NEWS BULLETIN EXHIBIT 99
FOR FURTHER INFORMATION:
POINT.360
7083 HOLLYWOOD BLVD. SUITE 200
HOLLYWOOD, CA 90028
Nasdaq: PTSX
AT THE COMPANY:
Alan Steel
Executive Vice President
(323) 860-6206
FOR IMMEDIATE RELEASE - HOLLYWOOD, CA, AUGUST 8, 2003
POINT.360 REPORTS $0.9 MILLION ($0.09 PER SHARE) SECOND QUARTER 2003 PROFIT
BEFORE SPECIAL CHARGES.
o Company reports income of $0.3 million ($0.03 per share) after special
charges vs. $0.4 million ($0.05 per share) in the prior year quarter.
o Company writes off deferred assets associated with terminated proposed
acquisition and financing transactions.
o Company delivers six-month net income of $1.9 million ($0.20 per share)
before special charges; $1.3 million ($0.14 per share) after special
charges compared to $1.1 million ($0.12 per share) in the prior year.
o EBITDA before special charges increases 28% and 15% in the quarter and
six-month periods ended June 30, 2003 from 2002 levels.
Point.360 (Nasdaq: PTSX), a leading provider of integrated media management
services, today announced results for the three- and six-month periods ended
June 30, 2003.
Haig S. Bagerdjian, the Company's Chairman, President and Chief Executive
Officer, said: "We are strengthening our operating model with continued margin
and cost improvements. Except for the special charge associated with the
termination of acquisition and related financing activities, our second quarter
results show significant improvement over the same period last year. Our
continuing strategy is to leverage our asset and talent base to fulfill our
customer service needs."
REVENUES
Revenue for the second quarter ended June 30, 2003, totaled $15.8 million
compared to $16.7 million in the same quarter of 2002, a decrease of 6%.
Revenues for the six months ended June 30, 2003 were $33.1 million, down 1% from
$33.6 million in the 2002 period. Sales to studio and advertising clients are
dependent on the number and timing of motion picture and advertising campaign
release schedules, which releases can vary from quarter to quarter.
GROSS MARGIN
In the second quarter of 2003, gross margin increased by 1% of sales. Gross
margin on sales was 37% in the 2003 second quarter compared to 36% in the prior
year's second quarter.
For first half of 2003, gross margin was 37% of sales the same as the 2002
period. For both the 2003 and 2002 periods, the Company achieved $12.3 million
of gross profit.
SELLING, GENERAL AND ADMINISTRATIVE AND OTHER EXPENSES
In the second quarter, selling, general and administrative expenses ("SG&A")
decreased by 11% from the same period last year. For the second quarter of 2003,
SG&A expenses were $4.0 million, or 25% of sales, compared to $4.5 million, or
27% of sales in the second quarter of 2002.
For the first six months of 2003, SG&A decreased by 2% of sales to 25% as
compared to the prior year 27% of sales. In June 2003, the Company wrote off
approximately $1.0 million of previously deferred expenses related to a proposed
acquisition and financing package.
Interest expense decreased $0.1 million in the second quarter and $0.2 million
for the first six months of 2003 compared to the same periods of last year
because of lower debt levels due to principal payments made since June 30, 2002.
During the quarter ended June 30, 2003, the Company realized a non-cash credit
of $166,000 compared to a second quarter 2002 non-cash charge of $158,000 for
changes in the fair value of a derivative interest rate swap contract between
the beginning and end of each period and amortization of a cumulative-effect
adjustment made in 2001. For the first six months of 2003, the Company realized
a non-cash credit of $311,000 compared to a non-cash credit of $18,000 in the
2002 period. These amounts were recorded as required by Statement of Financial
Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging
Activities. By the end of the hedge contract in November 2003, the amounts
recognized as expense during the contract period will be taken back into income
as the contract will then have no further theoretical value, provided that the
contract continues to the end of the term.
OPERATING INCOME (A)
Before the special charge, operating income increased $0.3 million or 17.8% in
the second quarter of 2003 compared to the same period last year due to lower
SG&A expenses. The Company's operating income before the special charge was $1.9
million in the 2003 quarter as compared to $1.6 million in the same quarter of
the previous year.
For the first six months of 2003, operating income before the special charge was
$3.9 million, up approximately 21% or $0.7 million from the $3.2 million
achieved in the 2002 period. After the special charge, operating income was $2.9
million in the 2003 period.
