Exhibit 99.1
Image Entertainment Reports Fiscal
2006 Financial Results; Net Revenues for Fourth Quarter Were $30.4
Million; Net Revenues for the Fiscal Year Were $111.9 Million
CHATSWORTH, Calif.--(BUSINESS WIRE)--June 28, 2006--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 fourth quarter and
fiscal year ended March 31, 2006.
Fiscal 2006 Financial Summary
-- Net revenues decreased 5.5% to $111.9 million, compared to
$118.4 million for fiscal 2005
-- Gross profit margins decreased 0.5% to 24.8%, compared to
25.3% for fiscal 2005
-- Selling expenses increased to 9.6% of net revenues, up from
8.3% of net revenues for fiscal 2005
-- General and administrative expenses were up $2.4 million in
absolute dollars for fiscal 2006, due primarily to bad debt
charges associated with Musicland Holding Corp.'s January 12,
2006 bankruptcy filing of approximately $1.6 million, an asset
impairment charge of $248,000 and the incremental expenses of
subsidiaries Egami and Image UK. Egami began operations during
the fourth quarter of fiscal 2005 and Image UK began
operations during fiscal 2006.
-- Net loss was ($207,000), or ($0.01) per diluted share,
compared to net earnings of $5,127,000, or $0.26 per diluted
share, for fiscal 2005
-- Net loss of ($0.01) per diluted share for fiscal 2006
includes a $0.07 charge per diluted share as a result of
Musicland Holding Corp's Chapter 11 bankruptcy filing
-- On October 14, 2005, the Company completed consolidation of
newly acquired Home Vision into its existing facilities
-- 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. On June 23, 2006, the Company
further amended its revolving credit facility, reducing the
required minimum EBITDA covenants effective on a go-forward
basis
-- On April 10, 2006, the Company engaged Lazard Freres & Co. LLC
as its financial advisor
Fiscal Fourth Quarter Financial Summary
-- Net revenues increased 5.2% to $30.4 million, compared to
$28.9 million for the fourth quarter of fiscal 2005
-- DVD and CD revenues were 84.3% and 14.5% of revenues,
respectively
-- Gross margins decreased to 20.9%, compared to 26.1% for the
fourth quarter of fiscal 2005 primarily due to a larger sales
concentration of lower gross profit margin titles vs. higher
gross profit margin titles
-- Selling expenses were 8.9% of net revenues, down from 9.7% of
net revenues for the fourth quarter of fiscal 2005
-- General and administrative expenses were 12.1% of net
revenues, compared to 12.2% of net revenues for the fourth
quarter of fiscal 2005
-- Net loss was ($283,000), or ($0.01) per diluted share,
compared to net earnings of $1,067,000, or $0.05 per diluted
share, for the fourth quarter of fiscal 2005
Martin W. Greenwald, president and chief executive officer of
Image Entertainment, commented, "Although we were disappointed with
the overall fourth quarter financial performance, we did see a rebound
in growth looking at the second half of our fiscal year as a whole,
where our revenues increased 64% to $69.6 million, from the $42.3
million we reported in the first half of fiscal 2006. We were very
pleased to see growth of our core library, which now contains North
American distribution rights to over 3,000 DVD titles. For many of
these titles, we also have international distribution rights. Our
library also contains approximately 200 CD titles, and the aggressive
expansion of our digital rights through our wholly-owned subsidiary
Egami has resulted in a library of over 1,500 video titles and 150
audio titles, with more than 2,500 individual audio tracks offered for
download. While we do not believe that the retail environment is
currently operating at its historically high levels, we remain
encouraged by the up tick in revenue we experienced in the second half
of our fiscal year."
Mr. Greenwald continued, "During the quarter we saw a drop in our
gross profit margins, which we believe was primarily due to higher
market development costs incurred as we expanded our retail reach, and
a larger percentage of sales coming from higher profile but lower
margin titles, such as titles where we have rights under distribution
agreements instead of licensing agreements. Additionally, in January
2006, Musicland, at the time a top 10 customer of Image, filed for
Chapter 11 bankruptcy protection. The filing had a significant impact
on our bottom line results. We took a $1.6 million bad debt charge
equivalent to $0.07 per share, which ultimately made us unprofitable
for the year. Despite this setback we remain committed to
profitability, and accordingly we are continuing to invest in and
acquire high profile, high margin content. This content includes
feature films, music events, comedy specials and urban programs. We
also will continue to pursue new retail opportunities like our recent
Starbucks Hear Music announcement featuring a Chuck Berry Hail! Hail!
Rock 'N' Roll exclusive DVD/CD deluxe edition, which is now available
in several thousand Starbucks locations nationwide."
Mr. Greenwald concluded, "Looking ahead, we're optimistic about
Image's future and remain committed to growing our revenues and
achieving consistent profitability. Our exclusive library is stronger
than it has ever been and we are presented with more and more
opportunities for new programming on a daily basis. We look forward to
a successful fiscal 2007, a year that will be dedicated to building
upon our strengths as one of the largest independent home
entertainment companies in the world."
Fiscal Year 2007 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
At this time, the Company expects that revenues for fiscal 2007
will be in the range of $112 million to $120 million. The Company has
not provided specific earnings guidance but anticipates that it will
be profitable for fiscal 2007.
First Quarter of Fiscal 2007 Ending June 30, 2006 Guidance
The Company expects that net revenues for the first quarter ended
June 30, 2006, will be in the range of $21 million to $23 million,
resulting in a net loss for the quarter.
