<PAGE>
CONTACT: RIA MARIE CARLSON
VP, CORPORATE COMMUNICATIONS
AND INVESTOR RELATIONS
(323) 932-4096
FOR IMMEDIATE RELEASE
EQUITY MARKETING POSTS STRONG SECOND QUARTER;
AUTHORIZES STOCK BUY-BACK
SIX-MONTH NET INCOME INCREASES 85% VS. FIRST HALF OF 1999
LOS ANGELES, CA, JULY 20, 2000 --- Equity Marketing, Inc. (Nasdaq: EMAK)
announced today financial results for the second quarter and first half ended
June 30, 2000. The company also announced that its board of directors has
authorized the expenditure of up to $10 million over the next 12 months for the
repurchase of shares of the company's common stock.
FINANCIAL RESULTS
For the second quarter of 2000, net income was $3.1 million on revenues of
$55.3 million, versus net income of $2.6 million (before restructuring gains) on
revenues of $56.0 million for the comparable quarter in 1999. Earnings before
interest, taxes, depreciation and amortization (EBITDA) were $5.5 million,
compared to $5.3 million in 1999.
Earnings per share were $0.41, matching the earnings per share (before
restructuring gains) posted in the second quarter a year ago, despite a 17
percent increase in the number of shares outstanding due to the private equity
investment from Crown Capital Group. The quarter's average shares outstanding
was 7.4 million, compared to 6.3 million a year ago. If the Crown Capital
investment had not occurred, quarterly earnings per share would have been $0.44.
"Second-quarter performance was better than anticipated," said Equity
Chairman and Chief Executive Officer Don Kurz. "Because of the promotional
calendars of our clients and an extraordinarily strong first quarter, we
originally expected the second quarter to be down compared to last year.
However, business continued to strengthen and all divisions exceeded their
second quarter plan. As a result, second-quarter net income (before
restructuring gains) increased 17 percent and we posted a very powerful first
half - with record sales, net income and EBITDA."
For the six-month period ended June 30, 2000, revenues were $98.8 million,
an 18 percent increase over the $83.5 million reported for the first half of
1999. Net income (before restructuring gains) increased 85 percent - from $2.4
million in 1999 to $4.4 million in 2000 - while earnings before interest, taxes,
depreciation and amortization (EBITDA) increased 43 percent, to $8.2 million
versus $5.7 million in 1999.
Earnings per share for the first half were $0.63, a 70 percent increase
over the $0.37 (before restructuring gains) posted in 1999. Without the Crown
Capital investment, earnings per share would have been $0.65 - a 76 percent
increase.
- more -
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Equity Marketing, Inc.
Second Quarter Earnings
July 20, 2000
"Driving the strong results in the first half was a 21 percent increase in
sales from our promotions and marketing services business," said Mr. Kurz. "I am
also particularly pleased with the health of our balance sheet, as evidenced by
our current ratio of 2.7 at June 30, 2000, compared to 1.2 at December 31, 1999
and 1.6 at March 31, 2000."
STOCK REPURCHASE
As noted above, the company's board of directors authorized an
expenditure of up to $10 million over the next 12 months for the repurchase of
Equity Marketing, Inc. common stock.
Shares will be purchased from time to time after July 21, 2000 in the
open market at prevailing prices, based on market conditions. The Company may
also make a number of purchases effected as block trades as well as certain
negotiated, off-exchange purchases not in the open market. The share repurchase
program will be funded through a combination of working capital and bank debt.
"This repurchase program demonstrates our commitment to shareholder
value and confidence in the long-term prospects of the company," said Mr. Kurz.
"We believe that a buy-back program is an excellent investment, considering our
historical performance, liquidity and strong growth prospects. The company's
five-year compounded annual growth rates for sales and operating profit are 29.7
percent and 30.2 percent, respectively, while five-year average return on equity
is 29.4 percent. Moreover, due to our strong cash flow, we expect to continue
investing in our key growth initiatives, which include mergers and acquisitions,
new business development and providing an expanded portfolio of marketing
services. Our strategy has not changed - we're continuing to pursue aggressive
growth."
Mr. Kurz continued: "We now have good visibility for the next six
months and 2000 is shaping up to be another strong year, with both the third and
fourth quarters progressing well. As we communicated last month, operating
profit and net income for the year are expected to grow by at least 25 percent,
and we believe earnings per share will surpass that of 1999, despite the
anticipated 20 percent increase in average weighted shares outstanding resulting
from the Crown Capital transaction."
Equity Marketing, Inc. is a leading marketing services company,
providing a wide range of custom promotional programs that build sales and brand
awareness for retailers, restaurant chains and consumer goods companies such as
Burger King Corporation, The Coca-Cola Company, Exxon / Mobil, Sunoco, Inc.,
CVS/pharmacy and others. The company is also a developer and marketer of
distinctive, branded consumer products that complement its core promotions
business and are based on trademarks it owns or classic licensed properties.
More information about Equity Marketing is available on the company's web site
at WWW.EQUITY-MARKETING.COM.