NET INCOME (A)
For the second quarter of 2003, the Company reported net income of $0.3 million
($0.03 per share) compared to a net profit of $0.4 million ($0.05 per share) in
the same period last year. The Company recorded income tax expense of $0.2
million in the 2003 quarter as compared to a $0.3 million expense in the second
quarter of last year. Before special charges, the Company's net income was $0.9
million, or $0.09 per share, in the 2003 quarter.
For the first six months of 2003, the Company reported net income of $1.3
million ($0.14 per diluted share) compared to net income of $1.1 million ($0.12
per diluted share) last year. The income tax expense in 2003 was $0.9 million (a
41% effective rate); in 2002 the Company's tax expense was $0.8 million (a 43%
effective rate). Before special charges, the Company's net income was $1.9
million, or $0.20 per share, in the 2003 period.
EBITDA AND FREE CASH FLOW BEFORE SPECIAL CHARGES (A)
In the second quarter, the Company's EBITDA (earnings before interest, taxes,
depreciation and amortization) before special charges was $3.3 million (21.2% of
sales) compared to $2.6 million (15.7% of sales) in the 2002 period. For the
first six months of 2003, the Company's EBITDA before special charges was $6.8
million (20.0% of sales) compared to $6.0 million (17.7% of sales) in 2002.
Special charges refer to the write-off during the quarter ended June 30, 2003 of
deferred acquisition and financing costs.
In the 2003 second quarter, the Company's free cash flow (EBITDA before special
charges less interest, taxes and capital expenditures) was $2.3 million compared
to $1.2 million in the same quarter last year. Free cash flow before special
charges for the first half of 2003 was $4.1 million compared to $3.1 million in
2002.
The following table reconciles the Company's operating income, net income,
EBITDA and free cash flow before special charges to the Company's net income
which is the most directly comparable financial measure under Generally Accepted
Accounting Principles ("GAAP").
COMPUTATION OF OPERATING INCOME, NET INCOME, EBITDA AND FREE CASH FLOW BEFORE
SPECIAL CHARGES (A)
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2002 2003 2002 2003
---- ---- ---- ----
(in thousands)
Operating income $ 1,588 $ 868 $ 3,233 $ 2,925
Add back:
Special charge - 1,002 - 1,002
-------- -------- -------- --------
Operating income before special charges $ 1,588 $ 1,870 $ 3,233 $ 3,927
======== ======== ======== ========
Net income $ 434 $ 271 $ 1,085 $ 1,263
Add back:
Special charges, net of tax benefit - 600 - 600
-------- -------- -------- --------
Net income before special charges $ 434 $ 871 $ 1,085 $ 1,863
======== ======== ======== ========
Net income
Interest $ 642 $ 575 $ 1,319 $ 1,096
Income taxes 354 188 847 877
Depreciation 1,170 1,290 2,655 2,558
Amortization 22 18 44 35
-------- -------- -------- --------
EBITDA 2,622 2,342 5,950 5,829
Special charges - 1,002 - 1,002
-------- -------- -------- --------
EBITDA before special charges $ 2,622 $ 3,344 $ 5,950 $ 6,831
======== ======== ======== ========
EBITDA $ 2,622 $ 2,342 $ 5,950 $ 5,829
Deduct:
Interest (642) (575) (1,319) (1,096)
Income taxes (354) (188) (847) (877)
Capital expenditures (424) (285) (711) (750)
-------- -------- -------- --------
Free cash flow 1,202 1,294 3,073 3,106
Special charges - 1,002 - 1,002
-------- -------- -------- --------
Free cash flow before special charges $ 1,202 $ 2,296 $ 3,073 $ 4,108
======== ======== ======== ========
- ------------------------------------
(A) The measurements of operating income and net income before special
charges, and EBITDA and free cash flow before and after special charges
do not represent the results of operations or cash generated from
operating activities in accordance with GAAP, are not to be considered
as an alternative to operating income, net income or any other GAAP
measurements as a measure of operating performance and are not
necessarily indicative of cash available to fund all cash needs. Not all
companies calculate such statistics in the same fashion and, therefore,
the statistics may not be comparable to other similarly titled measures
of other companies. Management believes that these computations provide
useful information to investors because they are measures of the
Company's operations before special charges and cash flow available to
the Company to pay interest, repay debt, make acquisitions or invest in
new technologies. The Company is currently committed to use a portion of
its cash flows to service existing debt, if outstanding, and,
furthermore, anticipates making certain capital expenditures as part of
its business plan. Additionally, 2003 operating income, net income,
EBITDA and free cash flow amounts before special charges represent more
comparable figures to the same periods in 2002 since in the opinion of
management such charges are unusual items.
