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 21, 2006
POINT.360 ANNOUNCES FOURTH QUARTER SALES OF $16.4 MILLION.
o Sales for 2005 were $66.2 million, an increase of 5% over 2004.
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, 2005.
Haig S. Bagerdjian, the Company's Chairman, President and Chief Executive
Officer, said: "In the fourth quarter, we completed the acquisition of Visual
Sound, began our refinancing by closing a new $10 million term loan with General
Electric Capital Corporation and set the stage for the addition of a significant
new channel of distribution for advertising clients, which was completed in
January. We hope to continue this momentum into 2006."
REVENUES
Revenue for the fourth quarter ended December 31, 2005, totaled $16.4 million
compared to $17.5 million in the same quarter of 2004. Revenues for the year
ended December 31, 2005 were $66.2 million, up 5% from $63.3 million in the 2004
period. Revenues increased $2.9 million in 2005 due to the inclusion of
International Video Conversions, Inc., which was acquired on July 1, 2004, for
the entire twelve months as opposed to only six months in 2004. Without IVC
sales for the first six months of 2005, twelve-month 2005 sales declined $2.9
million to $60.4 million from the same period last year.
GROSS MARGIN
In the fourth quarter of 2005, gross margin on sales was 37% compared to 38% in
the prior year's fourth quarter.
For all of 2005, gross margin was 35% of sales compared to 36% the 2004 period.
The Company achieved $23.0 million of gross profit in 2005 compared to $22.8
million in 2004. The decline in gross margin percentage was due principally to
an increase in delivery costs and a shift in the business mix.
SELLING, GENERAL AND ADMINISTRATIVE AND OTHER EXPENSES
For the fourth quarter of 2005, SG&A expenses were $5.4 million, or 33% of
sales, compared to $5.2 million, or 29% of sales in the fourth quarter of 2004,
with the increase due principally to the addition of sales personnel and related
expenses. For all of 2005, SG&A was 32% of sales, the same as in 2004. In the
statistical information presented below, the write-off of deferred acquisition
and settlement costs related to the termination of a potential acquisition has
been set forth separately.
Interest expense increased $0.2 million in the fourth quarter and $0.7 million
for all of 2005 compared to the same periods of last year because of higher debt
levels due to the purchase of IVC and real property in the third quarter of
2004, higher rates on variable interest debt and a $0.2 million write-off of
deferred financing costs in 2005.
OPERATING INCOME (A)
Operating income decreased $0.9 million in the fourth quarter of 2005 compared
to the same period last year due principally to higher delivery and selling
expenses. For all of 2005, operating income decreased to $1.6 million from $3.9
million in 2004 before special charges. The inclusion of IVC for the entire 2005
period accounted for an operating income increase of $0.6 million, offset by
lower operating income for our other facilities as a whole. After the special
charge, operating income for the 2004 twelve-month period was $2.8 million.
NET INCOME (A)
For the fourth quarter of 2005, the Company reported a net loss of $1,000 ($0.00
per share) compared to net income of $0.8 million ($0.08 per share) in the same
period last year.
For all of 2005, the Company reported net income of $14,000 compared to net
income of $1.2 million ($0.13 per diluted share) last year. In 2004 the
Company's tax expense was $0.8 million (a 39% effective rate).
EBITDA BEFORE SPECIAL CHARGES (A)
In the fourth quarter, the Company's EBITDA (earnings before interest, taxes,
depreciation and amortization) was $2.0 million (12% of sales) compared to $3.2
million (18% of sales) in the 2004 period. For all of 2005, the Company's EBITDA
was $7.7 million (12% of sales) compared to $8.7 million (14% of sales) in 2004.
EBITDA for 2004 before special charges was $9.8 million (15% of sales).
