Announces Third Quarter 2008 Results
Schedules Conference Call for Monday, November 3, 2008
NEW YORK, Oct. 31 /PRNewswire-FirstCall/ -- EDCI Holdings, Inc. (Nasdaq:
EDCI) ("EDCI"), the holding company for Entertainment Distribution Company,
Inc., the majority shareholder of Entertainment Distribution Company, LLC
("EDC, LLC"), a global and independent provider of supply chain services to
the home entertainment market, today announced that it has entered into a
definitive asset purchase agreement for the sale of EDC, LLC's distribution
operations located in Fishers, Indiana, U.S. supply agreements with Universal
Music Group ("UMG"), the equipment located in its Fishers, Indiana
distribution facility and certain manufacturing equipment located in its Kings
Mountain, North Carolina facility, as well as the transfer of U.S. customer
relationships to Sony DADC US Inc. ("Sony DADC") for $26.0 million in cash.
The transaction includes potential contingent consideration of up to $2.0
million in cash related to the transferred operations achieving certain
additional criteria. The transaction, which is subject to certain consents and
closing conditions, is currently expected to close on or about December 31,
2008. EDCI also announced today third quarter financial results for the period
ending September 30, 2008.
Clarke Bailey, Chairman and Interim Chief Executive Officer of EDCI,
commented, "This transaction is a significant step in the strategic
alternative process for EDC, LLC, which we outlined approximately a year ago.
EDC, LLC's overall business has been impacted by the substantial changes in
consumer consumption habits that have in turn driven consolidation across the
industry. We expect these consolidation trends will continue and we are open
to additional strategic alternatives for the remaining EDC, LLC assets. The
sale allows EDC, LLC to focus on its international business."
EDC, LLC will continue to serve all of its customers through the close of
the transaction, at which point it will begin shutting down its remaining
North American manufacturing and distribution facilities, which is expected to
be completed by the end of February 2009. Sony DADC is a highly respected
leader in the industry and under the sale transition plan, EDC, LLC's
customers that continue working with Sony DADC should expect a smooth
transition. Sony DADC will continue distribution operations at the Fishers,
Indiana facility and manufacturing services for any transferred customers will
be provided from existing Sony DADC facilities in the U.S. In connection with
the sale, EDC, LLC and Sony DADC have agreed to provide certain transition
services for up to approximately two months following the closing. Upon
completion of the transition services period, EDC, LLC will no longer operate
manufacturing or distribution facilities in North America. EDC, LLC will
continue to operate and serve its international customers through its
facilities in Hannover, Germany and Blackburn, United Kingdom.
Proceeds from the sale, along with cash on hand, will be utilized to pay
down a significant amount of EDC, LLC's outstanding debt, which was $38.8
million at September 30, 2008. Upon closing of this transaction, EDC, LLC is
expected to have total debt of approximately $12.3 million, including $9.0
million under a term-loan due in installments through December 2010, $3.1
million in international rebate obligations to UMG and $0.2 million for
capital leases. In connection with the transaction, EDC entered into an
amendment to its credit facility, which will be effective upon the closing of
the transaction, in order to permit the sale, provide for the modified payment
terms described above and amend certain other provisions. Upon the closing of
the sale, completion of the transition period and the sale of the remaining
manufacturing equipment and facility, EDC, LLC expects to record a gain on the
transaction.
"We are pleased with our results for the third quarter, which were in line
with our internal expectations," Bailey added. "Our management team remains
focused on improving and right-sizing our operations to meet demand which will
ensure we are maximizing our cash flows."
Financial highlights (for EDCI and its subsidiaries (the "Company") on a
consolidated basis unless noted):
-- Revenue of $87.8 million for the third quarter compared to $96.6
million for the same quarter last year.
-- Revenue of $250.4 million for the first nine months compared to $260.8
million for the same period last year.
-- Net income from continuing operations of $0.9 million, or $0.13 per
diluted share, for the third quarter compared to net income from
continuing operations of $0.6 million, or $0.09 per diluted share, for
the same quarter last year.
-- Net loss from continuing operations of $(11.9) million, or $(1.72) per
diluted share, for the first nine months of 2008 compared to net loss
from continuing operations of $(10.8) million, or $(1.55) per diluted
share, for the same period last year.
