Concepts Direct, Inc. Reports Second Quarter and Fiscal Year-to-date 2000 Sales and Earnings Results.Business Editors LONGMONT Longmont, city (1990 pop. 51,555), Boulder co., N Colo.; inc. 1885. It is a trade and processing center for a rich farm area irrigated by the Colorado–Big Thompson project. Vitamins, primary metal products, and manufacturing equipment are produced. , Colo.--(BUSINESS WIRE)--Aug. 1, 2000 Concepts Direct, Inc. (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on : CDIR CDIR Cumulative Damage Index Right Engine CDIR Chemical Demilitarization and Installation Restoration CDIR Channel Distribution Information at the Receiver ) announced today its results and results of its subsidiaries for the quarter and six months ended June June: see month. 30, 2000. The Company made several other key announcements as well. Sales for the quarter ended June 30, 2000 were $11,179,000, a 1% increase from sales of $11,068,000 for the same period in 1999. On a consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: basis, the Company posted a net loss of $1,850,000, or $0.37 per share for the quarter, compared to a net loss of $736,000 or $0.15 per share in the same period in 1999. For the six months ended June 30, 2000, sales were $23,984,000, a 2% increase over sales of $23,613,000 for the same period in 1999. The Company reported a net loss of $3,605,000 or $0.72 per share, compared to a net loss of $1,181,000 or $0.24 per share for the same period of 1999. The 2000 results reflect an assumed zero percent income tax rate, based on the Company's expectations that anticipated consolidated losses for the balance of the year will not be deductible That which may be taken away or subtracted. In taxation, an item that may be subtracted from gross income or adjusted gross income in determining taxable income (e.g., interest expenses, charitable contributions, certain taxes). in the current year for tax purposes. The results by company, prior to consolidation, are as follows:
Operating Operating Operating Operating
(Loss) (Loss) Income (Loss) Income (Loss)
Quarter Quarter 6-months 6-months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
Company 2000 1999 2000 1999
----------------------------------------------------------------------
Concepts Direct, Inc. $(99,000) $(861,000) $555,000 $(1,084,000)
----------------------------------------------------------------------
iConcepts, Inc. $(733,000) $(139,000)$(1,373,000) $(512,000)
----------------------------------------------------------------------
BOTWEB, Inc. $(877,000) $(37,000)$(2,574,000) $(45,000)
----------------------------------------------------------------------
Phillip A. Wiland, Chairman of the Board of Concepts Direct and
its two subsidiaries, stated that: "Concepts Direct, our catalog
business, experienced mild softness in results during the spring
period. Nevertheless, excellent work with regard to cost control
allowed the business to post substantially improved operating results
vs. the same period last year. The focus in our catalog business
during the first six months of this year has been on improvement in
operating income. As a result, we are pleased that for the six months
ended June 30, 2000 operating income has improved by over $1,600,000
vs. the same period last year. For the second half of 2000, we hope to
continue making excellent progress on the bottom line of our catalog
business while reestablishing a measure of top line growth."
Mr. Wiland continued saying that: "We have instituted a number of
changes with regard to our Internet subsidiaries. It had been our goal
to obtain new capital for one or both of iConcepts and BOTWEB during
the second quarter. However, in light of the tight capital market that
has evolved for Internet development companies, we were not successful
in achieving this goal. We have made the decision to reduce the
negative cash flow that these companies have been generating. BOTWEB's
expenditure levels have already been cut dramatically and will be cut
further. iConcepts expenditures have also been reduced and will be cut
further.
"We are also making a few strategic shifts. Operations of the new
Internet retailing brands that have been developed in iConcepts will
be consolidated into Concepts Direct. As a result, all of our
retailing functions will be in one company, which should lead to
operating efficiencies. This leaves iConcepts as strictly a technology
services business, owning highly robust software supporting the
Concepts Direct operations. However, for the present, it will be
without sufficient capital to expand its operations and pursue other
opportunities. BOTWEB will discontinue the beta version of BOTWEB.com,
our portal site, and pursue development at a slow pace. Collectively,
it is our intent that these actions will ultimately lead to
profitability and positive cash flow for the consolidated companies,
although accounting write downs associated with the cutbacks may occur
during the second half of 2000.
