (loss) per share $ (0.46) $ 0.61 $ 0.68 $ 1.46
============= ============= ============ =============
Weighted average shares outstanding 6,266,811 6,600,100 6,460,557 6,440,738
============= ============= ============ =============
EQUITY MARKETING, INC.
Condensed Consolidated Balance Sheets
(In thousands)
ASSETS DECEMBER 31, DECEMBER 31,
2000 1999
(UNAUDITED)
----------------- ------------------
Cash and cash equivalents $ 32,405 $ 7,131
Marketable securities 5,100 --
Accounts receivable, net 30,137 37,385
Note receivable 8,322 5,024
Inventory 11,744 8,742
Prepaids and other current assets 4,828 5,696
----------------- ------------------
CURRENT ASSETS 92,536 63,978
Fixed assets, net 4,263 4,907
Intangible assets, net 12,459 21,846
Note receivable -- 5,491
Other assets 1,284 1,022
----------------- ------------------
TOTAL ASSETS $ 110,542 $ 97,244
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LIABILITIES AND
STOCKHOLDERS' EQUITY ----------------- ------------------
Short-term debt $ -- $ 12,500
Accounts payable 18,421 21,726
Accrued liabilities 21,975 18,707
----------------- ------------------
CURRENT LIABILITIES 40,396 52,933
Long-term liabilities 1,856 2,286
----------------- ------------------
TOTAL LIABILITIES 42,252 55,219
Mandatory redeemable preferred stock 23,049 --
Stockholders' equity 45,241 42,025
----------------- ------------------
TOTAL LIABILITIES AND $ 110,542 $ 97,244
STOCKHOLDERS' EQUITY
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