Corporate Conference Call
Image Entertainment's management will host a conference call
today, June 28, at 4:30 p.m. ET to review the fiscal 2006 fourth
quarter and year ended financial results. Image executive management
will be on-line to discuss these results and to also take part in a Q
& A session. The call can be accessed by dialing 800-231-9012 and
requesting to join the conference call by stating the confirmation
code 4651774, or by webcast at www.image-entertainment.com or
www.earnings.com. Dial-ins begin at approximately 4:20 PM EASTERN, or
at any time during the conference call. International participants
please dial (719) 457-2617.
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: 4651774.
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 over 3,000 exclusive DVD titles and approximately 200
exclusive CD titles in domestic release and approximately 450 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., has digital download rights to more than
1,500 video programs and over 150 audio programs containing more than
2,500 tracks. 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)
March 31, 2006 and 2005
ASSETS
(In thousands) 2006 2005
-------- --------
Current assets:
Cash and cash equivalents $1,079 $6,339
Accounts receivable, net of allowances of
$9,172 - March 31, 2006;
$8,646 - March 31, 2005 17,162 22,993
Inventories 17,498 15,408
Royalty and distribution fee advances 13,366 8,142
Prepaid expenses and other assets 948 803
-------- --------
Total current assets 50,053 53,685
-------- --------
Noncurrent inventories, principally production costs 2,805 2,189
Noncurrent royalty and distribution advances 23,558 12,563
Property, equipment and improvements, net 4,999 6,563
Goodwill 5,715 --
Other assets 545 186
-------- --------
$87,675 $75,186
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IMAGE ENTERTAINMENT, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
March 31, 2006 and 2005
LIABILITIES AND STOCKHOLDERS' EQUITY
(In thousands, except share data) 2006 2005
-------- --------
Current liabilities:
Accounts payable $5,302 $6,175
Accrued liabilities 4,234 3,300
Accrued royalties and distribution fees 13,355 12,423
Accrued music publishing fees 5,890 4,617
Deferred revenue 5,751 5,392
Revolving credit and term loan facility 11,500 --
Subordinated note payable - Ritek Taiwan -- 1,337
Capital lease obligations -- 109
-------- --------
Total liabilities - all current 46,032 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 March 31, 2006 and March 31, 2005,
respectively 47,518 47,513
Additional paid-in capital 3,790 3,774
Accumulated other comprehensive loss (4) --
Accumulated deficit (9,661) (9,454)
-------- --------
Net stockholders' equity 41,643 41,833
-------- --------
$87,675 $75,186
======== ========
IMAGE ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
For the Three Months Ended March 31, 2006 and 2005
(In thousands, except per share data) 2006 2005
-------------- --------------
NET REVENUES $30,408 100.0 % $28,895 100.0 %
-------------- --------------
OPERATING COSTS AND EXPENSES:
Cost of sales 24,060 79.1 21,365 73.9
Selling expenses 2,692 8.9 2,811 9.7
General and administrative expenses 3,678 12.1 3,514 12.2
-------------- --------------
30,430 100.1 27,690 95.8
-------------- --------------
EARNINGS (LOSS) FROM OPERATIONS (22) 0.1 1,205 4.2
OTHER EXPENSES:
Interest expense, net 246 0.8 14 0.0
Other 4 0.0 58 0.2
-------------- --------------
250 0.8 72 0.2
-------------- --------------
EARNINGS (LOSS) BEFORE INCOME TAXES (272) (0.9) 1,133 3.9
INCOME TAX EXPENSE 11 (0.0) 66 0.2
-------------- --------------
NET EARNINGS (LOSS) $(283) (0.9)% $1,067 3.7 %
============== ==============
NET EARNINGS (LOSS) PER SHARE:
Net earnings (loss) - basic and
diluted $(.01) $.05
======== ========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING:
Basic 21,296 21,244
======== ========
Diluted 21,296 22,373
======== ========
IMAGE ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
For the Years Ended March 31, 2006 and 2005
(In thousands, except per share data) 2006 2005
--------------- ---------------
NET REVENUES $111,902 100.0 % $118,383 100.0 %
--------------- ---------------
OPERATING COSTS AND EXPENSES:
Cost of sales 84,168 75.2 88,435 74.7
Selling expenses 10,750 9.6 9,853 8.3
General and administrative
expenses 16,460 14.7 14,092 11.9
--------------- ---------------
111,378 99.5 112,380 94.9
--------------- ---------------
EARNINGS FROM OPERATIONS 524 0.5 6,003 5.1
OTHER EXPENSES (INCOME):
Interest expense, net 707 0.6 665 0.6
Other (3) (0.0) 49 (0.0)
--------------- ---------------
704 0.6 714 0.6
--------------- ---------------
EARNINGS (LOSS) BEFORE INCOME TAXES (180) 0.2 5,289 4.5
INCOME TAX EXPENSE 27 0.0 162 0.1
--------------- ---------------
NET EARNINGS (LOSS) $(207) 0.2 % $5,127 4.3 %
=============== ===============
NET EARNINGS (LOSS) PER SHARE:
Net earnings (loss) - basic $(.01) $.27
--------- ---------
Net earnings (loss) - diluted $(.01) $.26
========= =========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING:
Basic 21,273 19,100
========= =========
Diluted 21,273 19,912
========= =========
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