-- Third quarter EBITDA from continuing operations of $5.5 million,
compared to EBITDA from continuing operations of $6.9 million for the
same quarter last year.
-- First nine months EBITDA from continuing operations of $8.3 million,
compared to EBITDA from continuing operations of $6.6 million for the
same period last year.
-- As of September 30, 2008, total unrestricted cash and short-term
investments of $81.0 million, of which $52.4 million is held at EDCI
and $28.6 million is held at EDC, LLC.
-- As of September 30, 2008, total long-term debt of $38.8 million, net
of unamortized discount.
Share Buyback Program
EDCI announced on June 4, 2008 a share buyback program that authorized the
repurchase of up to 10 million shares of common stock over the next 12 months.
As a result of the plan of reorganization, approved by shareholders on August
26, 2008, which had the effect of a 1:10 reverse stock split, the share
buyback program was adjusted to 1 million shares. All share repurchase figures
have been adjusted to reflect the plan of reorganization. During the third
quarter of 2008, EDCI repurchased a total of 143,574 shares. Since
implementing the program EDCI has repurchased a total of 174,794 shares for an
aggregate purchase price of $752,000. The share buyback program does not
include the 150,000 shares the Company purchased in a single privately
negotiated transaction in the first quarter 2008.
Conference Call
The Company will host a conference call to discuss the sale and third
quarter 2008 financial results on Monday, November 3, 2008 at 4:30 p.m. ET. To
access the conference call, please dial (877)-860-4996 or (973)-582-2854
(international callers) and reference pass code 70981226. A live webcast of
the conference call will also be available on the Company's corporate Web
site, located at www.edcllc.com. A replay of the conference call will be
available through midnight ET on Monday, November 10, 2008. The replay can be
accessed by dialing (800)-642-1687 or (706)-645-9291 (international callers).
The pass code for the replay is 70981226.
Summary of Third Quarter 2008
For the third quarter of 2008, the Company reported revenue of $87.8
million compared to $96.6 million for the third quarter of 2007. The decrease
is primarily attributable to a decrease in volumes from U.S. and central
European operations, offset by the impact of favorable exchange rate
fluctuations and improved pricing.
The Company had EBITDA from continuing operations of $5.5 million in the
third quarter of 2008, as compared to EBITDA from continuing operations of
$6.9 million in the third quarter of 2007. The EBITDA from continuing
operations for the third quarter of 2008 includes $1.0 million of severance
costs primarily related to the restructuring of our European operations.
EBITDA is a non-GAAP financial measure. Reconciliation between EBITDA and the
most directly comparable GAAP financial measure is provided following the
Consolidated Financial Statements included in this release. The reconciliation
also includes a description of how the Company calculates EBITDA.
The Company reported net income from continuing operations of $0.9 million
for the third quarter of 2008, or $0.13 per diluted share. This compares to a
net income from continuing operations of $0.6 million, or $0.09 per diluted
share, for the third quarter of 2007. The 2008 period includes a net gain of
$2.1 million, compared to a net loss of $1.0 million in the 2007 period,
related to the impact of the devaluation of the Euro against the U.S. dollar
on a foreign currency swap and inter-company balances. The third quarter of
2007 included a benefit of $1.8 million relating to an adjustment to the
Company's deferred tax assets and liabilities due to tax rate changes in the
UK and Germany.
For the third quarter, the Company reported net income of $1.0 million, or
$0.15 per diluted share, which compares to a net income of $0.3 million, or
$0.04 per diluted share, for the third quarter of 2007.
Nine Months Ended September 30, 2008
For the nine months ended September 30, 2008, the Company reported revenue
of $250.4 million compared to $260.8 million for the first nine months of
2007. The decrease is primarily attributable to a decrease in volumes from
U.S. and central European operations, offset in part by the impact of
favorable exchange rates and improved pricing.
