Exhibit 99.1
Image Entertainment Reports Third Quarter 2006 Financial Results, Including
Record Third Quarter Revenues of $39.2 Million; Fiscal Third Quarter Net
Earnings Increased 20% to $2,341,000, from Net Earnings of $1,955,000, a Year
Ago
CHATSWORTH, Calif.--(BUSINESS WIRE)--Feb. 9, 2006--
Fiscal Third Quarter Net Earnings of $0.11 Per Share Includes an
$0.08 Per Share Bad Debt Charge to Earnings Associated with the Recent
Musicland Holding Corp. Bankruptcy Filing
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 third
quarter and nine months ended December 31, 2005.
Fiscal 2006 Third Quarter Financial Highlights
-- Net revenues increased 13.9% to a record $39,171,000, compared
with net revenues of $34,391,000 for the third quarter of
fiscal 2005
-- DVD and CD revenues were 95.7% and 1.7% of revenues,
respectively
-- Gross profit margins increased to 28.3%, compared to 25.3% for
the third quarter of fiscal 2005
-- Selling expenses decreased to 6.9% of net revenues, from the
8.5% of net revenues for the third quarter of fiscal 2005, due
in part to fixed costs being spread over comparatively higher
quarterly revenues
-- General and administrative expenses were up $2.2 million in
absolute dollars for the third quarter of fiscal 2006, due
primarily to a $1.7 million bad debt charge, associated with
Musicland Holding Corp.'s bankruptcy filing, an asset
impairment charge of $248,000 and the incremental expenses of
subsidiaries Egami Media and Image UK which were not in
existence in the prior-year quarter
-- Net earnings were $2,341,000 ($.11 per diluted share on
diluted shares outstanding of 21,763,000), up 20% from net
earnings of $1,955,000 ($0.10 per diluted share on 19,746,000
diluted shares outstanding) for the third quarter of fiscal
2005. Net earnings of $0.11 per diluted share for the quarter
ended December 31, 2005 includes an $0.08 charge per diluted
share as a result of the Musicland bankruptcy
-- The Company had $16.1 million in bank borrowings with $6.8
million in availability, after factoring in Musicland's trade
receivable bad debt allowance
-- Total liabilities increased to $49.8 million, from $33.4
million at March 31, 2005, due primarily to increased
borrowings for the acquisition of Home Vision Entertainment,
and the funding of advances paid for new-release and future
content
-- On November 4, 2005, the Company amended its revolving credit
line to provide a seasonal increase to its maximum borrowing
availability from $21 million to $25 million each year from
October 31 through April 15
Fiscal 2006 Nine Months Ended December 31, 2005 Highlights
-- Net revenues were $81.5 million, compared to $89.5 million for
the first nine months of fiscal 2005
-- DVD and CD revenues were 91.7% and 5.8% of revenues,
respectively
-- Gross margins increased to 26.2%, compared to 25.1% for the
first nine months of fiscal 2005
-- Selling expenses were 9.9% of net revenues, up from 7.9% of
net revenues for first nine months of fiscal 2005, due in part
to higher advertising and promotion costs and fixed costs
being spread over comparatively lower nine-month revenues.
-- General and administrative expenses were 15.7% up from 11.8%
for the first nine months of fiscal 2005, primarily as a
result of the Musicland bad debt charge noted above
-- Net earnings were $76,000, or $0.00 per diluted share,
compared to net earnings of $4,060,000, or $0.21 per diluted
share for the first nine months of fiscal 2005
Martin W. Greenwald, President and Chief Executive Officer of
Image Entertainment, commented, "I was pleased to see a return to
growth in revenues and profitability in the third quarter. Over the
past few years we have worked diligently to position the Company for
the future, and believe this quarter's performance demonstrates that
we have a strong platform. From a revenue perspective, the first half
of our fiscal year was a difficult retail environment not only for us
but for many of the major studios and independents in the DVD
business. We believe our strong third quarter performance is hopefully
an indication of a DVD industry on the rebound, at least when it comes
to retailer support for independent content. It was unfortunate in
regards to the untimely Musicland Chapter 11 filing and the associated
charge we took of $1.7 million, or $0.08 per share. Without this
charge, we would have posted record third quarter earnings to go along
with our record revenues. The absence of Musicland's buying will have
some negative impact for us in the short term but we are confident
that over the longer term, other retailers and e-tailers should
strengthen as a result.
