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EXHIBIT 99.1
FOR IMMEDIATE RELEASE
CONTACT: Ria Marie Carlson
VP, Public & Investor Relations
(323) 932-4096
EQUITY MARKETING REPORTS RECORD RESULTS FOR
THIRD QUARTER, NINE MONTHS
NET INCOME INCREASES 34% FOR QUARTER, 62% FOR NINE-MONTH PERIOD
LOS ANGELES, October 19, 2000 - Equity Marketing, Inc. (Nasdaq: EMAK)
announced today financial results for the third quarter and nine-month period
ended September 30, 2000.
"Sales, net income and earnings per share hit record levels for both the
third quarter and nine months," said Equity Chairman and Chief Executive Officer
Don Kurz.
THIRD QUARTER HIGHLIGHTS
- Revenues were $56.0 million versus $53.3 million in 1999. Marketing services
represented approximately 85% of the total revenues, while the remaining
15% of revenues were generated from the consumer products division.
- Net income was $3.5 million, a 34% increase over the $2.6 million (excluding
restructuring gains) reported in 1999.
- Fully diluted earnings per share were $0.42, exceeding the earnings per
share (excluding restructuring gains) of $0.40 in the year-ago quarter,
despite a 27% increase in the weighted average number of shares outstanding
primarily due to the private equity investment from Crown Capital Group. If
the private placement had not occurred, quarterly earnings per share would
have been approximately $0.50 - a 25% increase over 1999.
- Earnings before interest, taxes, depreciation and amortization (EBITDA)
increased 18%, from $5.2 million in the third quarter of 1999 (excluding
restructuring gains) to $6.1 million this year.
NINE-MONTH HIGHLIGHTS
- Revenues were $154.8 million, 13% higher than the $136.8 million reported
last year. Marketing services generated 89% of total revenues; the remaining
11% came from consumer products.
- Net income increased 62%, from $5.0 million (excluding restructuring gains)
in 1999 to $8.1 million this year.
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- Fully diluted earnings per share were $1.09, 40% higher than the $0.78
posted for the comparable period last year (excluding restructuring gains).
Without the Crown Capital Group investment, nine-month earnings per share
would have been approximately $1.18 - a 51% increase.
- EBITDA was $14.8 million, 35% higher than the $11.0 million reported in
1999.
Nine-month 2000 results exclude a charge of $227,000 (net of tax
effects), or $0.03 per diluted share, posted in the first quarter of 2000 to
reflect a discount for the time value of money relating to the sale of
receivables owed to the company by AmeriServe Food Distribution, Inc., which
filed for bankruptcy on January 31, 2000.
"Driving the results in the third quarter was growth in higher-margin
businesses, such as consumer products and international promotions," explained
Mr. Kurz. "Revenues from our consumer products division increased 47% compared
to last year's third quarter. Pretax margins for the third quarter improved more
than 200 basis points - from 8.2% in 1999 to 10.5% this year - while gross
margins were more than 29%. Moreover, our working capital, at $46.3 million, is
at a historic high."
STOCK REPURCHASE UPDATE
On July 20, 2000, the company announced that its board of directors
authorized the expenditure of up to $10 million over 12 months to repurchase
shares of the company's common stock. As of September 30, 2000, the company
spent approximately $1.15 million to purchase shares at an average price of
$13.18.
"Since we believe our stock is a good investment, we expect to purchase
shares of our stock from time to time, based on market conditions, except for
quiet periods," said Mr. Kurz. "At the same time, we continue to pursue
aggressively the key growth initiatives announced earlier this year - including
a focused mergers and acquisition program."
The number of weighted average shares outstanding increased to 8.3 million
for the third quarter of 2000 compared to 6.5 million a year ago, due primarily
to the private equity transaction with Crown Capital Group. The company expects
the share-count to remain at 8.3 million in the fourth quarter and close the
fiscal year with about 7.7 million weighted average shares outstanding.
OUTLOOK
For the fourth quarter ending December 31, 2000, the company currently
expects sales to range from $90 million to $100 million and fully diluted
earnings per share, excluding any non-recurring items, to be between $0.60 and
$0.65.
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For the 2000 fiscal year, the company currently expects sales to range from
$245 million to $255 million and fully diluted earnings per share, excluding the
first-quarter AmeriServe charge and any other non-recurring items, to be between
$1.69 and $1.74. Gross margins are expected to range between 25% and 27%.