"I will continue as Chairman of all three companies. J. Michael
Wolfe, President and CEO of Concepts Direct, has also been named Chief
Executive Officer of iConcepts and BOTWEB. Since being named CEO of
Concepts Direct earlier this year, Mike has done an excellent job of
leading the restoration of strong results in our catalog business. His
knowledge of our business specifically and industry in general will be
integral to our successfully managing the subsidiary companies."
Largely as a result of the Company's lack of success to date in
raising funds for its subsidiaries in the capital markets, it has been
seeking alternative means of raising capital. Effective July 31, 2000
the Board of Directors of the Company passed a resolution authorizing
management to pursue several sources of financing, each dealing with
leveraging the Company's significant real estate assets. A potential
lender recently had an appraisal completed on the Company's building
and the 11-acre lot on which it is built. In addition, the Company
owns 128 acres of business/light industrial land on which an appraisal
is pending. These real estate assets are currently utilized as
collateral for all of the Company's bank debt (approximately $5.0
million borrowed in connection with the construction of the building
and purchase of the land and an additional $3.0 million line of
credit, for a total of $8.0 million of debt). The initial and pending
appraisals indicate that the equity in the Company's real property
assets is sufficient to provide additional financing needed by the
Company in connection with its operations for the balance of the year.
The Company anticipates that during the third quarter it will be
in a position to borrow sufficient funds against its real estate to
pay off the current debt ($8.0 million) and generate cash for
operations. Alternatively, a sale/leaseback and/or land sale may
occur. The bank has extended the $3.0 million line of credit and
waived covenant compliance until September 29, 2000 and the Company
expects to close its real estate financing in advance of this date.
In another matter, the Company announced that, effective August 1,
Mr. Wiland will be taking a medical leave of absence that will last
approximately two months. Mr. Wiland has been diagnosed with early
stage prostate cancer. Surgery is scheduled for later this month and
his physicians advise that his prospects for a full recovery are
excellent. The Company expects Mr. Wiland to return from leave
sometime in October.
Review of Results
Three and six month periods ended June 30, 2000
and 1999 Consolidated Financial Results
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
------------------------------------------------------
Sales $11,179,000 $11,068,000 $23,984,000 $23,613,000
----------------------------------------------------------------------
Gross Profit $3,680,000 $4,127,000 $8,267,000 $9,087,000
----------------------------------------------------------------------
Operating Loss $(1,709,000) $(1,037,000) $(3,391,000) $(1,641,000)
----------------------------------------------------------------------
Net Loss $(1,850,000) $(736,000) $(3,605,000) $(1,181,000)
----------------------------------------------------------------------
Diluted Loss
per Share $(0.37) $(0.15) $(0.72) $(0.24)
----------------------------------------------------------------------
Average Shares
Outstanding 4,998,000 4,977,000 4,992,000 4,973,000
----------------------------------------------------------------------
Recap of Second Quarter Financial Results by Company
The following is a recap of sales and expense activity for the
second quarter of 2000 for the three companies included in the
consolidated Concepts Direct, Inc. financial results. Sales and
expenses are shown with the appropriate company. The related party
line items refer to charges between related companies for services
provided to other related companies.
Concepts Direct, Inc. iConcepts, Inc. BOTWEB, Inc.