POINT.360
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2002 2003 2002 2003
---- ---- ---- ----
Revenues $ 16,710,000 $ 15,773,000 $ 33,557,000 $ 33,066,000
Cost of goods sold (10,634,000) (9,908,000) (21,229,000) (20,762,000)
------------ ------------ ------------ ------------
Gross profit 6,076,000 5,865,000 12,328,000 12,304,000
Selling, general and administrative expense (4,488,000) (3,995,000) (9,095,000) (8,377,000)
Write-off of deferred acquisition and
financing costs - (1,002,000) - (1,002,000)
------------ ------------ ------------ ------------
Operating income 1,588,000 868,000 3,233,000 2,925,000
Interest expense, net (642,000) (575,000) (1,319,000) (1,096,000)
Derivative fair value change (158,000) 166,000 18,000 311,000
------------ ------------ ------------ ------------
Income (loss) before income taxes 788,000 459,000 1,932,000 2,140,000
(Provision for) benefit from income taxes (354,000) (188,000) (847,000) (877,000)
------------ ------------ ------------ ------------
Net income (loss) $ 434,000 $ 271,000 $ 1,085,000 $ 1,263,000
============ ============ ============ ============
Earnings (loss) per share:
Basic:
Net income (loss) $ 0.05 $ 0.03 $ 0.12 $ 0.14
Weighted average number of shares 9,013,065 9,060,551 9,012,199 9,042,215
============ ============ ============ ============
Diluted:
Net income (loss) $ 0.05 $ 0.03 $ 0.12 $ 0.14
Weighted average number of shares
including the dilutive effect of stock options 9,325,662 9,408,030 9 ,244,311 9,336,976
============ ============ ============ ============
ABOUT POINT.360
Point.360 is one of the largest providers of video and film asset management
services to owners, producers and distributors of entertainment and advertising
content. Point.360 provides the services necessary to edit, master, reformat,
archive and ultimately distribute its clients' film and video content, including
television programming, spot advertising, feature films and movie trailers.
The Company delivers commercials, movie trailers, electronic press kits,
infomercials and syndicated programming, by both physical and electronic means,
to hundreds of broadcast outlets worldwide.
The Company provides worldwide electronic distribution, using fiber optics,
satellites, and the Internet.
Point.360's interconnected facilities in Los Angeles, New York, Chicago, Dallas
and San Francisco provide service coverage in each of the major U.S. media
centers. Clients include major motion picture studios such as Universal, Disney,
Fox, Sony Pictures, Paramount, MGM, and Warner Bros. and advertising agencies
TBWA Chiat/Day, Saatchi & Saatchi and Young & Rubicam.
FORWARD-LOOKING STATEMENTS
Certain statements in Point.360 press releases may contain "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such statements include, without limitation (i) statements concerning
the Company's projected revenues, earnings, cash flow and EBITDA; (ii)
statements of the Company's management relating to the planned focus on internal
growth and acquisitions; (iii) statements concerning reduction of facilities and
actions to streamline operations; (iv) statements on actions being taken to
reduce costs and improve customer service; and (v) statements regarding new
business and new acquisitions. Such statements are inherently subject to known
and unknown risks, uncertainties and other factors that may cause actual
results, performance or achievements of the Company to be materially different
from those expected or anticipated in the forward looking statements. In
addition to the factors described in the Company's SEC filings, including its
quarterly reports on Form 10-Q and its annual reports on Form 10-K, the
following factors, among others, could cause actual results to differ materially
from those expressed herein: (a) lower than expected net sales, operating income
and earnings; (b) less than expected growth, even following the refocus of the
Company on sales and streamlined operations; (c) actions of competitors
including business combinations, technological breakthroughs, new product
offerings and marketing and promotional successes; (d) the risk that anticipated
new business may not occur or be delayed; (e) the risk of inefficiencies that
could arise due to top-level management changes and (f) general economic and
political conditions that adversely impact the Company's customers' willingness
or ability to purchase or pay for services from the Company. The Company has no
responsibility to update forward-looking statements contained herein to reflect
events or circumstances occurring after the date of this release.