NEWS BULLETIN RE:
POINT.360
7083 HOLLYWOOD BLVD. SUITE 200
HOLLYWOOD, CA 90028
Nasdaq: PTSX
FOR FURTHER INFORMATION:
AT THE COMPANY:
Alan Steel
Executive Vice President
(323) 860-6206
FOR IMMEDIATE RELEASE - HOLLYWOOD, CA, August 12, 2004
POINT.360 REPORTS $0.10 MILLION ($0.01 PER SHARE) SECOND QUARTER 2004 PROFIT
o 2003 second quarter results were income of $0.3 million ($0.03 per
share).
o Company delivers six-month net income of $0.6 million ($0.06 per
share) in 2004 compared to 2003 net income of $1.3 million ($0.14
per share).
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, 2004.
Haig S. Bagerdjian, the Company's Chairman, President and Chief Executive
Officer, said: "Sales volume was less in the second quarter due to slowdown in
advertising and promotion for new theatrical releases. Net income was also
impacted by costs associated with the vault consolidation project, which should
be completed in 2004. On the positive side, the recently announced acquisition
of International Video Conversions, Inc. will not only strengthen the top line,
but add earnings, cash flow and recognized technical expertise. We look forward
to better earnings in the second half of 2004."
Revenues
Revenue for the second quarter ended June 30, 2004, totaled $13.9 million
compared to $15.8 million in the same quarter of 2003, a decrease of 12%.
Revenues for the six months ended June 30, 2004 were $29.4 million, down 11%
from $33.1 million in the 2003 period. The decline in the 2004 first half 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.
Gross Margin
In the second quarter of 2004, gross margin decreased by 2% of sales. Gross
margin on sales was 35% in the 2004 second quarter compared to 37% in the prior
year's second quarter.
For first half of 2004, gross margin was 36% of sales compared to 37% the 2003
period. The Company achieved $10.5 million of gross profit in the 2004 period
compared to $12.3 million in 2003. The decline in gross margins was due to lower
sales and additional rent associated with a new vault facility.
Selling, General and Administrative and Other Expenses
In the second quarter, selling, general and administrative expenses ("SG&A")
increased by 14% from the same period last year. For the second quarter of 2004,
SG&A expenses were $4.6 million, or 33% of sales, compared to $4.0 million, or
25% of sales in the second quarter of 2003. The increase was due principally to
the write-off of certain software costs and professional fees associated with
several on-going or settled lawsuits.
For the first six months of 2004, SG&A was 31% of sales as compared to the prior
year 25% of sales. 2004 software amortization amounted to approximately $0.3
million, or 1% 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 $0.5 million in the second quarter and $0.9 million
for the first six months of 2004 compared to the same periods of last year
because of lower debt levels due to principal payments made since June 30, 2003.
During the quarter ended June 30, 2003, the Company realized a non-cash credit
of $166,000 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 the first six months of 2003, the
Company realized a non-cash credit of $311,000. 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 decreased $1.6 million in the second quarter of 2004 compared
to the same period last year after excluding the special charge in 2003. For the
first half of 2004, operating income declined to $1.3 million from $3.9 million
in the 2003 period before special charges. The reduction was due to lower sales,
write-off of deferred software and financing costs, and extra rent associated
with a new facility while the vault consolidation is completed.
Net Income (A)
For the second quarter of 2004, the Company reported net income of $0.1 million
($0.01 per share) compared to a net profit of $0.3 million ($0.03 per share) in
the same period last year. The Company recorded income tax expense of $0.1
million in the 2004 quarter as compared to a $0.2 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 2004, the Company reported net income of $0.6
million ($0.06 per diluted share) compared to net income of $1.3 million ($0.14
per diluted share) last year. The income tax expense in 2004 was $0.4 million (a
41% effective rate); in 2003 the Company's tax expense was $0.9 million (a 41%
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) was $1.6 million (12% of sales) compared to $3.3
million (21% of sales) in the 2003 period before special charges. For the first
six months of 2004, the Company's EBITDA was $4.0 million (14% of sales)
compared to $6.8 million (20% of sales) in 2003. Special charges refer to the
write-off during the quarter ended June 30, 2003 of deferred acquisition and
financing costs.