------------------------------------------------------
Sales to Third
Parties $10,886,000 $292,000 $0
----------------------------------------------------------------------
Sales to Related
Parties $30,000 $566,000 $0
----------------------------------------------------------------------
Total Sales $10,916,000 $858,000 $0
----------------------------------------------------------------------
Expenses from
Third Parties $10,732,000 $1,559,000 $596,000
----------------------------------------------------------------------
Expenses from
Related Parties $283,000 $32,000 $281,000
----------------------------------------------------------------------
Total Expenses $11,015,000 $1,591,000 $877,000
----------------------------------------------------------------------
Operating Loss $(99,000) $(733,000) $(877,000)
Sales On a consolidated basis sales increased by 1% for the quarter ended June 30, 2000, compared to the same period in 1999 primarily due to strong performance by the Colorful Images(R) and Snoopy Snoopy world’s most famous beagle. [Comics: “Peanuts” in Horn, 542] See : Dogs Snoopy imaginative dog. [Comics: “Peanuts” in Horn, 542–543] See : Illusion (TM) etc. catalogs. For Concepts Direct, Inc., sales decreased by about 1% primarily because of the reduction in catalog catalog, descriptive list, on cards or in a book, of the contents of a library. Assurbanipal's library at Nineveh was cataloged on shelves of slate. The first known subject catalog was compiled by Callimachus at the Alexandrian Library in the 3d cent. B.C. circulation of the Linda A set of parallel processing functions added to languages, such as C and C++, that allows data to be created and transferred between processes. It was developed by Yale professor David Gelernter, when he was a 23-year old graduate student. Anderson Anderson, river, Canada Anderson, river, c.465 mi (750 km) long, rising in several lakes in N central Northwest Territories, Canada. It meanders north and west before receiving the Carnwath River and flowing north to Liverpool Bay, an arm of the Arctic (R) and Collectibles(SM) concepts. This reduction versus the prior year circulation is expected to continue until later in this year, at which point we will be making comparisons with the period in which we began shifting our circulation strategy to produce positive contribution. Overall catalog circulation in the second quarter of 2000 was up about 5% compared to the second quarter of 1999. Gross Profit Margin Gross profit margin Gross profit divided by sales, which is equal to each sales dollar left over after paying for the cost of goods sold. gross profit margin A measure calculated by dividing gross profit by net sales. On a consolidated basis, gross profit as a percentage of sales was 33% for the second quarter of 2000 compared to 37% in the same period of 1999. This decrease related to the costs of expanding the operations of iConcepts and BOTWEB (Best Of The WEB) A now defunct site that listed exemplary Web sites in a variety of categories. The BOTWEB seal signified that a site had been evaluated on presentation, functionality and content and was one of the best of its kind on the Web. with little incremental Additional or increased growth, bulk, quantity, number, or value; enlarged. Incremental cost is additional or increased cost of an item or service apart from its actual cost. revenue. Gross profit as a percentage of sales for Concepts Direct, Inc., the catalog business, increased to 41% during the second quarter of 2000, compared to 36% in the second quarter of 1999. The primary reasons for this increase were the increase in higher margin paper product sales in 2000, compared to the same period in 1999 and the reduction in inventory obsolescence ob·so·les·cent adj. 1. Being in the process of passing out of use or usefulness; becoming obsolete. 2. Biology Gradually disappearing; imperfectly or only slightly developed. expense in 2000 compared to the same period in 1999. Selling, General and Administrative Costs administrative costs, n.pl the overhead expenses incurred in the operation of a dental benefits program, excluding costs of dental services provided. as a Percentage of Sales On a consolidated basis, selling, general and administrative costs as a percentage of sales increased to 48% in the second quarter of 2000 from 47% in 1999. Selling, general and administrative costs for Concepts Direct, Inc., the catalog business, was 42% in the second quarter of 2000 compared to 44% in the same period of 1999. Balance Sheet Review As of the end of the quarter, the Company had utilized its cash and borrowed all amounts available under its $3,000,000 line of credit. These funds have been used to support the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the initiatives and to reduce long term debt by over $1.0 million during the first six months of 2000. As noted above, the Company expects refinancing Refinancing An extension and/or increase in amount of existing debt. of its real estate to provide liquidity for the balance of the year. The Company will assess its additional capital needs after its real estate financing is completed. Cautionary Statement This press release contains certain forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. as such term is defined in the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. Company statements that are not historical facts, including statements about the Company's expectations, beliefs, plans and objectives are forward-looking statements and involve various risks and uncertainties, including the risks associated with starting new businesses. Additional discussion of factors that could cause actual results to differ materially from management's expectations, beliefs, plans and objectives is contained in the Company's SEC filings.
Selected Key Statistics - Concepts Direct, Inc.
