Business Editors
SAN JOSE, Calif.--(BUSINESS WIRE)--Oct. 24, 2000
Media Arts Group, Inc. (NYSE: MDA) today announced proforma net income for the quarter ended September 30, 2000 of $6.2 million, or $0.47 per share, up 46% from the prior year. Including the operations of Exclaim Technologies, Inc., the Company's Internet subsidiary, and the write-down of certain Exclaim assets, net income for the second quarter was $2.9 million, or $0.22 per share, meeting expectations and remaining unchanged from the prior year. Revenues for the second quarter were as anticipated at $35.4 million, up 2% from $34.6 million in the prior year. Year-to-date proforma earnings were $10.4 million, or $0.79 per share, up 114% from the prior year. Year-to-date revenues were $64.4 million, up 7% from the prior year.
"We are very pleased with our proforma results. We have effectively managed our core business throughout the internal funding and subsequent write-down of Exclaim," stated Craig Fleming, Chairman and CEO of Media Arts. The write-down of Exclaim, net of tax, was $1.6 million and included the write-off of the Marketplace(TM) product and all related assets and other products under development which did not directly support Media Arts' dealers. "Going forward, Exclaim will focus solely on development and support of the Storefront(TM) retail operating system which is used by many of our Thomas Kinkade Signature Galleries(TM)," added Fleming.
Net sales to Signature Galleries increased 15% to $18.9 million for the September 2000 quarter. Sales to Showcase dealers were up 2% to $5.7 million and sales to other non-branded wholesale accounts increased 40% to $8.2 million. Included in non-branded wholesale accounts is QVC, which was up 43% to $2.4 million. Licensing revenues were up 14% to $1.5 million. Due to the conversion of nearly all company owned stores to Signature Galleries and one closure since the prior year, the growth in wholesale revenues were offset by a decline of $4.7 million in net retail sales of company owned Thomas Kinkade Stores.
District comparable sales are up 39.6% indicating continued overall growth and continued popularity of the Thomas Kinkade brand within the geographical territories in which Signature Galleries are operating, however, same store sales are down 13.4%. "In order to improve same store sales, and the overall performance of our Signature Gallery dealers, we are focusing on growth in underdeveloped domestic and international territories, and reducing emphasis to increase retail outlets in existing territories. We are also developing plans to test new retail formats that will leverage our artist diversification strategies," stated Fleming.
Gross margin for the second quarter of fiscal 2001 was virtually unchanged at 62.6% compared to 62.2% in the prior year. Proforma operating margin for the September 2000 quarter was 27.6% versus 20.2% in the prior year. Including Exclaim's operations and the related asset write-down, operating margin for the quarter was 12.9% versus 13.6% for the prior year. Proforma selling and marketing expenses were down 29.2% to $6.2 million, or down 24.0% to $6.7 million including Exclaim. Proforma general and administrative expenses were up 6.3% to $6.2 million, or up 4.0% to $8.3 million including Exclaim.
Media Arts Group, Inc. is a leading designer, manufacturer, marketer and branded retailer of canvas and paper lithographs, art-based home decorative accessories, collectibles and gift products
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The foregoing comments include forward-looking statements and actual results may vary. Such statements are indicated by words or phrases such as "believe," "intend," "expect," "seek," "plan" and similar words or phrases. Such statements are based on current expectations and are subject to certain risks, uncertainties and assumptions, including product development efforts, consumer acceptance of licensed artwork and of the Company's products based on such work, expansion of distribution channels for the Company's products and, in particular, the successful implementation of the Signature Gallery program, successful third party manufacturing relationships and the continued control of operating expenses. Media Arts Group, Inc. expressly disclaims any obligation to release publicly any updates or revisions to such forward-looking statements to reflect any change in its expectations with regard thereto or any change in events or circumstances on which any such statement is based.
CONSOLIDATED FINANCIAL INFORMATION (In thousands, except per share amounts) Three Months Ended Six Months Ended September 30, September 30, ------------------- ---------------- 2000 1999 2000 1999 ---- ---- ---- ---- Net sales $ 35,390 $ 34,624 $ 64,368 $ 60,369 Cost of sales 13,250 13,073 23,653 22,900 -------- -------- -------- -------- Gross profit 22,140 21,551 40,715 37,469 -------- -------- -------- -------- Operating expenses Selling and marketing 6,742 8,874 14,472 17,803 General and administrative 8,274 7,957 16,175 14,319 Write-down of Internet business assets 2,541 -- 2,541 -- -------- -------- -------- -------- Total operating expenses 17,557 16,831 33,188 32,122 -------- -------- -------- -------- Operating income 4,583 4,720 7,527 5,347 Interest income (expense) (52) (3) (6) 7 -------- -------- -------- -------- Income before taxes 4,531 4,717 7,521 5,354 Provision for income taxes 1,676 1,864 2,782 2,113 -------- -------- -------- -------- Net income $ 2,855 $ 2,853 $ 4,739 $ 3,241 ======== ======== ======== ======== Net income per common share (basic) $ 0.22 $ 0.22 $ 0.36 $ 0.25 Net income per common share (diluted) $ 0.22 $ 0.22 $ 0.36 $ 0.25 Weighted average common shares and common share equivalents (basic) 13,157 12,926 13,152 12,929 Weighted average common shares and common share equivalents (diluted) 13,187 13,067 13,210 13,141 Proforma earnings (net of income taxes): Net income $ 2,855 $ 2,853 $ 4,739 $ 3,241 Adjustments: Internet business operations 1,696 558 4,031 806 Write-down of Internet business assets 1,601 -- 1,601 -- Non-recurring charge -- 807 -- 807 -------- -------- -------- -------- Proforma net income $ 6,152 $ 4,218 $ 10,371 $ 4,854 ======== ======== ======== ======== Proforma net income per common share (basic) $ 0.47 $ 0.33 $ 0.79 $ 0.38 Proforma net income per common share (diluted) $ 0.47 $ 0.32 $ 0.79 $ 0.37 Sept. 30, March 31, --------- --------- 2000 2000 ---- ---- Cash and cash equivalents and investments $ 896 $ 5,544 Accounts receivable 37,209 27,844 Inventories 24,821 22,102 Working capital 58,460 48,590 Total assets 93,390 89,812 Long-term debt less current portion 5,714 5,243 Total stockholders' equity 71,208 66,408
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