Exhibit 99.1
Image Entertainment Reports 51% Revenue Growth to $34.4 Million for
Fiscal Third Quarter 2005;
Revenue Increased 54% to $89.5 Million for First Nine Months of Fiscal 2005
CHATSWORTH, Calif.--(BUSINESS WIRE)--Feb. 10, 2005--
Fiscal Third Quarter Net Earnings Increased to
$1,955,000 or $0.10 Per Share Versus a Net Loss of
($8,301,000) or ($0.45) Per Share a Year Ago
Image Entertainment, Inc. (Nasdaq:DISK), a leading independent
licensee, producer and distributor of home entertainment programming
in North America, today reported financial results for its fiscal
third quarter 2005 and nine months ended December 31, 2004. The
financial results below exclude that of Image's wholly owned
subsidiary, DVDPlanet, Inc., which sold its assets in September 2003
and was dissolved in December 2004, and reflect only the continuing
operations of the Company. DVDPlanet's financial results are reflected
as discontinued operations for all periods reported.
Fiscal Third Quarter Financial Highlights
-- Q3 2005 net revenues from continuing operations increased to
$34.4 million, up 51% from Q3 2004.
-- Q3 2005 domestic net revenues increased to $33.1 million, up
55.6% from Q3 2004.
-- Q3 2005 gross margins, net of amortization of production
costs, increased to 25.3%, up from 19.9% from Q3 2004.
-- Q3 2005 earnings from continuing operations were $0.10 per
share, compared to a ($0.39) loss per share in Q3 2004.
-- Q3 2005 net earnings were $0.10 per share, compared to a
($0.45) net loss per share in Q3 2004.
-- Net proceeds of approximately $14.2 million raised in a
private placement of common stock to institutional investors.
-- Paid down entire balance of revolving credit line with Wells
Fargo Foothill, Inc. resulting in $23 million in borrowing
availability.
-- Interest-bearing debt decreased to $1.9 million from $13.4
million at March 31, 2004.
Martin W. Greenwald, President and Chief Executive Officer of
Image Entertainment, commented, "We are extremely pleased with the
strong results of our fiscal third quarter. Image has now put together
four strong quarters of continued growth in both our top and bottom
line. Our new release schedule of exclusive DVD content is the
strongest it has ever been, which is attributable in large part to our
aggressive programming acquisition efforts over the last eighteen
months. Our sales strategies, marketing efforts and catalogue of
content continue to make us an increasingly valuable supplier of
independent DVD and CD programming."
Mr. Greenwald continued, "During the quarter we raised a net $14.2
million through a private placement, which significantly strengthened
our balance sheet and afforded us the ability to pay off substantially
all of our interest-bearing debt. We believe this influx of capital
has positioned Image to continue growing its existing business, and to
take advantage of new opportunities in the future."
Mr. Greenwald concluded, "During this first nine months of fiscal
2005, we have accomplished a complete turnaround in both revenue
growth and profitability, putting Image in a strong financial
position. With one quarter left in our fiscal year, I believe we are
on track to report our most successful year since the launch of DVD.
Finally, we are very excited about the opportunities that lie ahead,
as we continue to see a strong pipeline of excellent exclusive
programming."
Fiscal Third Quarter 2005 Compared to Fiscal Third Quarter 2004
Consolidated net revenues for the third quarter ended December 31,
2004, increased 50.9% to $34,391,000, from the $22,791,000 reported in
the same quarter last year. Net domestic revenues increased 55.6% to
$33,105,000 for the December 2004 quarter, from $21,280,000 for the
December 2003 quarter. The increase was primarily attributable to
strong revenue performance from new exclusive DVD releases,
comparatively strong sales of previously released DVD and CD
programming, and expanding relationships with our larger retail
customers. Net international and broadcast revenues decreased 14.9% to
$1,286,000 for the December 2004 quarter, from $1,511,000 for the same
quarter last year. The decrease was primarily due to lower royalty
revenues reported by our international sublicensees.
Gross profit margins, which are now disclosed net of amortization
of production costs, were up substantially to 25.3% for the December
2004 quarter compared to 19.9% for the same quarter last year.