The Company had EBITDA from continuing operations of $8.3 million in the
first nine months of 2008, as compared to EBITDA from continuing operations of
$6.6 million in the first nine months of 2007. The EBITDA from continuing
operations for the first nine months of 2008 includes $1.9 million of
severance costs primarily related to the restructuring of our European
operations. EBITDA from continuing operations in the first nine months of
2007 included approximately $2.5 million of non-recurring costs associated
with stock option investigation and litigation legal expenses and consulting
costs.
The Company reported a net loss from continuing operations of $(11.9)
million for the first nine months of 2008, or $(1.72) per diluted share. This
compares to a net loss from continuing operations of $(10.8) million, or
$(1.55) per diluted share, for the first nine months of 2007, which included a
benefit of $1.8 million relating to an adjustment to the Company's deferred
tax assets and liabilities due to tax rate changes in the UK and Germany.
For the first nine months of 2008, the Company reported a net loss of
$(10.7) million, or $(1.55) per diluted share, which compares to a net loss of
$(9.8) million, or $(1.40) per diluted share, for the first nine months of
2007.
About EDCI Holdings, Inc.
EDCI Holdings, Inc. (Nasdaq: EDCI) is the holding company of Entertainment
Distribution Company, Inc., which is the majority shareholder of Entertainment
Distribution Company, LLC ("EDC, LLC"), a global and independent provider of
supply chain services to the home entertainment market. EDC, LLC serves every
aspect of the manufacturing and distribution process and is one of the largest
providers in the industry. Its clients include some of the world's best-known
music, movies and gaming companies. Headquartered in New York, EDC, LLC's
operations include manufacturing and distribution facilities throughout North
America and in Hannover, Germany, and a manufacturing facility in Blackburn,
UK. For more information, please visit www.edcllc.com.
About Sony DADC US Inc.
Sony DADC, a total supply chain provider, has twenty-three optical media,
distribution and digital facilities located globally. Although widely known
for its quality disc production and distribution services, Sony DADC also
develops and delivers dynamic technologies that not only protect disc content,
but transforms discs into powerful marketing tools by adding secure links to
bonus web-site content or prize incentives. Sony DADC operates within the Sony
Corporation of America corporate group. For more information, visit
www.sonydadc.com or call 1.800.358.7316.
Safe Harbor Statement
This news release contains statements that may be forward looking within
the meaning of applicable securities laws. The statements may include
projections regarding future revenues and earnings results, and are based upon
the Company's current forecasts, expectations and assumptions, which are
subject to a number of risks and uncertainties that could cause the actual
outcomes and results to differ materially. Some of these results and
uncertainties are discussed in the Company's most recently filed Annual Report
on Form 10-K, as amended. These factors include, but are not limited to
restructuring activities; potential intellectual property infringement claims;
potential acquisitions and strategic investments; volatility of stock price;
ability to attract and retain key personnel; competition; variability of
quarterly results and dependence on key customers; potential market changes
resulting from rapid technological advances; proprietary technology; potential
changes in government regulation; international business risks; continuation
and expansion of third party agreements; sensitivity to economic trends and
customer preferences; increased costs or shortages of raw materials or energy;
dependence on Universal Music Group; potential inability to manage successful
production; advances in technology and changes in customer demands;
variability in production levels; and development of digital distribution
alternatives including copying and distribution of music and video files. The
Company assumes no obligation to update any forward-looking statements and
does not intend to do so except where legally required.