(in thousands except percentages
and average order amounts)
Concepts Direct Catalog Business Statistics:
Q2-00 Q1-00 1999 Q4-99 Q3-99 Q2-99
-----------------------------------------------
Approximate Catalogs
Circulated (1)(8)
--------------------
Colorful Images 7,604 8,284 26,550 5,329 8,152 6,361
Linda Anderson 534 1,887 9,701 3,001 2,073 1,520
Snoopy etc. 534 180 1,579 150 204 361
Linda Anderson's
Collectibles 399 469 2,085 430 444 551
the Music Stand 448 425 1,202 580 622 0
Total 9,519 11,245 41,416 9,490 11,495 9,092
Customer Database
Size (2)(9)
--------------------
Colorful Images 9,144 9,037 8,899 8,640 8,507
Linda Anderson 770 750 713 644 595
Snoopy etc. 214 193 176 164 150
Linda Anderson's
Collectibles 196 188 176 161 146
the Music Stand 2,141 2,135 2,127 2,110 0
Total 11,652 11,523 11,338 11,121 8,979
Active
Customers (3)(9)
--------------------
Colorful Images 1,060 1,054 1,024 1,170 1,331
Linda Anderson 149 167 185 255 287
Snoopy etc. 41 39 41 56 60
Linda Anderson's
Collectibles 46 48 49 81 89
the Music Stand 49 43 37 142
Total 1,293 1,295 1,282 1,611 1,660
Average Order Amount
--------------------
Colorful Images $27 $27 $28 $27 $28 $29
Linda Anderson $58 $57 $58 $57 $58 $59
Snoopy etc. $75 $73 $64 $66 $62 $62
Linda Anderson's
Collectibles $56 $57 $61 $58 $62 $62
the Music Stand $58 $58 $55 $58 $49
Catalog Merchandise
Mix(4)
--------------------
Personalized Paper
Products 45% 45% 41% 40% 45% 40%
Other Merchandise 55% 55% 59% 60% 55% 60%
Catalog Customer
Marketing (6)
--------------------
Sales 8,146 9,563 37,521 14,372 7,531 7,472
Related Advertising
Expense 2,280 2,273 9,228 3,276 1,934 1,958
Advertising as
% of Sales 28.0% 23.8% 24.6% 22.8% 25.7% 26.2%
Catalog Prospect
Marketing (7)
--------------------
Sales 2,240 2,821 16,760 5,622 3,274 3,446
Related Advertising
Expense 1,088 1,158 7,163 2,138 1,294 1,677
Advertising as %
of Sales 48.6% 41.0% 42.7% 38.0% 39.5% 48.7%
E-Commerce Sales
--------------------
LindaAnderson.com 80.4 103.8 286.5 250.7 34.9 0.9
theMusicStand.com 43.0 27.8 77.9 77.9
Gross Profit
Margin (5)(10) 40.7% 41.7% 35.3% 29.4% 35.9% 35.8%
SG&A Costs As A
Percent of
Sales (10) 41.6% 36.6% 39.4% 32.1% 40.5% 43.6%
Selected Key Statistics - Concepts Direct, Inc.
(in thousands except percentages
and average order amounts)
Concepts Direct Catalog Business Statistics:
Q1-99 1998 Q4-98 Q3-98 Q2-98 Q1-98
---------------------------------------------
Approximate Catalogs
Circulated (1)(8)
--------------------
Colorful Images 6,708 51,603 8,283 20,895 10,130 12,295
Linda Anderson 3,107 17,299 5,417 5,636 2,531 3,715
Snoopy etc. 864 2,942 1,033 1,244 128 537
Linda Anderson's
Collectibles 660 6,429 2,941 2,366 1,122 0
the Music Stand 0 0 0 0 0 0
Total 11,339 78,273 17,674 30,141 13,911 16,547
Customer Database
Size (2)(9)
--------------------
Colorful Images 8,293 8,188 7,891 7,670 7,512
Linda Anderson 513 470 314 247 198
Snoopy etc. 122 110 45 34 23
Linda Anderson's
Collectibles 122 112 45 27 15
the Music Stand 0 0 0 0 0
Total 8,956 8,774 8,286 7,959 7,727
Active
Customers (3)(9)
--------------------
Colorful Images 1,429 1,561 1,827 1,865 1,999
Linda Anderson 308 301 215 168 132
Snoopy etc. 57 53 37 26 23
Linda Anderson's
Collectibles 92 83 45 27 15
the Music Stand
Total 1,758 1,859 2,009 2,000 2,097
Average Order Amount
--------------------
Colorful Images $29 $28 $29 $29 $28 $26
Linda Anderson $59 $58 $59 $59 $58 $58
Snoopy etc. $62 $65 $64 $66 $68 $62
Linda Anderson's
Collectibles $63 $61 $63 $62 $61 $56
the Music Stand
Catalog Merchandise