Amortization of production costs included in cost of sales for the
December 2004 quarter were 2.9% of net revenues, down from 4.3% for
the December 2003 quarter.
During last year's third quarter, the Company established a
valuation allowance against 100% of its then-net deferred tax assets,
which were composed primarily of operating loss carry forwards. The
Company recorded income tax expense of $7,504,000 of which $732,000
was allocated to discontinued operations for last year's third
quarter.
Earnings from continuing operations after tax were $1,955,000, or
$0.10 per diluted share, compared to a loss of ($7,160,000), or ($.39)
per diluted share, in the same quarter a year ago. The loss from
discontinued operations for the December 2003 quarter was ($1,141,000)
or ($0.06) per diluted share, including applicable income tax expense.
Net earnings were $1,955,000, or $0.10 per diluted share, for the
December 2004 quarter, compared to a net loss of ($8,301,000), or
($0.45) per diluted share, for the December 2003 quarter.
Nine Months Ended December 31, 2004 Compared to Nine Months Ended
December 31, 2003
Consolidated net revenues for the nine months ended December 31,
2004, increased 53.6% to $89,488,000, from $58,271,000 for the same
period last year. Net domestic revenues for the nine months ended
December 31, 2004, increased 58.1% to $85,546,000, from $54,110,000
for the same period last year. Net international and broadcast
revenues for the nine months ended December 31, 2004 were $3,942,000,
down 5.3% from $4,161,000 for the nine months ended December 31, 2003.
Gross profit margins for the nine months ended December 31, 2004
were 25.1%, up from 20.5% for the prior year period. Amortization of
production costs included in cost of sales for the nine months ended
December 31, 2004 were 3.4% of net revenues, down from 5.1% for the
2003 period.
Earnings from continuing operations before income taxes were
$4,156,000 for the nine months ended December 31, 2004, compared to a
loss from continuing operations before tax of ($1,844,000) for the
same period last year.
The Company recorded tax expense of $6,244,000 during the nine
months ended December 31, 2003, relating to the establishment of a
valuation allowance against net deferred tax assets.
Earnings from continuing operations for the nine months ended
December 31, 2004, after tax were $4,060,000, or $0.21 per diluted
share, compared to a loss of ($8,088,000), or ($0.44) per diluted
share, for the same period in the prior year. The loss from
discontinued operations for the nine months ended December 31, 2003,
was ($2,441,000), or ($0.14) per diluted share. Net earnings for the
nine months ended December 31, 2004, were $4,060,000, or $0.21 per
diluted share, compared to a net loss of ($10,529,000), or ($0.58) per
diluted share, for the nine months ended December, 31, 2003.
Fiscal Year 2005 Guidance Update
The following statements are based on the Company's current
expectations. These statements are forward-looking, and actual results
may differ materially. Please see below for complete disclosure.
The Company is increasing its previously disclosed revenue
guidance. The Company believes that revenue growth for the year will
be between 36% and 39%, which if realized would result in fiscal 2005
net revenue ranging between $116 and $118 million. The Company has not
provided specific earnings guidance but continues to anticipate that
it will profitable for fiscal 2005.
Corporate Conference Call
Image Entertainment's management will host a conference call
today, February 10, at 4:30 p.m. ET to review the third quarter
financial results as well as other corporate events. Martin W.
Greenwald, CEO; Jeff Framer, CFO; and David Borshell, COO, will be
on-line to discuss these results and take part in a Q & A session. The
call can be accessed by dialing 800-289-0518 and requesting to join
the conference call by stating the confirmation code 4863587, or by
webcast at www.image-entertainment.com. Dial-ins begin at
approximately 4:20 PM EASTERN, or at any time during the conference
call. International participants please dial 913-981-5532.
A replay of the conference call will be available beginning two
hours after the call and for the following five business days by
dialing 888-203-1112 and entering the following pass code: 4863587.
International participants please dial 719-457-0820 using the same
passcode.