Mr. Greenwald continued, "We are also very pleased with the
programming obtained from the acquisition of Home Vision and the
signing of our exclusive distribution agreement with The Criterion
Collection, both of which strongly contributed to our record third
quarter revenues. Having seen success with the integration of our Home
Vision acquisition, we continue to focus on identifying additional
acquisition candidates. The ability to leverage our distribution
operations as well as our strong marketing and sales expertise
represents a great opportunity for Image to create potential cost
savings opportunities for us and for an acquired company.
Mr. Greenwald concluded, "Given our status as a leading
independent content supplier with significant long-term experience and
a stellar reputation in the marketplace, an overwhelming number of
content creators continue to offer us some of the best independent
programming available. Whether it is the worldwide acquisition or the
co-production of content for DVD, CD, digital, broadcast, theatrical
or high definition exploitation, Image remains the perfect partner. We
look forward to continued success and expansion."
Fiscal Year 2006 Guidance
The following statements are based on the Company's current
expectations. These statements are forward-looking, and actual results
may differ materially.
Annual Guidance
Based upon the Company's current visibility into its fiscal fourth
quarter, the Company expects that revenues for fiscal 2006 will be in
the range of $110 million to $113 million. The Company has not
provided specific earnings guidance but continues to anticipate that
it will be profitable for fiscal 2006.
Corporate Conference Call
Image Entertainment's management will host a conference call
today, February 9, at 4:30 p.m. ET to review the fiscal 2006 third
quarter financial results. Image executive management will be on-line
to discuss these results and will make available subsidiary Egami
senior management to also take part in a Q & A session. The call can
be accessed by dialing 888-695-0612 and requesting to join the
conference call by stating the confirmation code 5407068, 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 (719) 457-2663.
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: 5407068.
International participants please dial (719) 457-0820 using the same
pass code.
About Image Entertainment:
Image Entertainment, Inc. is a leading independent licensee,
producer and distributor of home entertainment programming in North
America, with approximately 3,000 exclusive DVD titles and over 200
exclusive CD 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. The Company's subsidiary Image Entertainment (UK) maintains a
content acquisition office in London England. For more information
about Image Entertainment, Inc., please go to
www.image-entertainment.com.
Forward-Looking Statements:
This press release includes forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995
relating to, among other things, our goals, plans and projections
regarding our financial position, results of operations, market
position, product development and business strategy. These statements
may be identified by the use of words such as "will," "may,"
"estimate," "expect," "intend," "plan," "believe," and other terms of
similar meaning in connection with any discussion of future operating
or financial performance. All forward-looking statements are based on
management's current expectations and involve inherent risks and
uncertainties, including factors that could delay, divert or change
any of them, and could cause action outcomes and results to differ
materially from current expectations.
These factors include, among other things, our inability to raise
additional working capital, changes in debt and equity markets,
increased competitive pressures, changes in our business plan, and
changes in the retail DVD and entertainment industries. For further
details and a discussion of these and other risks and uncertainties,
see "Forward-Looking Statements" and "Risk Factors" in our most recent
Annual Report on Form 10-K. Unless otherwise required by law, we
undertake no obligation to publicly update any forward-looking
statement, whether as a result of new information, future events or
otherwise.
