EXHIBIT 99.1
CONTACT: Larry Madden Lisa Mueller
Chief Financial Officer Investor Relations
Equity Marketing, Inc. Financial Relations Board
(323) 932-4315 (310) 442-0599
FOR IMMEDIATE RELEASE
EQUITY MARKETING REPORTS FIRST QUARTER RESULTS
COMPANY RECORDS SECOND HIGHEST FIRST QUARTER REVENUE IN ITS HISTORY
LOS ANGELES, APRIL 25, 2001 - Equity Marketing, Inc. (Nasdaq: EMAK) today
announced its financial results for the first quarter ended March 31, 2001.
"We are pleased that in a difficult economic environment, we
achieved the second highest first quarter sales number in the history of the
company," said Equity Marketing Chairman and Chief Executive Officer Don Kurz.
FIRST QUARTER HIGHLIGHTS
o Revenues were $28.0 million, compared with $43.5 million in
the same period in 2000. Revenues in the first quarter of 2000
were positively impacted by an extraordinary promotion during
this time period.
o Promotions revenue for the quarter represented 83% of total
revenue, while consumer products revenue represented 17% of
total revenue.
o Net income was $0.9 million, compared with $1.5 million
(excluding charges) in the same period in 2000.
o Diluted earnings per share were $0.09, compared with $0.23
(excluding charges) in the same period in 2000. Earnings per
share comparisons are affected by a private equity transaction
completed in the second quarter of 2000; without this
investment, earnings per share for the first quarter of 2001
would have been $0.12.
o Gross margin increased to 29.2% in the first quarter of 2001
from 23.6% in the prior year.
o SG&A expenses decreased to $3.7 million from $4.3 million
(excluding charges) in the prior year quarter as the company
continued to aggressively manage its costs.
"The unusual promotion activity that boosted our first quarter
2000 revenues makes year-over-year comparisons for our overall results difficult
and belies the significant progress we have made in key areas," said Mr. Kurz.
"Most notably, revenue from our consumer products division increased 49% in the
first quarter as compared to last year. And while, as expected, our core
promotions revenue was down for the quarter, customer indications suggest a
strong year in our non-Burger King promotions business for 2001."
Growth in the consumer products division was primarily
attributable to a 29% increase in sales of Scooby-Doo products and a 104%
increase in sales of Tub Tints products.
"Scooby-Doo sales have picked up momentum as we have broadened
the product line and increased its distribution. Tub Tints is benefiting from
strong sell-through and increased distribution outlets, and is now an everyday
item sold by major retailers such as Wal-Mart, Target and Toys R Us," said Mr.
Kurz.
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 March 31,
2001, the company had spent approximately $5.2 million to purchase 414,729
shares at an average price of $12.59 per share.
"With our strong cash position, we have ample resources to
continue the stock repurchase program, as market conditions warrant, while
pursuing M&A opportunities and other strategic growth initiatives," said Mr.
Kurz.
For purposes of computing earnings per share, the number of
diluted weighted average shares outstanding was 6.3 million for the first
quarter of 2001. In accordance with accounting principles generally accepted in
the United States, based on the level of net income for the first quarter of
2001, the calculation of diluted earnings per share excludes the impact of the
assumed conversion of preferred stock. For the full year 2001, the company
expects its weighted shares outstanding to be approximately 8.2 million.
OUTLOOK
For the second quarter of 2001, the company currently expects
revenues to range from $27 million to $30 million and fully diluted earnings per
share to be between $0.08 and $0.12. Based on customer indications and business
trends, the company expects to see significant improvement in both sales and
earnings beginning in the third quarter of 2001.
The company also reiterated its previous guidance for the full
years 2001 and 2002. In 2001, the company expects revenues to be between $185
million and $215 million, and fully diluted earnings per share to range from
$1.05 to $1.40. Revenues in 2002 are expected to range from $250 million to $300
million, and fully diluted earnings per share are expected to be between $1.70
and $2.00.
"Although the temporary downturn in our sales to Burger King
announced earlier this month will impact our 2001 results - with the most
significant impact occurring in the second quarter -- I am pleased to report
that all other aspects of our business are proceeding in accordance with or
surpassing our expectations," said Mr. Kurz. "Throughout the remainder of the
year, we expect to achieve strong quarter-over-quarter growth in all of these
non-Burger King related areas."
