SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 9, 2004
eGames, Inc.
(Exact name of registrant as specified in its charter)
Pennsylvania 0-27102 23-2694937
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(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
2000 Cabot Blvd. West, Suite 110, Langhorne, PA 19047-1833
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (215) 750-6606
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(Former name or former address, if changed since last report)
Item 7(c). Exhibits
Exhibit
Number Description
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99.1 Press Release dated August 9, 2004
Item 12. Results of Operations and Financial Condition
On August 9, 2004, eGames, Inc. (the "Company") issued a press release
announcing its financial results for the quarter and fiscal year ended June 30,
2004. A copy of the press release is furnished as Exhibit 99.1.
The information in this report shall not be deemed to be "filed" for purposes of
Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), or otherwise subject to the liability of that section, and shall not be
incorporated by reference into any registration statement or other document
filed under the Securities Act of 1933, as amended, or the Exchange Act, except
as shall be expressly set forth by specific reference in such filing.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
eGames, Inc.
By:/s/ Thomas W. Murphy
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Thomas W. Murphy, Vice President and
Chief Financial Officer
Dated: August 9, 2004
EXHIBIT 99.1
At eGames, Inc.
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Jerry Klein, President & CEO
(215) 750-6606 (Ext. 118)
Tom Murphy, Vice President & CFO
(215) 750-6606 (Ext. 113)
For Immediate Release
eGames Announces Fiscal 2004 Financial Results
Operating Income Increases 21%
Langhorne, PA - August 9, 2004 - eGames, Inc. (OTCBB: EGAM), a publisher of
Family Friendly(TM), affordable consumer entertainment PC software games, today
announced financial results for the fiscal fourth quarter and year ended June
30, 2004.
Year ended June 30, 2004:
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Net sales increased by $827,000, or 11%, to $8,038,000 for the year ended June
30, 2004, compared to $7,211,000 for the prior fiscal year. Operating income
increased 21% to $1,822,000 for the year ended June 30, 2004, compared to
$1,507,000 for fiscal 2003. Net income was $1,740,000, or $0.16 per diluted
share, for the year ended June 30, 2004, compared to $1,592,000, or $0.16 per
diluted share, for the prior year.
Contributing to the $827,000 increase in net sales was a $1,555,000 increase in
sales of eGames software titles through software distributors to major North
American mass-merchant and specialty retailers, warehouse clubs and office
superstores. Partially offsetting this increase in net sales was a $397,000
decrease in direct sales to software retailers and a $273,000 decrease in
inventory liquidation sales.
Quarter ended June 30, 2004:
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Net sales decreased by $158,000, or 8%, to $1,717,000 for the quarter ended June
30, 2004, compared to $1,875,000 for the same quarter a year earlier. Operating
income decreased 52% to $273,000 for the quarter ended June 30, 2004, compared
to $571,000 for the year ago quarter. Net income decreased 59% to $262,000, or
$0.02 per diluted share, for the quarter ended June 30, 2004, compared to
$642,000, or $0.06 per diluted share, for the same quarter a year earlier.
The $158,000 decrease in net sales resulted primarily from the prior year's
comparable quarter benefiting from the sales of various higher priced box titles
retail priced at $19.99, compared to this year's fourth quarter sales which were
comprised primarily of $9.99 retail priced jewel case titles. This quarter's
titles were primarily within our historically successful core game genres, such
as Mahjongg, Puzzles, Game Collections, Mini-golf, Solitaire, and Card and Board
games, among others.
Fiscal 2004 - Full Year Financial Highlights:
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o Net sales increased by 11% to $8.0 million, up from $7.2 million for
fiscal 2003;
o Net sales to software distributors increased by $1.6 million, or 31%
over fiscal 2003;
o Gross profit increased by 10% to $4.7 million, up from $4.3 million in
fiscal 2003;
o Gross profit margin decreased to 59%, down from 60% during fiscal 2003;
o Operating income increased by 21% to $1.8 million, up from $1.5 million
for fiscal 2003;
o Operating margin increased to 23%, up from 21% in fiscal 2003;
o Income tax provision was $83,000, compared to an income tax benefit of
$121,000 in fiscal 2003; and
o Net income increased to $1.7 million, up from $1.6 million for fiscal
2003.