IMAGE ENTERTAINMENT, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
December 31, 2005 and March 31, 2005
ASSETS
(In thousands) December 31, March 31,
2005 2005
---------------- ----------------
Current assets:
Cash and cash equivalents $ 707 $ 6,339
Accounts receivable, net of
allowances of
$13,075 - December 31,
2005;
$8,646 - March 31, 2005 26,660 22,993
Inventories 19,332 15,408
Royalty and distribution fee
advances 11,175 8,142
Prepaid expenses and other
assets 876 803
--------------- ---------------
Total current assets 58,750 53,685
--------------- ---------------
Noncurrent inventories,
principally production costs 2,011 2,189
Noncurrent royalty and
distribution advances 19,158 12,563
Property, equipment and
improvements, net 5,428 6,563
Goodwill 5,735 --
Other assets 596 186
--------------- ---------------
$ 91,678 $ 75,186
=============== ===============
IMAGE ENTERTAINMENT, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
December 31, 2005 and March 31, 2005
LIABILITIES AND STOCKHOLDERS' EQUITY
(In thousands, except share December 31, March 31,
data) 2005 2005
---------------- ----------------
Current liabilities:
Accounts payable $ 7,044 $ 6,175
Accrued liabilities 4,374 3,300
Accrued royalties and
distribution fees 9,900 12,423
Accrued music publishing fees 6,112 4,617
Deferred revenue 5,886 5,392
Revolving credit and term loan
facility 16,118 --
Subordinated note payable -
Ritek Taiwan 334 1,337
Capital lease obligations -- 109
--------------- ---------------
Total liabilities - all current 49,768 33,353
--------------- ---------------
Stockholders' equity:
Preferred stock, $.0001 par
value, 25 million shares
authorized; none issued and
outstanding -- --
Common stock, $.0001 par value,
100 million shares authorized;
21,296,000 and 21,252,000
issued and outstanding at
December 31, 2005 and March
31, 2005, respectively 47,518 47,513
Additional paid-in capital 3,774 3,774
Cumulative translation
adjustment (4) --
Accumulated deficit (9,378) (9,454)
--------------- ---------------
Net stockholders' equity 41,910 41,833
--------------- ---------------
$ 91,678 $ 75,186
=============== ===============
IMAGE ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
For the Three Months Ended December 31, 2005 and 2004
(In thousands, except per share
data) 2005 2004
--------------- ---------------
NET REVENUES $39,171 100.0 % $34,391 100.0 %
------- ------ ------- ------
OPERATING COSTS AND EXPENSES:
Cost of sales 28,088 71.7 25,705 74.7
Selling expenses 2,692 6.9 2,909 8.5
General and administrative
expenses 5,770 14.7 3,565 10.4
------- ------ ------- ------
36,550 93.3 32,179 93.6
------- ------ ------- ------
EARNINGS FROM OPERATIONS 2,621 6.7 2,212 6.4
OTHER EXPENSES (INCOME):
Interest expense, net 267 0.7 207 0.6
Other (3) (0.0) 4 0.0
------- ------ ------- ------
264 0.7 211 0.6
------- ------ ------- ------
EARNINGS BEFORE INCOME TAXES 2,357 6.0 2,001 5.8
INCOME TAX EXPENSE 16 0.0 46 0.1
------- ------ ------- ------
NET EARNINGS $ 2,341 6.0 % $ 1,955 5.7 %
======= ====== ======= ======
NET EARNINGS PER SHARE:
Net earnings - basic $ .11 $ .10
------- -------
Net earnings - diluted $ .11 $ .10
======= =======
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING:
Basic 21,290 18,642
======= =======
Diluted 21,763 19,746
======= =======
IMAGE ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
For the Nine Months Ended December 31, 2005 and 2004
(In thousands, except per share
data) 2005 2004
--------------- ---------------
NET REVENUES $81,494 100.0 % $89,488 100.0 %
------- ------ ------- ------
OPERATING COSTS AND EXPENSES:
Cost of sales 60,108 73.8 67,070 74.9
Selling expenses 8,058 9.9 7,042 7.9
General and administrative
expenses 12,782 15.7 10,578 11.8
------- ------ ------- ------
80,948 99.3 84,690 94.6
------- ------ ------- ------
EARNINGS FROM OPERATIONS 546 0.7 4,798 5.4
OTHER EXPENSES (INCOME):
Interest expense, net 461 0.6 651 0.7
Other (7) (0.0) (9) (0.0)
------- ------ ------- ------
454 0.6 642 0.7
------- ------ ------- ------
EARNINGS (LOSS) BEFORE INCOME
TAXES 92 0.1 4,156 4.6
INCOME TAX EXPENSE 16 0.0 96 0.1
------- ------ ------- ------
NET EARNINGS $ 76 0.1 % $ 4,060 4.5 %
======= ====== ======= ======
NET EARNINGS PER SHARE:
Net earnings - basic $ .00 $ .22
------- -------
Net earnings - diluted $ .00 $ .21
======= =======
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING:
Basic 21,265 18,395
======= =======
Diluted 21,776 19,101
======= =======
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
Corporate/Press Contact:
THE HONIG COMPANY, INC.
Steve Honig, 310-246-1801
press@honigcompany.com