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, February 26, 2004
POINT.360 ANNOUNCES FOURTH QUARTER AND YEAR-END 2003 RESULTS
Point.360 reports net income for calendar 2003 of $3.7 million ($0.39 per
share) before special charges ($3.1 million or $0.33 per share after special
charges) vs. $2.8 million ($0.30 per share) in the prior year.
Point.360 (Nasdaq: PTSX), a leading provider of integrated media management
services, today announced results for the three- and twelve-month periods ended
December 31, 2003.
Haig S. Bagerdjian, the Company's Chairman, President and Chief Executive
Officer, said: "We are pleased with the Company's performance. Our profitability
and strong positive cash flow have enabled us to reduce our net debt position by
$9 million during the year. Our focus in 2004 will be to build revenues to
leverage the full extent of our service offering."
REVENUES
Revenue for the fourth quarter ended December 31, 2003, totaled $15.1 million
compared to $17.9 million in the same quarter of 2002. The decline in the 2003
quarter is due to lower spot advertising distribution for studio film releases
as the result of delays of new feature introductions, and the late 2002/early
2003 completion of a large film re-mastering project which contributed to higher
fourth quarter 2002 sales.
Revenues for the year ended December 31, 2003 were $64.9 million, down 5% from
$68.4 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 year to year.
GROSS MARGIN
In the fourth quarter of 2003, gross margin on sales was 39% compared to 40% in
the prior year's fourth quarter.
For the entire year, gross margin was 39% of sales as compared to 38% in 2002.
In 2003, the Company achieved $25.2 million of gross profit vs. $26.2 million in
2002.
SELLING, GENERAL AND ADMINISTRATIVE AND OTHER EXPENSES
In the fourth quarter, selling, general and administrative expenses ("SG&A")
decreased by 16% from the same period last year. For the fourth quarter of 2003,
SG&A expenses were $4.4 million, or 29% of sales, compared to $5.2 million, or
29% of sales in the fourth quarter of 2002.
For all of 2003, SG&A dollars spent decreased by 8% to 27% of sales as compared
to the prior year 28% of sales. In June 2003, the Company also wrote off
approximately $1.0 million of previously deferred expenses related to a proposed
acquisition and financing package, which is excluded from the above 2003 annual
percentage.
Interest expense decreased $0.2 million in the fourth quarter and $0.4 million
for all of 2003 compared to the same periods of last year because of lower debt
levels due to principal payments made since December 31, 2002.
During the quarter ended December 31, 2003, the Company realized a non-cash
credit of $119,000 compared to a fourth quarter 2002 non-cash credit of $117,000
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 all of 2003, the Company realized
a non-cash credit of $611,000 compared to a non-cash credit of $82,000 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. The hedge contract expired in November 2003 and there will be no
further accounting charges or credits related to the swap contract after that
date.
OPERATING INCOME (A)
Operating income decreased $0.4 million or 20% in the fourth quarter of 2003
compared to the same period last year due to lower sales. The Company's
operating income was $1.6 million in the 2003 quarter as compared to $2.0
million in the same quarter of the previous year.
For all of 2003, operating income before the special charge was $7.7 million, up
approximately 6% or $0.4 million from the $7.3 million achieved in the 2002
period. After the special charge, operating income was $6.7 million in the 2003
period.
NET INCOME (A)
For the fourth quarter of 2003, the Company reported net income of $0.8 million
($0.08 per diluted share) compared to a net profit of $0.9 million ($0.10 per
diluted share) in the same period last year. The Company recorded income tax
expense of $0.5 million in the 2003 quarter as compared to a $0.6 million
expense in the fourth quarter of last year.
For all of 2003, the Company reported net income of $3.1 million ($0.33 per
diluted share) compared to net income of $2.8 million ($0.30 per diluted share)
last year. The income tax expense in 2003 was $2.1 million (a 40% effective
rate); in 2002 the Company's tax expense was $2.0 million (a 42% effective
rate). Before special charges, the Company's net income was $3.7 million, or
$0.39 per share, in the 2003 period.
EBITDA AND FREE CASH FLOW BEFORE SPECIAL CHARGES (A)
In the fourth quarter, the Company's EBITDA (earnings before interest, taxes,
depreciation and amortization) was $3.1 million (21% of sales) compared to $3.4
million (19.0% of sales) in the 2002 period. For all of 2003, the Company's
EBITDA before special charges was $13.8 million (21% of sales) compared to $12.7
million (19.0% of sales) in 2002. Special charges refer to the write-off during
the 2003 period of deferred acquisition and financing costs.