About Image Entertainment:
Image Entertainment, Inc. is a leading independent licensee,
producer and distributor of home entertainment programming in North
America, with more than 2,500 exclusive DVD titles in domestic release
and approximately 300 programs internationally via sublicense
agreements. For many of its titles, the Company has exclusive audio
and broadcast rights and, through its subsidiary Egami Media, Inc.,
exclusive video on demand, streaming video and download rights. The
Company is headquartered in Chatsworth, California, and has a domestic
distribution facility in Las Vegas, Nevada. For more information about
Image Entertainment, Inc., please go to www.image-entertainment.com.
Forward-Looking Statements:
This press release may contain forward-looking statements which
are based on the Company's current expectations, forecasts and
assumptions. In some cases forward-looking statements may be
identified by forward-looking words like "would," "intend," "hope,"
"will," "may," "should," "expect," "anticipate," "believe,"
"estimate," "predict," "continue," or similar words. Forward-looking
statements involve risks and uncertainties which could cause actual
outcomes and results to differ materially from the Company's
expectations, forecasts and assumptions. These risks and uncertainties
include risks and uncertainties not in the control of the Company,
including, without limitation, the current economic climate and other
risks and uncertainties, including those enumerated and described in
the Company's filings with the Securities and Exchange Commission,
which filings are available on the SEC's website at www.sec.gov.
Unless otherwise required by law, the Company disclaims any intention
or obligation to update or revise any forward-looking statements,
whether as a result of new information, future events, or otherwise.
IMAGE ENTERTAINMENT, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
December 31, 2004 and March 31, 2004
-------------------------------------------------------------------
ASSETS
(In thousands) December March
31, 31,
2004 2004
-------- --------
Current assets:
Cash $3,277 $540
Accounts receivable, net of allowances of
$10,040 - December 31, 2004;
$7,413 - March 31, 2004 30,623 21,742
Inventories 16,400 13,725
Royalty and distribution fee advances 8,139 7,540
Prepaid expenses and other assets 1,161 887
-------- --------
Total current assets 59,600 44,434
-------- --------
Noncurrent inventories, principally production costs 2,425 2,604
Noncurrent royalty and distribution advances 11,786 11,037
Property, equipment and improvements, net 7,018 5,782
Other assets 185 275
-------- --------
$81,014 $64,132
======== ========
IMAGE ENTERTAINMENT, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
December 31, 2004 and March 31, 2004
-------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
(In thousands, except share data) December March
31, 31,
2004 2004
-------- --------
Current liabilities:
Accounts payable $9,871 $8,124
Accrued liabilities 4,825 2,472
Accrued royalties and distribution fees 12,883 9,255
Accrued music publishing fees 5,101 5,196
Deferred revenue 5,706 3,360
Revolving credit and term loan facility -- 10,218
Current portion of long-term debt 1,422 1,592
Current portion of capital lease obligations 172 247
-------- --------
Total current liabilities 39,980 40,464
-------- --------
Long-term debt, less current portion 334 1,224
Capital lease obligations, less current portion -- 109
-------- --------
Total liabilities 40,314 41,797
-------- --------
Shareholders' equity:
Preferred stock, $1 par value, 3,366,000 shares
authorized; none issued and outstanding -- --
Common stock, no par value, 30,000,000 shares
authorized; 21,210,000 and 18,268,000 issued and
outstanding at December 31, 2004 and March 31,
2004, respectively 47,447 33,142
Additional paid-in capital 3,774 3,774
Accumulated deficit (10,521) (14,581)
-------- --------
Net shareholders' equity 40,700 22,335
-------- --------
$81,014 $64,132
======== ========