EDCI HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, December 31,
2008 2007
(unaudited)
ASSETS (In thousands, except share data)
Current Assets:
Cash and cash equivalents $77,594 $63,850
Restricted cash 1,770 1,940
Investments 3,417 29,589
Accounts receivable, net of
allowances for doubtful accounts
of $3,670 and $3,328 for 2008
and 2007, respectively 29,592 35,577
Current portion of long-term
receivable 474 515
Inventories, net 9,553 9,111
Prepaid expenses and other current
assets 20,740 16,180
Deferred income taxes 244 277
Total Current Assets 143,384 157,039
Restricted cash 26,088 26,015
Property, plant and equipment, net 46,543 55,245
Long-term receivable 3,799 4,244
Intangible assets 36,961 44,604
Deferred income taxes 1,482 1,934
Other assets 6,366 6,940
TOTAL ASSETS $264,623 $296,021
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $31,353 $33,287
Accrued expenses and other
liabilities 34,773 37,503
Income taxes payable 128 3,697
Deferred income taxes - 126
Loans from employees 1,170 1,267
Current portion of long-term debt 18,546 24,364
Total Current Liabilities 85,970 100,244
Other non-current liabilities 10,148 12,185
Loans from employees 2,394 3,646
Long-term debt 20,222 21,589
Pension and other defined benefit
obligations 37,323 36,155
Deferred income taxes 9,473 10,195
Total Liabilities 165,530 184,014
Minority interest in subsidiary
company 5,514 5,771
Commitments and contingencies
Stockholders' Equity:
Preferred stock, $.01 par value;
authorized: 1,000,000 shares, no
shares
issued and outstanding - -
Common stock, $.02 par value;
authorized: 15,000,000 shares,
issued:
September 30, 2008 --
7,019,436 shares; December
31, 2007 -- 7,015,594 shares 140 140
Additional paid in capital 371,046 370,928
Accumulated deficit (284,025) (273,333)
Accumulated other comprehensive
income 7,845 8,501
Treasury stock at cost: - -
September 30, 2008 -- 324,794
shares; December 31, 2007 --
0 shares (1,427) -
Total Stockholders' Equity 93,579 106,236
$264,623 $296,021
EDCI HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended September 30,
2008 2007
(In thousands, except per share amounts)
REVENUES:
Product revenues $68,141 $76,233
Service revenues 19,670 20,397
Total Revenues 87,811 96,630
COST OF REVENUES:
Cost of product revenues 60,338 66,114
Cost of service revenues 14,060 14,901
Total Cost of Revenues 74,398 81,015
GROSS PROFIT 13,413 15,615
OPERATING EXPENSES:
Selling, general and
Administrative expense 11,389 12,106
Amortization of intangible
assets 2,393 2,109
Total Operating Expenses 13,782 14,215
OPERATING INCOME (LOSS) (369) 1,400
OTHER INCOME (EXPENSE):
Interest income 846 1,063
Interest expense (840) (1,081)
Gain (loss) on currency
swap, net 3,474 (1,658)
Gain (loss) on currency
transaction, net (1,371) 645
Other income (expense), net (352) 4
Total Other Income (Expense) 1,757 (1,027)
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME
TAXES AND MINORITY INTEREST 1,388 373
Income tax provision (benefit) 484 (233)
Minority interest income 39 (18)
INCOME FROM CONTINUING OPERATIONS 865 624
DISCONTINUED OPERATIONS, NET OF TAX:
INCOME (LOSS) FROM DISCONTINUED
OPERATIONS 147 (481)
GAIN ON SALE OF MESSAGING
BUSINESS - 111
NET INCOME $1,012 $254
INCOME PER WEIGHTED AVERAGE
COMMON SHARE (1):
Income from continuing
operations $0.13 $0.09
Discontinued Operations:
Income (loss) from
discontinued operations 0.02 (0.07)
Gain on sale of Messaging
business - 0.02
Net income per weighted average
common share $0.15 $0.04
INCOME PER WEIGHTED AVERAGE
DILUTED COMMON SHARE (1):
Income from continuing
operations $0.13 $0.09
Discontinued Operations:
Income (loss) from
discontinued operations 0.02 (0.07)
Gain on sale of Messaging
business - 0.02
Net income per diluted weighted
average common share $0.15 $0.04
(1) Income per weighted average common share amounts are rounded to
the nearest $.01; therefore, such rounding may impact individual
amounts presented.