"We anticipate that our consumer products business will
continue to perform well as we add distribution outlets and capitalize on the
incremental domestic and international revenue opportunities presented by the
release of a Scooby-Doo feature film by Warner Bros. in 2002. In addition, based
on indications from both new and existing clients, we anticipate that our
non-Burger King promotions business will achieve strong growth in all the
remaining quarters of 2001 as well.
"Our client roster is the strongest in the company's history,
as our new business development efforts have produced five client wins so far
this year. We continue to maintain an exceptional retention rate with our
existing clients, as we have been doing business with most of our major clients
for over five years.
"Finally, our solid balance sheet, with a current ratio of
4.1, working capital of $51.6 million, $41.7 million in cash and no debt,
combined with our recently announced credit facility with Bank of America,
provides the company with ample resources to execute our strategic growth
initiatives and mergers and acquisitions activity. Our resources will be further
strengthened by the strong cash flow we anticipate generating in both 2001 and
2002.
"With so many elements of our business trending positively, we
believe that we are well-positioned to produce a strong second half in 2001 and
significantly build on that momentum in 2002 when we anticipate that all
elements of our business will perform at strong levels. Our primary focus at
Equity Marketing is creating value for our shareholders, and with a seven-year
average return on equity of approximately 28%, we have consistently delivered in
this regard. We are extremely proud of this track record and we fully anticipate
producing strong returns going forward."
The company will host a conference call today at 5:00 p.m.
ET/2:00 p.m. PT to discuss its first quarter 2001 financial results and
operational highlights. All interested parties may listen to the live call or
access a replay of the call via the Internet at WWW.EQUITY-MARKETING.COM. To
listen to the live call, visit the Web site at least 15 minutes prior to
download any necessary software.
Equity Marketing, Inc., a leading marketing services company
based in Los Angeles, 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-market
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.
FINANCIAL TABLES FOLLOW
EQUITY MARKETING, INC.
Condensed Consolidated Statements of Income
(In thousands, except share and per share data)
THREE MONTHS ENDED
MARCH 31
(UNAUDITED)
--------------------------------
2001 2000
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Revenues..................................................................... $ 28,027 $ 43,477
Cost of sales................................................................ 19,837 33,203
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Gross profit............................................................. 8,190 10,274
Operating expenses:
Salaries, wages and benefits............................................... 3,729 3,401
Selling, general and administrative........................................ 3,715 4,337
AmeriServe bankruptcy bad debt expense..................................... -- 482
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Total operating expenses................................................. 7,444 8,220
Income from operations................................................... 746 2,054
Other income, net ........................................................... 779 85
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Income before provision for income taxes................................. 1,525 2,139
Provision for income taxes................................................... 610 845
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Net income............................................................... $ 915 $ 1,294
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Preferred stock dividends.................................................... 375 6
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Net income available to common stockholders.............................. $ 540 $ 1,288
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Basic net income per share
Earnings per share........................................................ $ 0.09 $ 0.21
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Weighted average shares outstanding ...................................... 6,106,644 6,236,718
============== ==============
Diluted net income per share
Earnings per share........................................................ $ 0.09 $ 0.20
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Weighted average shares outstanding....................................... 6,310,608 6,473,471
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EQUITY MARKETING, INC.
Condensed Consolidated Balance Sheets
(In thousands)
MARCH 31, DECEMBER 31,
ASSETS 2001 2000
------------- --------------
(UNAUDITED)
Cash and cash equivalents.......................................................$ 41,737 $ 32,405
Marketable securities........................................................... -- 5,100
Accounts receivable, net........................................................ 9,474 30,137
Note receivable................................................................. 6,311 8,322
Inventory....................................................................... 6,082 11,744
Prepaids and other current assets............................................... 4,634 4,828
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CURRENT ASSETS............................................................... 68,238 92,536
Fixed assets, net............................................................... 4,142 4,263
Intangibles assets, net......................................................... 12,275 12,459
Other assets.................................................................... 1,869 1,284
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TOTAL ASSETS.................................................................$ 86,524 $ 110,542
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LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term debt.................................................................$ -- $ --
Accounts payable................................................................ 7,220 18,421
Accrued liabilities............................................................. 9,400 21,975
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CURRENT LIABILITIES.......................................................... 16,620 40,396
Long-term liabilities........................................................... 1,842 1,856
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TOTAL LIABILITIES............................................................ 18,462 42,252
Mandatory redeemable preferred stock............................................ 23,049 23,049
Stockholders' equity............................................................ 45,013 45,241
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY...................................$ 86,524 $ 110,542
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