EXHIBIT 99
NEWS BULLETIN
FOR FURTHER INFORMATION:
POINT.360
2777 NORTH ONTARIO STREET
BURBANK, CA 91504
Nasdaq: PTSX
AT THE COMPANY:
Alan Steel
Executive Vice President
(818) 565-1443
FOR IMMEDIATE RELEASE - BURBANK, CA, February 24, 2005
POINT.360 REPORTS $0.8 MILLION ($0.08 PER SHARE) FOURTH QUARTER 2004 PROFIT.
o Prior year fourth quarter income was $0.8 million ($0.08 per share).
o Company delivers twelve-month net income of $1.9 million ($0.20 per
share) before special charges; $1.2 million ($0.13 per share) after
special charges. Comparable amounts in 2004 were net income of $3.7
million ($0.39 per share) before special charges; net income of $3.1
million ($0.33 per share) after special charges.
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, 2004.
Haig S. Bagerdjian, the Company's Chairman, President and Chief Executive
Officer, said: "In calendar 2004, Point.360 took major steps to solidify the
Company's operations. We completed the acquisition of International Video
Conversions, Inc., consolidated four media storage facilities into one,
restructured our banking relationship to significantly improve cash flow, and
settled several time - consuming and costly legal actions. We also strengthened
our sales team by the late-2004 addition of experienced personnel. While the IVC
acquisition and the new bank arrangement contributed positively to 2004's
results, the other items, along with price erosion, reduced earnings when
compared to the previous year. We expect better results in 2005."
REVENUES
Revenue for the fourth quarter ended December 31, 2004, totaled $17.5 million
compared to $15.1 million in the same quarter of 2003. Revenues for the twelve
months ended December 31, 2004 were $63.3 million, down 2% from $64.9 million in
the 2003 period. The decline in 2004 is due to lower spot advertising
distribution for studio film releases and the early 2003 completion of a large
film re-mastering project which contributed to higher 2003 sales. The declines
were offset by the additional revenues of $3.1 million and $6.5 for the three
and twelve-month periods, respectively, from the July 1, 2004 acquisition of
IVC.
GROSS MARGIN
In the fourth quarter of 2004, gross margin on sales was 38% compared to 39% in
the prior year's fourth quarter.
For all of 2004, gross margin was 36% of sales compared to 39% the 2003 period.
The Company achieved $22.8 million of gross profit in 2004 compared to $25.2
million in 2003. The decline in gross margins was due to lower spot distribution
sales and duplicated rent associated with the new Media Center facility.
SELLING, GENERAL AND ADMINISTRATIVE AND OTHER EXPENSES
For the fourth quarter of 2004, SG&A expenses were $5.2 million, or 29% of
sales, compared to $4.4 million, or 29% of sales in the fourth quarter of 2003.
For all of 2004, SG&A was 30% of sales as compared to 27% in 2003. In the annual
periods presented below, the write-off of deferred acquisition and financing and
settlement costs related to the termination of the potential acquisition of
three subsidiaries of Alliance Atlantis Communications, Inc. (Alliance) has been
set forth separately. The Company wrote off approximately $1.0 million of such
expenses in each of 2003 and 2004.
Interest expense decreased $0.1 million in the fourth quarter and $1.2 million
for all of 2004 compared to the same periods of last year because of lower debt
levels due to principal payments made since December 31, 2003 and the expiration
of an interest rate swap contract in late 2003, offset partially by interest on
new debt incurred for the purchase of IVC and real property in the third quarter
of 2004.
During the quarter ended December 31, 2003, the Company realized a non-cash
credit of $119,000 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. For all of 2003, the Company realized
a non-cash credit of $611,000. 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 after that date.
OPERATING INCOME (A)
Operating income was $1.5 million in the fourth quarter of 2004, down $0.1
million from last year's fourth quarter. For all of 2004, operating income
before special charges declined to $3.9 million from $7.8 million in 2003. The
reduction was due to lower sales and duplicated rent associated with a new
facility while the Media Center consolidation was completed. After the special
charges, operating income for 2004 and 2003 was $2.8 million and $6.7 million,
respectively.
NET INCOME (LOSS) (A)
For the fourth quarter of 2004, the Company reported net income of $0.8 million
($0.08 per share) compared to a net profit of $0.8 million ($0.08 per share) in
the same period last year.
For all of 2004, the Company reported net income of $1.2 million ($0.13 per
diluted share) compared to net income of $3.1 million ($0.33 per diluted share)
last year. Income tax expense in 2004 was $0.8 million (a 39% effective rate);
in 2003 the Company's tax expense was $2.1 million (a 40% effective rate).
EBITDA BEFORE SPECIAL CHARGES (A)
In the fourth quarter, the Company's EBITDA (earnings before interest, taxes,
depreciation and amortization) was $3.2 million (18% of sales) compared to $3.1
million (21% of sales) in the 2003 period. For all of 2004, the Company's EBITDA
before special charges was $9.8 million (15% of sales) compared to $13.9 million
(21% of sales) in 2003. Special charges refer to the write-offs of deferred
acquisition, financing and settlement costs.