EDCI HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Nine Months Ended September 30,
2008 2007
(In thousands, except per share amounts)
REVENUES:
Product revenues $190,964 $203,500
Service revenues 59,393 57,296
Total Revenues 250,357 260,796
COST OF REVENUES:
Cost of product revenues 171,741 180,104
Cost of service revenues 44,425 44,416
Total Cost of Revenues 216,166 224,520
GROSS PROFIT 34,191 36,276
OPERATING EXPENSES:
Selling, general and
administrative expense 36,705 39,582
Amortization of intangible
assets 7,231 6,223
Total Operating Expenses 43,936 45,805
OPERATING LOSS (9,745) (9,529)
OTHER INCOME (EXPENSE):
Interest income 2,893 3,415
Interest expense (2,932) (3,717)
Gain (loss) on currency
swap, net 881 (2,406)
Gain (loss) on currency
transaction, net (1,965) 984
Other income (expense), net (344) 71
Total Other Expense (1,467) (1,653)
LOSS FROM CONTINUING OPERATIONS
BEFORE INCOME
TAXES AND MINORITY INTEREST (11,212) (11,182)
Income tax provision
(benefit) 852 (349)
Minority interest income (203) (18)
LOSS FROM CONTINUING OPERATIONS (11,861) (10,815)
DISCONTINUED OPERATIONS,
NET OF TAX:
INCOME (LOSS) FROM DISCONTINUED
OPERATIONS 1,169 (231)
GAIN ON SALE OF MESSAGING
BUSINESS - 1,287
NET LOSS $(10,692) $(9,759)
LOSS PER WEIGHTED AVERAGE COMMON
SHARE (1):
Loss from continuing
Operations $(1.72) $(1.55)
Discontinued Operations:
Income (loss) from
discontinued operations 0.17 (0.03)
Gain on sale of Messaging
business - 0.18
Net loss per weighted average common
share $(1.55) $(1.40)
LOSS PER WEIGHTED AVERAGE DILUTED
COMMON SHARE:
Loss from continuing
operations $(1.72) $(1.55)
Discontinued Operations:
Income (loss) from
discontinued operations 0.17 (0.03)
Gain on sale of Messaging
business - 0.18
Net loss per diluted weighted
Average common share $(1.55) $(1.40)
(1) Loss per weighted average common share amounts are rounded to the
nearest $.01; therefore, such rounding may impact individual amounts
presented.
EDCI Holdings, Inc. and Subsidiaries
Summary Schedule of Non-GAAP Financial Data
(In thousands) Unaudited
The following summary of financial data shows the reconciliation of
loss from continuing operations, as determined in accordance with
accounting principles generally accepted in the United States (GAAP),
to income (loss) from continuing operations and earnings before
interest, taxes, and depreciation and amortization from continuing
operations.
EBITDA is income (loss) from continuing operations before interest
expense (income), net, income taxes, and depreciation and amortization
and is presented because the Company believes that such information is
commonly used in the entertainment industry as one measure of a
company's operating performance. EBITDA from continuing operations is
not determined in accordance with generally accepted accounting
principles, it is not indicative of cash provided by operating
activities, should not be used as a measure of operating income and
cash flows from operations as determined under GAAP, and should not be
considered in isolation or as an alternative to, or to be more
meaningful than, measures of performance determined in accordance with
GAAP. EBITDA, as calculated by the Company, may not be comparable to
similarly titled measures reported by other companies and could be
misleading unless all companies and analysts calculated EBITDA in the
same manner.
Three Months Nine Months
Ended Ended
September 30, September 30,
2008 2007 2008 2007
Income (loss) from continuing
operations 865 624 (11,861) (10,815)
Income tax provision (benefit) 484 (233) 852 (349)
(Gain) loss on currency swap, net (3,474) 1,658 (881) 2,406
(Gain) loss on currency transaction,
net 1,371 (645) 1,965 (984)
Interest (income) expense, net (6) 18 39 302
Depreciation and amortization 5,867 5,443 17,853 16,096
Other (income) expense, net 352 (4) 344 (71)
EBITDA from continuing operations $5,459 $6,861 $8,311 $6,585
SOURCE EDCI Holdings, Inc.
-0- 10/31/2008
/CONTACT: Jennifer Gery, or Scott Cianciulli - media, +1-914-602-4143, or
Mike Smargiassi, or Dianne Pascarella - investors, +1-212.986.6667, Brainerd
Communicators, Inc./
(EDCI)
CO: EDCI Holdings, Inc.; Entertainment Distribution Company,
LLC~~Entertainment Distribution Company, Inc.~~Universal Music
Group~~Sony DADC US Inc.
ST: New York, Indiana
IN: ENT REA
SU: ERN TNM CCA
PR
-- NY43282 --
3282 10/31/2008 16:22 EDT http://www.prnewswire.com