CERTAIN EXPECTATIONS AND PROJECTIONS REGARDING THE FUTURE PERFORMANCE OF EQUITY
MARKETING, INC. DISCUSSED IN THIS NEWS RELEASE ARE FORWARD-LOOKING AND ARE MADE
UNDER THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM
ACT OF 1995. THESE EXPECTATIONS AND PROJECTIONS ARE BASED ON CURRENTLY AVAILABLE
COMPETITIVE, FINANCIAL AND ECONOMIC DATA ALONG WITH THE COMPANY'S OPERATING
PLANS AND ARE SUBJECT TO FUTURE EVENTS AND UNCERTAINTIES. MANAGEMENT CAUTIONS
THE READER THAT THE FOLLOWING FACTORS, AMONG OTHERS, COULD CAUSE THE COMPANY'S
ACTUAL CONSOLIDATED RESULTS OF OPERATIONS AND FINANCIAL POSITION IN 2000 AND
THEREAFTER TO DIFFER SIGNIFICANTLY FROM THOSE EXPRESSED IN FORWARD-LOOKING
STATEMENTS: THE COMPANY'S DEPENDENCE ON A SINGLE CUSTOMER; THE SIGNIFICANT
QUARTER-TO-QUARTER VARIABILITY IN THE COMPANY'S REVENUES AND NET INCOME; THE
COMPANY'S DEPENDENCE ON THE POPULARITY OF LICENSED ENTERTAINMENT PROPERTIES AND
THE ABILITY TO LICENSE, DEVELOP AND MARKET NEW PRODUCTS; THE COMPANY'S
DEPENDENCE ON FOREIGN MANUFACTURERS; THE COMPANY'S NEED FOR ADDITIONAL WORKING
CAPITAL; AND THE POTENTIAL NEGATIVE IMPACT OF FUTURE ACQUISITIONS. THE COMPANY
UNDERTAKES NO OBLIGATION TO PUBLICLY RELEASE THE RESULTS OF ANY REVISIONS TO
FORWARD-LOOKING STATEMENTS, WHICH MAY BE MADE TO REFLECT EVENTS OR CIRCUMSTANCES
AFTER THE DATE HEREOF OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS. THE
RISKS HIGHLIGHTED HEREIN SHOULD NOT BE ASSUMED TO BE THE ONLY ITEMS THAT COULD
AFFECT THE FUTURE PERFORMANCE OF THE COMPANY.
WHILE MANY IN THE FINANCIAL COMMUNITY CONSIDER EBITDA TO BE AN IMPORTANT MEASURE
OF COMPARATIVE OPERATING PERFORMANCE, IT SHOULD BE CONSIDERED IN ADDITION TO,
BUT NOT AS A SUBSTITUTE FOR OR SUPERIOR TO, OPERATING INCOME, NET EARNINGS, CASH
FLOW AND OTHER MEASURES OF FINANCIAL PERFORMANCE PREPARED IN ACCORDANCE WITH
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES.
(tables follow)
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Equity Marketing, Inc.
Second Quarter Earnings
July 20, 2000
EQUITY MARKETING, INC.
Condensed Consolidated Statements of Income
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------- --------
(UNAUDITED) (UNAUDITED)
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues $ 55,314 $ 56,011 $ 98,791 $ 83,468
Cost of sales 41,487 42,992 74,690 63,537
--------- --------- --------- ---------
Gross profit 13,827 13,019 24,101 19,931
Operating expenses:
Salaries, wages and benefits 3,746 3,444 7,147 6,916
Selling, general and administrative 5,242 4,986 10,061 8,645
Restructuring gain -- (401) -- (401)
--------- --------- --------- ---------
Total operating expenses 8,988 8,029 17,208 15,160
Income from operations 4,839 4,990 6,893 4,771
Other income (expense) 270 (217) 355 (439)
--------- --------- --------- ---------
Income before provision for income taxes 5,109 4,773 7,248 4,332
Provision for income taxes 2,043 1,909 2,888 1,733
--------- --------- --------- ---------
Net income $ 3,066 $ 2,864 $ 4,360 $ 2,599
--------- --------- --------- ---------
Preferred Stock Dividends 201 -- 207 --
--------- --------- --------- ---------
Net income Available to Common Stockholders $ 2,865 $ 2,864 $ 4,153 $ 2,599
========= ========= ========= =========
Basic Income Per Share
Earnings Per Share $ 0.46 $ 0.46 $ 0.66 $ 0.42
========= ========= ========= =========
Weighted Average Shares Outstanding 6,291,180 6,223,099 6,263,949 6,216,607
========= ========= ========= =========
Diluted Income Per Share
Earnings Per Share $ 0.41 $ 0.45 $ 0.63 $ 0.41
========= ========= ========= =========
Weighted Average Shares Outstanding 7,412,498 6,340,969 6,956,283 6,314,557
========= ========= ========= =========
</TABLE>
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Equity Marketing, Inc.
Second Quarter Earnings
July 20, 2000
EQUITY MARKETING, INC.
Condensed Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
ASSETS JUNE 30, DECEMBER 31,
2000 1999
(UNAUDITED)
------- -------
<S> <C> <C>
Cash and short-term investments $14,461 $ 7,131
Accounts receivable, net 29,878 37,385
Note receivable 7,957 5,024
Inventory 6,682 8,742
Prepaids and other current assets 6,459 5,696
------- -------
CURRENT ASSETS 65,437 63,978
Fixed assets, net 4,520 4,907
Intangible assets, net 21,589 21,846
Note receivable 4,254 5,491
Other assets 938 1,022
------- -------
TOTAL ASSETS $96,738 $97,244
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</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND JUNE 30, DECEMBER 31,
STOCKHOLDERS' EQUITY 2000 1999
------- -------
<S> <C> <C>
Short-term debt $ -- $12,500
Accounts payable 11,304 21,726
Accrued liabilities 12,738 18,707
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CURRENT LIABILITIES 24,042 52,933
Long-term liabilities 2,366 2,286
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TOTAL LIABILITIES 26,408 55,219
Mandatory redeemable preferred stock 23,092 --
Stockholders' equity 47,238 42,025
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TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $96,738 $97,244
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