Fiscal 2004 financial results benefited from an increase in overall net sales
that resulted from strong consumer demand for the Company's software titles at
leading North American mass-merchant retailers. This increase in net sales was
partially offset by reductions in less profitable direct sales to various
software retailers and inventory liquidators. Additionally, our gross profit
margin decreased by 1% primarily as a result of increased product costs
associated with various box titles containing multiple CD's and the requirement
by certain mass-merchant retailers to include security sensor tags on the
Company's products that occurred during fiscal 2004, along with an increase in
the provision for inventory obsolescence related to end of lifecycle products.
The following table represents the Company's net sales by distribution channel
for the quarters and years ended June 30, 2004 and 2003, respectively:
Net Sales by Distribution Channel
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(amounts in thousands)
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Years ended
June 30,
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Increase %
Distribution Channel 2004 2003 (Decrease) Change
- ------------------------ -------- -------- -------- ------
Software distributors $ 6,522 $ 4,967 $ 1,555 31%
Software retailers 660 1,057 (397) (38%)
Licensees 425 429 (4) (1%)
Internet 246 199 47 24%
Inventory liquidators 166 439 (273) (62%)
Other 19 120 (101) (84%)
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Total Net Sales $ 8,038 $ 7,211 $ 827 11%
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Quarters ended
June 30,
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Increase %
Distribution Channel 2004 2003 (Decrease) Change
- ------------------------ -------- -------- -------- ------
Software distributors $ 1,354 $ 1,397 ($ 43) (3%)
Software retailers 130 208 (78) (38%)
Licensees 107 115 (8) (7%)
Internet 54 45 9 20%
Inventory liquidators 55 110 (55) (50%)
Other 17 - 0 - 17 n/m
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Total Net Sales $ 1,717 $ 1,875 ($ 158) (8%)
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The following table represents the Company's summary balance sheet information
as of June 30, 2004 and 2003, respectively:
Summary Balance Sheet Information
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(amounts in thousands)
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As of
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June 30, June 30, Increase
Description 2004 2003 (Decrease)
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Cash and cash equivalents $ 1,742 $ 1,024 $ 718
Accounts receivable, net 1,534 1,149 385
Inventory, net 814 500 314
Prepaid and other expenses 440 237 203
Furniture and equipment, net 75 19 56
Intangibles and other assets, net 24 - 0 - 24
Accounts payable (441) (573) (132)
Accrued expenses (616) (610) 6
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Stockholders' equity $ 3,572 $ 1,746 $ 1,826
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Comments:
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"Throughout fiscal 2004, we continued to leverage our prior business successes,"
said Jerry Klein, President and Chief Executive Officer. "During fiscal 2004, we
earned operating income of approximately $1.8 million, which exceeded the $1.5
million of operating income we earned during fiscal 2003. We accomplished this
improvement in profitability by increasing our sales through expanded
distribution that was generated by strong consumer demand for our PC game
titles, in addition to increasing our operating margin by holding down the
growth of our operating expenses. Additionally, we continued to strengthen our
balance sheet and remain free of debt."
Mr. Klein further commented that, "an important sign of the increased consumer
demand for eGames titles at retail has been the strong performance of eGames
products in weekly NPD rankings based on units sold at retail. During fiscal
2004, eGames' Drop! and 251 Games Collectors Edition ranked within the top 10 PC
games sold at retail based on NPD Techworld, in addition to other eGames titles
being ranked within the top 50 PC games sold at retail. During fiscal 2004,
supported by this strong consumer demand for our PC game titles, we have
continued to enjoy increased sales at many of the major North American
retailers, such as Wal-Mart, Target, Best Buy, Office Max, Circuit City, Sam's
Club and BJ's."
About eGames, Inc.
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eGames, Inc., headquartered in Langhorne, PA, publishes and markets a
diversified line of Family Friendly(TM), affordable consumer entertainment PC
software games. The Company promotes the eGames(TM) brand in order to generate
customer loyalty, encourage repeat purchases and differentiate eGames software
products to retailers and consumers. eGames also publishes and markets
RealAge(R) Games & Skills, a collection of PC software activities and games
designed to help build and maintain mental sharpness. RealAge Games & Skills
provides information and knowledge about aging gathered from over twenty-five
years of research funded by the National Institute on Aging. Additional
information regarding eGames, Inc. and RealAge Games & Skills can be found at
www.egames.com and www.realagegames.com. eGames -- Where the "e" is for
Everybody!(R)