The following table reconciles the Company's operating income, net income and
EBITDA 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 AND
EBITDA BEFORE SPECIAL CHARGES (A)
THREE MONTHS ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
-------------------- --------------------
2003 2004 2003 2004
---- ---- ---- ----
(in thousands)
Operating income $ 1,576 $ 1,486 $ 6,708 $ 2,839
Add back:
Special charge - - 1,002 1,050
------- ------- -------- --------
Operating income before
special charges $ 1,576 $ 1,486 $ 7,710 $ 3,894
======= ======= ======== ========
Net income $ 812 $ 761 $ 3,149 $ 1,247
Add back:
Special charges,
net of tax benefit - - 605 641
------- ------- -------- --------
Net income before
special charges $ 812 $ 761 $ 3,754 $ 1,888
======= ======= ======== ========
Net income $ 812 $ 761 $ 3,149 $ 1,247
Interest 427 283 2,056 811
Income taxes 456 442 2,114 781
Depreciation 1,453 1,738 5,464 5,876
Amortization - - 35 -
------- ------- -------- --------
EBITDA 3,148 3,224 12,818 8,715
Special charges - - 1,043 1,050
------- ------- -------- --------
EBITDA before
special charges $ 3,148 $ 3,224 $ 13,861 $ 9,765
======= ======= ======== ========
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (A)
The table below summarizes pro forma results for the three- and twelve-month
periods ended December 31, 2003 and 2004, without the effects of (1) IVC's
contribution and (2) the write-off of deferred Alliance acquisition, financing
and settlement costs in 2003 and 2004. IVC was purchased on July 1, 2004. The
Alliance write-off represents the costs of due diligence, legal, financing and
the settlement of all matters related to the proposed acquisition of three
subsidiaries of Alliance, which matters were finalized in 2004 (in thousands
except per share amounts):
QUARTER ENDED
----------------------------------------------------------------------------------------------------
DECEMBER 31, 2003 DECEMBER 31, 2004
------------------------------------- ----------------------------------------------------------
PRO FORMA (2) GAAP PRO FORMA (1) (2) GAAP
--------- --- ---- --------- --- --- ----
Revenues $ 15,125 $ $ 15,125 $ 14,360 $ 3,138 $ - $ 17,498
Cost of goods sold (9,191) - (9,191) (8,900) (1,782) - (10,862)
-------- -------- -------- -------- -------- -------- --------
Gross profit 5,934 - 5,934 5,280 1,356 - 6,636
Selling, general and
administrative expense (4,358) - (4,358) (4,527) (623) - (5,150)
Write-off of deferred
acquisition, financing
and settlement costs - - - - - - -
-------- -------- -------- -------- -------- -------- --------
Operating income 1,576 - 1,576 753 733 - 1,486
Interest expense, net (427) - (427) (205) (78) - (283)
Derivative fair
value change 119 - 119 - - - -
-------- -------- -------- -------- -------- -------- --------
Income before
income taxes 1,268 - 1,268 548 655 - 1,203
Provision for income taxes (456) - (456) (201) (241) - (442)
-------- -------- -------- -------- -------- -------- --------
Net income $ 812 $ - $ 812 $ 347 $ 414 $ - $ 761
======== ======== ======== ======== ======== ======== ========
Earnings per share:
Basic $ 0.09 $ - $ 0.09 $ 0.04 $ 0.04 $ - $ 0.08
Diluted $ 0.08 $ - $ 0.08 $ 0.04 $ 0.04 $ - $ 0.08
Weighted average shares
outstanding - diluted 9,866 9,866 9,866 9,526 9,526 9,526 9,526
======== ======== ======== ======== ======== ======== ========
YEAR ENDED
----------------------------------------------------------------------------------------------------
DECEMBER 31, 2003 DECEMBER 31, 2004
------------------------------------- ----------------------------------------------------------
PRO FORMA (2) GAAP PRO FORMA (1) (2) GAAP
--------- --- ---- --------- --- --- ----
Revenues $ 64,900 $ - $ 64,900 $ 56,864 $ 6,480 $ - $ 63,344
Cost of goods sold (39,670) - (39,670) (36,915) (3,604) - (40,519)
-------- -------- -------- -------- -------- -------- --------
Gross profit 25,230 - 25,230 19,949 2,876 - 22,825
Selling, general and
administrative expense (17,479) - (17,479) (17,632) (1,304) - (18,936)
Write-off of deferred
acquisition, financing
and settlement costs - (1,043) (1,043) - - (1,050) (1,050)
-------- -------- -------- -------- -------- -------- --------
Operating income (loss) 7,751 (1,043) 6,708 2,317 1,572 (1,050) 2,839
Interest expense, net (2,056) - (2,056) (655) (156) - (811)
Derivative fair
value change 611 - 611 - - - -
-------- -------- -------- -------- -------- -------- --------
Income before
income taxes 6,306 (1,043) 5,263 1,662 1,416 (1,050) 2,028
Provision for income taxes (2,552) 438 (2,114) (645) (545) 409 (781)
-------- -------- -------- -------- -------- -------- --------
Net income $ 3,754 $ (605) $ 3,149 $ 1,017 871 (641) $ 1,247
======== ======== ======== ======== ======== ======== ========
Earnings per share:
Basic $ 0.41 $ (0.06) $ 0.35 $ 0.11 $ 0.10 $ (0.07) $ 0.14
Diluted $ 0.39 $ (0.06) $ 0.33 $ 0.11 $ 0.09 $ (0.07) $ 0.13
Weighted average shares
outstanding - diluted 9,555 9,555 9,555 9,671 9,671 9,671 9,671
======== ======== ======== ======== ======== ======== ========
(1) Contribution of IVC.
(2) Write-off of deferred acquisition, financing and settlement costs.
- ----------------------------------------------------------------------
(A) The consolidated statements of income, the measurements of operating
income and net income before special charges and the effect of the IVC
acquisition, and EBITDA before and after special charges do not
represent the results of operations or cash generated from operating
activities in accordance with generally accepted accounting principles
(GAAP), are not to be considered as an alternative to the statements of
income, 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 illustrate the effect of acquisitions and
special charges and/or 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 and, furthermore, anticipates making certain capital
expenditures as part of its business plan.
ABOUT POINT.360
Point.360 is one of the largest providers of high definition and standard
definition digital mastering, data conversion and 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; (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.