In the 2004 second quarter, the Company's free cash flow (EBITDA less interest,
taxes and capital expenditures) was $(0.2) million compared to $2.3 million
before special charges in the same quarter last year. Free cash flow for the
first half of 2004 was $1.3 million compared to $4.1 million in 2003 before
special charges. The decline was due to lower income levels and capital
expenditures related to the vault consolidation project.
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,
-------- --------
2003 2004 2003 2004
---- ---- ---- ----
(in thousands)
Operating income $868 $235 $2,925 $1,289
Add back:
Special charge 1,002 - 1,002 -
------ ----- ------ ------
Operating income before
special charges $1,870 $235 $3,927 $1,289
====== ==== ====== ======
Net income $271 $73 $1,263 $567
Add back:
Special charges, net of
tax benefit 600 - 600 -
------ ----- ------ ------
Net income before
special charges $871 $73 $1,863 $567
==== === ====== ====
Net income $271 $73 $1,263 $567
Interest 575 111 1,096 334
Income taxes 188 51 877 394
Depreciation 1,290 1,354 2,558 2,744
Amortization 18 - 35 -
------ ----- ------ ------
EBITDA 2,342 1,589 5,829 4,039
Special charges 1,002 - 1,002 -
------ ----- ------ ------
EBITDA before special
charges $3,344 $1,589 $6,831 $4,039
====== ====== ====== ======
EBITDA $2,342 $1,589 $5,829 $4,039
Deduct:
Interest (575) (111) (1,096) (334)
Income taxes (188) (51) (877) (394)
Capital expenditures (285) (1,675) (750) (1,962)
------ ----- ------ ------
Free cash flow 1,294 (248) 3,106 1,349
Special charges 1,002 - 1,002 -
------ ----- ------ ------
Free cash flow before
special charges $2,296 $(248) $4,108 $1,349
====== ===== ====== ======
________________________
(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 2004 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,
-------- --------
2003 2004 2003 2004
--------- --------- --------- ---------
Revenues $15,773,000 $13,913,000 $33,066,000 $29,382,000
Cost of goods
sold (9,908,000) (9,110,000) (20,762,000) (18,929,000)
--------- --------- --------- ---------
Gross profit 5,865,000 4,803,000 12,304,000 10,453,000
Selling, general
and administrative
expense (3,995,000) (4,568,000) (8,377,000) (9,164,000)
Write-off of
deferred
acquisition and
financing costs (1,002,000) - (1,002,000) -
--------- --------- --------- ---------
Operating income 868,000 235,000 2,925,000 1,289,000
Interest expense,
net (575,000) (111,000) (1,096,000) (329,000)
Derivative fair
value change 166,000 - 311,000 -
--------- --------- --------- ---------
Income (loss)
before income taxes 459,000 124,000 2,140,000 960,000
(Provision for)
benefit from income
taxes (188,000) (51,000) (877,000) (393,000)
--------- --------- --------- ---------
Net income (loss) $271,000 $73,000 $1,263,000 $567,000
========= ========= ========= =========
Earnings (loss) per
share:
Basic:
Net income (loss) $0.03 $0.01 $0.14 $0.06
Weighted average
number of
shares 9,060,551 9,200,211 9,042,215 9,176,354
========= ========= ========= =========
Diluted:
Net income (loss) $0.03 $0.01 $0.14 $0.06
Weighted average
number of shares
including the
dilutive effect
of stock
options 9,408,030 9,669,099 9,336,976 9,778,654
========= ========= ========= =========
About Point.360
Point.360 is one of the largest providers of high definition and standard
definition 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.