QUARTERLY AND ANNUAL FINANCIAL STATISTICS (A)
The following tables reconcile 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"), as well as selected balance sheet and income statement
statistics (in thousands):
COMPUTATION OF OPERATING INCOME, NET INCOME (LOSS)
AND EBITDA BEFORE SPECIAL CHARGES (A)
THREE MONTHS ENDED TWELVE MONTHS ENDED
------------------ -------------------
DECEMBER 31, DECEMBER 31,
----------------------- ------------------------
2004 2005 2004 2005
---- ---- ---- ----
(in thousands)
Operating income $1,486 $ 584 $2,839 $1,608
Add back:
Special charge 1 - 1,050 -
------ ------ ------ ------
Operating income
before special
charges $1,486 $ 584 $3,894 $1,608
====== ====== ====== ======
Net income (loss) $ 761 $ (1) $1,247 $ 14
Add back:
Special charges,
net of tax benefit - - 641 -
------ ------ ------ ------
Net income (loss)
before special
charges $ 761 $ (1) $1,888 $ 14
====== ====== ====== ======
Net income (loss) $ 761 $ (1) $1,247 $ 14
Interest 283 525 811 1,524
Income taxes 442 60 781 70
Depreciation 1,738 1,399 5,876 6,051
------ ------ ------ ------
EBITDA 3,224 1,983 8,715 7,659
Special charges - - 1,050 -
------ ------ ------ ------
EBITDA before
special charges $3,224 $1,983 $9,765 $7,659
====== ====== ====== ======
SELECTED BALANCE SHEET STATISTICS (UNAUDITED)(A)
AS OF DECEMBER 31,
2004 2005
---- ----
Working capital $ (119) $ 1,275
Property and equipment, net 31,451 28,079
Total assets 76,647 75,459
Borrowings under revolving
credit agreement 4,323 4,054
Current portion of notes payable 2,849 2,310
Long-term debt, net of current portion 14,494 13,744
Net debt (revolving credit, current
portion of notes payable and
long-term debt, minus cash on hand 20,998 19,621
Shareholders equity 38,944 39,510
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)(A)
The table below summarizes pro forma results for the three- and twelve-month
periods ended December 31, 2004 and 2005, without the effects of (1) IVC's
contribution for the first six months of 2005 and (2) the write-off of deferred
acquisition, financing and settlement costs in 2004. IVC was purchased on July
1, 2004. The write-off represents the costs of due diligence, legal, financing
and the settlement of all matters related to a proposed acquisition, which
matters were finalized in 2004 (in thousands except per share amounts):
QUARTER ENDED
----------------------------------------------------------------------------------
DECEMBER 30, 2004 DECEMBER 30, 2005
------------------------------------- ----------------------------------------
GAAP GAAP
---- ----
Revenues $ 17,498 $ 16,377
Cost of goods sold (10,862) (10,354)
-------- --------
Gross profit 6,636 6,024
Selling, general and
administrative expense (5,150) (5,440)
Write-off of deferred
acquisition, financing
and settlement costs - -
-------- --------
Operating income (loss) 1,486 584
Interest expense, net (283) (525)
-------- --------
Income (loss) before
income taxes 1,203 (59)
(Provision for) benefit
from income taxes (442) (60)
-------- --------
Net income (loss) $ 761 $ (1)
======== ========
Earnings (loss) per share:
Basic $ 0.08 $ 0.00
Diluted $ 0.08 $ 0.00
Weighted average shares
outstanding - diluted 9,526 9,481
======== ========
YEAR ENDED
----------------------------------------------------------------------------------
DECEMBER 30, 2004 DECEMBER 30, 2005
------------------------------------- ----------------------------------------
PRO FORMA (2) GAAP PRO FORMA (1) GAAP
--------- --- ---- --------- --- ----
Revenues $ 63,344 $ - $ 63,344 $ 60,409 $ 5,790 $ 66,199
Cost of goods sold (40,519) - (40,519) (39,260) (3,907) (43,167)
-------- -------- -------- -------- -------- --------
Gross profit 22,825 - 22,825 21,149 1,883 23,032
Selling, general and
administrative expense (18,936) - (18,936) (20,118) (1,306) (21,424)
Write-off of deferred
acquisition, financing
and settlement costs - (1,050) (1,050) - - -
-------- -------- -------- -------- -------- --------
Operating income (loss) 3,889 (1,050) 2,839 1,031 577 1,608
Interest expense, net (811) - (811) (1,256) (268) (1,524)
-------- -------- -------- -------- -------- --------
Income (loss) before
income taxes 3,078 (1,050) 2,028 (225) 309 84
(Provision for) benefit
from income taxes (1,185) 409 (781) 54 (124) (70)
-------- -------- -------- -------- -------- --------
Net income (loss) $ 1,893 (641) $ 1,247 $ (171) $ 185 $ 14
======== ======== ======== ======== ======== ========
Earnings (loss) per share:
Basic $ 0.21 $ (0.07) $ 0.14 $ 0.02) $ 0.02 $ 0.00
Diluted $ 0.20 $ (0.07) $ 0.13 $ (0.02) $ 0.02 $ 0.00
Weighted average shares
outstanding - diluted 9,671 9,671 9,671 9,714 9,714 9,714
======== ======== ======== ======== ======== =========
(1) Contribution of IVC for the six months ended June 30, 2005.
(2) Write-off of deferred acquisition, financing and settlement costs.
- ---------------------------------
(A) The consolidated statements of income (loss), the measurements of
operating income, net income (loss) and EBITDA before and after special
charges and selected balance sheet statistics do not represent the
results of operations or cash generated from operating activities or the
financial position of the Company in accordance with generally accepted
accounting principles (GAAP), and are not to be considered as
alternatives to a balance sheet or the statements of income (loss),
operating income, net income or any other GAAP measurements as
measurements of operating performance or financial position 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 present a summary of
balance sheet data as well as 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.