The earnings per share forecasts include the higher share count resulting
from the Crown Capital Group investment. Without the investment, forecasted
earnings per share for 2000, excluding any non-recurring items and the
first-quarter AmeriServe charge, would range from $0.70 to $0.75 for the fourth
quarter and $1.88 to $1.93 for the full year.
"We are particularly pleased with our growth this year," added Mr. Kurz.
"1999 is a tough year to beat because we experienced sales growth of more than
40% and a particularly strong fourth quarter. Nevertheless, our revenues from
marketing services are expected to exceed 1999 levels, which is better than we
originally anticipated. Combine this with the success of our consumer products
division, and sales and profitability for the 2000 fiscal year are on track to
hit record levels."
Equity Marketing will hold an investor conference call to discuss financial
and operational results at 12:30 p.m. Eastern time today. Investors may listen
to the live call or a replay via the Internet at www.vcall.com. Those wishing to
listen to the live call are encouraged to visit the web site at least 15 minutes
early to register, download and install any necessary audio software.
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. The
company's products are sold primarily through specialty and mass-market
retailers. 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
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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.
Condensed Consolidated Statements of Income
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -----------------
(UNAUDITED) (UNAUDITED)
2000 1999 2000 1999
------------ ------------ ------------- --------------
<S> <C> <C> <C> <C>
Revenues $ 56,026 $ 53,334 $ 154,817 $ 136,802
Cost of sales 39,589 39,295 114,279 102,832
------------ ------------ ------------- --------------
Gross profit 16,437 14,039 40,538 33,970
Operating expenses:
Salaries, wages and benefits 5,730 4,433 12,877 11,349
Selling, general and administrative 5,233 5,075 15,294 13,720
Restructuring gain -- (240) -- (641)
------------ ------------ ------------- --------------
Total operating expenses 10,963 9,268 28,171 24,428
Income from operations 5,474 4,771 12,367 9,542
Other income (expense) 391 (151) 746 (590)
------------ ------------ ------------- --------------
Income before provision for income
taxes 5,865 4,620 13,113 8,952
Provision for income taxes 2,346 1,848 5,234 3,581
------------ ------------ ------------- --------------
Net income $ 3,519 $ 2,772 $ 7,879 $ 5,371
============ ============ ============= ==============
Preferred Stock Dividends 375 -- 582 --
------------ ------------ ------------- --------------
Net income Available to Common Stockholders $ 3,144 $ 2,772 $ 7,297 $ 5,371
============ ============ ============= ==============
Basic Income Per Share
Earnings Per Share $ 0.50 $ 0.44 $ 1.16 $ 0.86
============ ============ ============= ==============
Weighted Average Shares Outstanding 6,307,650 6,230,906 6,278,516 6,221,374
============ ============ ============= ==============
Diluted Income Per Share
Earnings Per Share $ 0.42 $ 0.42 $ 1.06 $ 0.84
============ ============ ============= ==============
Weighted Average Shares Outstanding 8,288,741 6,533,737 7,403,427 6,387,617
============ ============ ============= ==============
</TABLE>
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EQUITY MARKETING, INC.
Condensed Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
ASSETS SEPTEMBER 30, DECEMBER 31,
2000 1999
(UNAUDITED)
----------------- ---------------
<S> <C> <C>
Cash and short-term investments $ 32,478 $ 7,131
Accounts receivable, net 43,043 37,385
Note receivable 8,137 5,024
Inventory 23,805 8,742
Prepaids and other current assets 6,282 5,696
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CURRENT ASSETS 113,745 63,978
Fixed assets, net 4,276 4,907
Intangible assets, net 21,286 21,846
Note receivable 2,151 5,491
Other assets 1,447 1,022
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TOTAL ASSETS $ 142,905 $ 97,244
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LIABILITIES AND SEPTEMBER 30, DECEMBER 31,
STOCKHOLDERS' EQUITY 2000 1999
--------------- -------------
Short-term debt $ -- $ 12,500
Accounts payable 37,849 21,726
Accrued liabilities 29,638 18,707
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CURRENT LIABILITIES 67,487 52,933
Long-term liabilities 2,391 2,286
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TOTAL LIABILITIES 69,878 55,219
Mandatory redeemable preferred stock 23,092 --
Stockholders' equity 49,935 42,025
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TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 142,905 $ 97,244
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</TABLE>