In the 2003 fourth quarter, the Company's free cash flow (EBITDA before special
charges less interest, taxes and capital expenditures) was $2.0 million compared
to $1.2 million in the same quarter last year. Free cash flow before special
charges for all of 2003 was $8.4 million compared to $6.1 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 operating
income and net income which are the most directly comparable financial measures
under Generally Accepted Accounting Principles ("GAAP").
COMPUTATION OF OPERATING INCOME, NET INCOME, EBITDA
AND FREE CASH FLOW BEFORE SPECIAL CHARGES (A)
THREE MONTHS ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
------------------ -----------------
2002 2003 2002 2003
---- ---- ---- ----
(in thousands)
GAAP operating income $ 1,964 $ 1,576 $ 7,270 $ 6,708
Add back:
Special charge - - - 1,002
-------- -------- -------- --------
Non-GAAP operating income
before special charges $ 1,964 $ 1,576 $ 7,270 $ 7,710
======== ======== ======== ========
GAAP net income $ 920 $ 812 $ 2,817 $ 3,149
Add back:
Special charges, net of tax benefit - - - 600
-------- -------- -------- --------
Non-GAAP net income before
special charges $ 920 $ 812 $ 2,817 $ 3,749
======== ======== ======== ========
GAAP net income $ 920 $ 812 $ 2,817 $ 3,149
Interest 585 427 2,528 2,056
Income taxes 576 456 2,007 2,114
Depreciation 1,316 1,453 5,258 5,464
Amortization 13 - 81 35
-------- -------- -------- --------
Non-GAAP EBITDA 3,410 3,148 12,691 12,818
Special charges - - - 1,002
-------- -------- -------- --------
Non-GAAP EBITDA before special charges $ 3,410 $ 3,148 $ 12,691 $ 13,820
======== ======== ======== ========
Non-GAAP EBITDA $ 3,410 $ 3,148 $ 12,691 $ 12,818
Deduct:
Interest (585) (427) (2,528) (2,056)
Income taxes (576) (456) (2,007) (2,114)
Capital expenditures (1,014) (240) (2,018) (1,223)
-------- -------- -------- ---------
Non-GAAP free cash flow 1,235 2,025 6,138 7,425
Special charges - - - 1,002
-------- -------- -------- ---------
Non-GAAP free cash flow before
special charges $ 1,235 $ 2,025 $ 6,138 $ 8,427
======== ======== ======== =========
- ------------------------------------
(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 YEAR ENDED
DECEMBER 31, DECEMBER 31,
------------------ -----------------
2002 2003 2002 2003
---- ---- ---- ----
Revenues $ 17,903,000 $ 15,125,000 $ 68,419,000 $ 64,900,000
Cost of goods sold (10,763,000) (9,191,000) (42,172,000) (39,670,000)
------------ ------------ ------------ ------------
Gross profit 7,140,000 5,934,000 26,247,000 25,230,000
Selling, general and administrative expense (5,176,000) (4,358,000) (18,977,000) (17,520,000)
Write-off of deferred acquisition and
financing costs - - - (1,002,000)
------------ ------------ ------------ ------------
Operating income 1,964,000 1,576,000 7,270,000 6,708,000
Interest expense, net (585,000) (427,000) (2,528,000) (2,056,000)
Derivative fair value change 117,000 119,000 82,000 611,000
------------ ------------ ------------ ------------
Income (loss) before income taxes 1,496,000 1,268,000 4,824,000 5,263,000
(Provision for) benefit from income taxes (576,000) (456,000) (2,007,000) (2,114,000)
------------ ------------ ------------ ------------
Net income (loss) $ 920,000 $ 812,000 $ 2,817,000 $ 3,149,000
============ ============ ============ ============
Earnings (loss) per share:
Basic:
Net income (loss) $ 0.10 $ 0.09 $ 0.31 $ 0.35
Weighted average number of shares 9,014,232 9,111,399 9,013,224 9,067,446
============ ============ ============ ============
Diluted:
Net income (loss) $ 0.10 $ 0.08 $ 0.30 $ 0.33
Weighted average number of shares
including the dilutive effect of stock options 9,233,651 9,866,290 9,376,707 9,554,847
============ ============ ============ ============
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.