Mix(4)
--------------------
Personalized Paper
Products 38% 34% 29% 33% 35% 44%
Other Merchandise 62% 66% 71% 67% 65% 56%
Catalog Customer
Marketing (6)
--------------------
Sales 8,146 46,977 17,048 10,932 9,489 9,508
Related Advertising
Expense 2,060 15,436 5,252 4,131 3,256 2,797
Advertising as
% of Sales 25.3% 32.9% 30.8% 37.8% 34.3% 29.4%
Catalog Prospect
Marketing (7)
--------------------
Sales 4,418 39,066 17,361 8,610 6,420 6,675
Related Advertising
Expense 2,054 19,110 7,936 4,670 2,708 3,796
Advertising as %
of Sales 46.5% 48.9% 45.7% 54.2% 42.2% 56.9%
E-Commerce Sales
--------------------
LindaAnderson.com
theMusicStand.com
Gross Profit
Margin (5)(10) 39.6% 44.1% 44.9% 44.1% 43.6% 42.9%
SG&A Costs As A
Percent of
Sales (10) 41.3% 45.9% 42.1% 50.8% 44.6% 49.1%
Selected Key Statistics - Concepts Direct, Inc.
(in thousands except percentages and average order amounts)
Consolidated Company Statistics
Q2-00 Q1-00 1999 Q4-99 Q3-99 Q2-99
-------------------------------------------
Balance Sheet
Information
--------------------
Cash 0 0 1,231 0 481
Deferred Advertising 3,369 2,804 2,115 4,256 2,726
Inventories 5,941 5,664 5,221 9,115 8,933
Property and
Equipment 11,880 12,232 12,484 12,328 11,807
Long Term
Liabilities 4,531 4,627 4,818 5,681 5,881
Total Liabilities 15,650 13,481 12,305 15,545 12,296
Stockholders' Equity 10,283 12,133 13,888 15,572 16,307
Effective Income
tax rate 0% 0% -20% 4% -34% -34%
--------------------
Selected Key Statistics - Concepts Direct, Inc.
(in thousands except percentages and average order amounts)
Consolidated Company Statistics
Q1-99 1998 Q4-98 Q3-98 Q2-98 Q1-98
-------------------------------------------
Balance Sheet
Information
--------------------
Cash 3,402 4,070 4,007 5,003 8,674
Deferred Advertising 3,088 4,455 11,187 8,333 6,493
Inventories 9,256 10,053 10,777 6,789 5,078
Property and
Equipment 12,691 12,272 11,659 11,606 11,781
Long Term
Liabilities 5,967 6,079 6,467 6,178 6,337
Total Liabilities 12,687 14,633 22,270 15,020 15,154
Stockholders' Equity 17,036 17,440 17,016 17,995 18,189
Effective Income
tax rate -34% -32% 43% -35% -35% -35%
--------------------
(1) Includes approximate number of catalogs mailed and catalogs
distributed in product shipments. Microniche mailings are
attributed to the related catalog title.
(2) Approximate size of proprietary customer database, including
customers, catalog requesters, gift recipients and catalog
referrals, at period end.
(3) Approximate number of prior 12 month buyers at period end.
(4) Estimated percentage of Company catalog sales attributable to
major merchandise categories.
(5) Net Sales less product cost, order fulfillment cost and order
shipping cost.
(6) Gross catalog sales and the related advertising expense to
customers of the same catalog title, prior to refunds.
(7) Gross catalog sales and the related advertising expense to
individuals not previously classified as customers of the catalog
title, prior to refunds.
(8) Catalogs distributed in the last 2 days of June 1998 are included
in 3rd Qtr. counts: 4,085,000 Colorful Images, 1,419,000 Linda
Anderson, 463,000 Snoopy, etc. and 597,000 Linda Anderson's
Collectibles
(9) Counts for a period may vary from one report to another due to
factors such as elimination of duplicate customer records,
elimination of undeliverable address records, changes in
classification, etc.
(10) Certain historical amounts have been restated to conform to the
current financial presentation.
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