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, May 12, 2004
POINT.360 REPORTS $0.5 MILLION ($0.05 PER SHARE) FIRST QUARTER 2004 PROFIT
2003 first quarter results were income of $1.0 million ($0.11 per share)
Point.360 (Nasdaq: PTSX), a leading provider of integrated media management
services, today announced results for the three-month period ended March 31,
2004.
Haig S. Bagerdjian, the Company's Chairman, President and Chief Executive
Officer, said: "During the first quarter, we successfully completed a new credit
agreement with our banks which will reduce 2004 debt service by approximately
$3.7 million. Additionally, the consolidation of our vault facilities continued
on schedule with an expected third quarter completion date. While each of these
significant events will benefit future income and cash flow, the immediate
impact of the write-off of deferred financing costs associated with our previous
term loan and duplicated vault facility costs had a negative effect on first
quarter results."
REVENUES
Revenue for the first quarter ended March 31, 2004, totaled $15.5 million
compared to $17.3 million in the same quarter of 2003. The decline in the 2004
first quarter is due to lower spot advertising distribution for studio film
releases as the result of delays of new feature introductions, and the early
2003 completion of a large film re-mastering project which contributed to higher
first quarter 2003 sales.
GROSS MARGIN
In the first quarter of 2004, gross margin on sales was 37%, the same as in the
prior year's first quarter, even though sales were lower.
SELLING, GENERAL AND ADMINISTRATIVE AND OTHER EXPENSES
In the first quarter, selling, general and administrative expenses ("SG&A")
increased by $0.2 million from the same period last year. For the first quarter
of 2004, SG&A expenses were $4.6 million, or 30% of sales, compared to $4.4
million, or 25% of sales in the first quarter of 2003. The increase is due
principally to the write-off of deferred financing costs associated with the
Company's prior term loan.
Interest expense decreased $0.3 million in the first quarter compared to the
same period last year because of lower debt levels and interest rates. In March
2004, the Company entered into a revised credit facility with its banks, which
provided for lower interest rates.
During the quarter ended March 31, 2003, the Company realized a non-cash credit
of $145,000 for changes in the fair value of a derivative interest rate swap
contract between the beginning and end of that period and amortization of a
cumulative-effect adjustment made in 2001. 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 were no further accounting charges or credits related to
the swap contract after that date.
OPERATING INCOME
Operating income decreased $1.0 million in the first quarter of 2004 compared to
the same period last year due to lower sales, write-off of deferred financing
costs, and extra rent associated with a new facility while the vault
consolidation is completed. The Company's operating income was $1.1 million in
the 2004 quarter as compared to $2.1 million in the same quarter of the previous
year.
NET INCOME
For the first quarter of 2004, the Company reported net income of $0.5 million
($0.05 per diluted share) compared to a net profit of $1.0 million ($0.11 per
diluted share) in the same period last year. The Company recorded income tax
expense of $0.3 million in the 2004 quarter as compared to a $0.7 million
expense in the first quarter of last year.
EBITDA AND FREE CASH FLOW (A)
In the first quarter, the Company's EBITDA (earnings before interest, taxes,
depreciation and amortization) was $2.5 million (16% of sales) compared to $3.5
million (20.0% of sales) in the 2003 period.
In the 2004 first quarter, the Company's free cash flow (EBITDA less interest,
taxes and capital expenditures) was $1.6 million compared to $1.8 million in the
same quarter last year.
The following table reconciles the Company's EBITDA and free cash flow to the
Company's net income which is the most directly comparable financial measure
under Generally Accepted Accounting Principles ("GAAP").
COMPUTATION OF EBITDA AND FREE CASH FLOW: (A)
THREE MONTHS ENDED
MARCH 31,
2003 2004
---- ----
(in thousands)
GAAP net income $ 992 $ 493
Interest 521 223
Income taxes 689 344
Depreciation 1,268 1,391
Amortization 17 -
--------- ---------
Non-GAAP EBITDA $ 3,505 $ 2,451
========= =========
Non-GAAP EBITDA $ 3,487 $ 2,451
Deduct:
Interest (521) (223)
Income taxes (689) (344)
Capital expenditures (466) (239)
--------- ---------
Non-GAAP free cash flow $ 1,811 $ 1,639
========= =========
- ----------------------------
(A) The measurements of EBITDA and free cash flow 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
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 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.
POINT.360
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
March 31,
2003 2004
---- ----
Revenues $ 17,293,000 $ 15,468,000
Cost of goods sold (10,854,000) (9,819,000)
------------ ------------
Gross profit 6,439,000 5,649,000
Selling, general and administrative expense (4,382,000) (4,595,000)
------------ -------------
Operating income 2,057,000 1,054,000
Interest expense, net (521,000) (223,000)
Derivative fair value change 145,000 -
Other income - 6,000
------------ -------------
Income (loss) before income taxes 1,681,000 837,000
(Provision for) benefit from income taxes (689,000) (344,000)
------------ -------------
Net income (loss) $ 992,000 $ 493,000
============ =============
Earnings (loss) per share:
Basic:
Net income (loss) $ 0.11 $ 0.05
Weighted average number of shares 9,023,440 9,152,497
============ =============
Diluted:
Net income (loss) $ 0.11 $ 0.05
Weighted average number of shares
including the dilutive effect
of stock options 9,289,476 9,890,447
============ =============
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, advertising agencies and
corporations.
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.