IMAGE ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
For the Three Months Ended December 31, 2004 and 2003
-------------------------------------------------------------------
(In thousands, except per share data) 2004 2003
-------------- --------------
NET REVENUES $34,391 100.0 % $22,791 100.0 %
-------------- --------------
OPERATING COSTS AND EXPENSES:
Cost of sales 25,705 74.7 18,260 80.1
Selling expenses 2,909 8.5 1,590 7.0
General and administrative expenses 3,565 10.4 3,151 13.8
-------------- --------------
32,179 93.6 23,001 100.9
-------------- --------------
EARNINGS (LOSS) FROM OPERATIONS 2,212 6.4 (210) (0.9)
OTHER EXPENSES (INCOME):
Interest expense 207 0.6 201 0.9
Other 4 0.0 (23) (0.1)
-------------- --------------
211 0.6 178 0.8
-------------- --------------
EARNINGS (LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES 2,001 5.8 (388) (1.7)
INCOME TAX EXPENSE 46 0.1 6,772 29.7
-------------- --------------
EARNINGS (LOSS) FROM CONTINUING
OPERATIONS 1,955 5.7 (7,160)(31.4)
-------------- --------------
DISCONTINUED OPERATIONS:
Loss from operations of discontinued
retail distribution segment (plus
tax expense of $480 in 2003) -- -- (889) (3.9)
Loss on sale of retail distribution
segment (plus tax expense of $252
in 2003) -- -- (252) (1.1)
-------------- --------------
LOSS FROM DISCONTINUED OPERATIONS -- -- (1,141) (5.0)
-------------- --------------
NET EARNINGS (LOSS) $1,955 5.7 % $(8,301)(36.4)%
============== ==============
NET EARNINGS (LOSS) PER SHARE:
Continuing operations - basic and
diluted $.10 $(.39)
Discontinued operations - basic and
diluted -- (.06)
-------- --------
Net earnings (loss) - basic and
diluted $.10 $(.45)
======== ========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING:
Basic 18,642 18,262
======== ========
Diluted 19,746 18,262
======== ========
IMAGE ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
For the Nine Months Ended December 31, 2004 and 2003
-------------------------------------------------------------------
(In thousands, except per share data) 2004 2003
-------------- ---------------
NET REVENUES $89,488 100.0 % $58,271 100.0 %
-------------- ---------------
OPERATING COSTS AND EXPENSES:
Cost of sales 67,070 74.9 46,323 79.5
Selling expenses 7,042 7.9 4,264 7.3
General and administrative expenses 10,578 11.8 9,137 15.7
-------------- ---------------
84,690 94.6 59,724 102.5
-------------- ---------------
EARNINGS (LOSS) FROM OPERATIONS 4,798 5.4 (1,453) (2.5)
OTHER EXPENSES (INCOME):
Interest expense 651 0.7 593 1.0
Other (9) 0.0 (202) (0.3)
-------------- ---------------
642 0.7 391 0.7
-------------- ---------------
EARNINGS (LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES 4,156 4.6 (1,844) (3.2)
INCOME TAX EXPENSE 96 0.1 6,244 (10.7)
-------------- ---------------
EARNINGS (LOSS) FROM CONTINUING
OPERATIONS 4,060 4.5 (8,088)(13.9)
-------------- ---------------
DISCONTINUED OPERATIONS:
Loss from operations of
discontinued retail distribution
segment -- -- (1,742) (3.0)
Loss on sale of retail distribution
segment -- -- (669) (1.1)
-------------- ---------------
LOSS FROM DISCONTINUED OPERATIONS -- -- (2,441) (4.2)
-------------- ---------------
NET EARNINGS (LOSS) $4,060 4.5 % $(10,529)(18.1)%
============== ===============
NET EARNINGS (LOSS) PER SHARE:
Continuing operations - basic $.22 $(.44)
Continuing operations - diluted .21 (.44)
-------- ---------
Discontinued operations - basic and
diluted -- (.14)
-------- ---------
Net earnings (loss) - basic $.22 $(.58)
-------- ---------
Net earnings (loss) - diluted $.21 $(.58)
======== =========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING:
Basic 18,395 18,245
======== =========
Diluted 19,101 18,245
======== =========
CONTACT: Image Entertainment, Inc.
Jeff Framer, 818-407-9100 ext. 299
jframer@image-entertainment.com
or
Investor Relations:
MKR Group, LLC
Charles Messman or Todd Kehrli, 818-556-3700
ir@mkr-group.com
or
Press Contact:
The Honig Company, Inc.
Steve Honig, 310-246-1801
press@honigcompany.com