Creative Computers, Inc. Announces 166% Sales Increase for the Third Quarter; Proprietary Mailing List Grows to Approximately One Million Names.TORRANCE Torrance, industrial and residential city (1990 pop. 133,107), Los Angeles co., SW Calif.; inc. 1921. It has large aircraft and electronics industries. Among its many manufactures are aircraft, electronics, communications equipment, aluminum products, steel, and , Calif.--(BUSINESS WIRE)--Oct. 30, 1995--Creative Computers, Inc. ("Creative") (Nasdaq: MALL) today announced record third-quarter results. "We are proud of our extremely strong third-quarter sales and the strength of our customer acquisition plan, which has expanded our proprietary customer list," said Frank Khulusi, Creative chairman and chief executive officer. "Sales in the third quarter were very strong across all major product categories. Our strong PC Mall results were achieved while we experienced some delay in demand early in the quarter as customers postponed their purchases until the shipment of Windows 95. "Our PC Mall 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. exhibited exceptional performance in its first full quarter with quarterly sales of over $19 million," Khulusi continued. "We shipped 15,600 Windows 95 orders during the quarter, making us one of the largest Windows 95 catalog resellers after being in the PC market less than four months. We also shipped an additional 17,400 Microsoft (Microsoft Corporation, Redmond, WA, www.microsoft.com) The most successful and influential software company. Microsoft's software and Intel's hardware pioneered the PC and revolutionized the computer industry. brand Windows 95 companion products such as Plus and Office during the quarter. Sales from our MacMall catalog grew over 140% compared with the three months ended September September: see month. 30, 1994, while also gaining valuable customers who continue to shop at MacMall." Net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight for the quarter ended September 30, 1995 reached $119.5 million, a 166% increase over net sales of $45.0 million for the comparable quarter in 1994 and a 45% increase over net sales for the second quarter of 1995. Mail order/catalog sales for the quarter exhibited an even stronger increase of 201% to $102.3 million, up from $34.0 million in the third quarter of 1994. Net income grew by $0.6 million to $1.8 million for the quarter ended September 30, 1995, increasing from $1.2 million for the year-ago quarter. Earnings per share were $0.19 for the third quarter of 1995, compared with $0.17 per share in the third quarter of 1994, while weighted average shares outstanding increased in 1995 to 9.63 million from 6.98 million a year ago as a result of Creative's initial and secondary stock offerings. For the nine months ended September 30, 1995, net sales increased 203% to $290.4 million compared with $96.0 million during the first nine months of 1994. Net income for the nine months of 1995 was $5.2 million, or $0.60 per share, compared with net income of $405,000, or $0.06 per share, during the same period in 1994. Increases Catalog Circulation "To accelerate the acquisition of new customers which improves our response rate, we aggressively increased our catalog circulation in the third quarter, investing additional advertising dollars above our typical 1.5% to 2.0% of sales," Khulusi said. "Net advertising was 3.1% of sales for the quarter. To take advantage of new product introductions, specifically Windows 95 and Apple CPUs, we made this investment in the third quarter, at a time when demand was strong in the consumer, small business and SOHO Soho (sōhō`, sə–), district of Westminster, London, England, known for its continental restaurants. Once a fashionable quarter, it became popular among writers and artists in the 19th cent. segments of the market, our largest customer segments. "We mailed approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 13 million catalogs, including 4 million on the PC-side of the business during the quarter. Approximately three million catalogs were mailed just prior to September 30, 1995, which are expected to contribute to fourth quarter revenue and earnings. As a result of this aggressive circulation strategy and aggressive introductory Windows 95 pricing, we increased our house mailing list An automated e-mail system on the Internet, which is maintained by subject matter. There are thousands of such lists that reach millions of individuals and businesses. New users generally subscribe by sending an e-mail with the word "subscribe" in it and subsequently receive all new by 48% from June June: see month. 30, 1995. Our total mailing list now includes approximately one million proprietary names." Additional Financial Highlights The Company's gross margin percentage was 13.4% compared with 14.2% for the first six months of 1995. The decrease in 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. was primarily due to the Company's strategy of aggressive introductory pricing on Windows 95 and Microsoft brand Windows 95 companion products, which contributed to a margin drop of 0.5%. As this introductory pricing and other promotions are now over, the run rate for margins exiting the quarter increased significantly to 14.4%. While PC sales increased significantly during the quarter, the average order size remained constant at approximately $460. Average monthly inventory turns for the quarter improved to 9.7 times compared with 8.5 times in the prior quarter. Inventory at September 30, 1995 included almost $9 million of product received during the last ten working days of the month from Apple Computer, as a result of Apple's year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. product availability improvement. Due to the opening of Creative's distribution center in Memphis next month, SG&A costs were affected by a one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. charge of approximately $150,000 associated with the planned downsizing (1) Converting mainframe and mini-based systems to client/server LANs. (2) To reduce equipment and associated costs by switching to a less-expensive system. (jargon) downsizing of the Company's Torrance warehouse. Commitment to Customer Service and Support "We continue in our commitment to provide the high level of customer service and support for which MacMall is known, which will be further enhanced by the opening of our Memphis distribution center next month," Khulusi continued. "We believe that the new distribution center will allow us to better serve the needs of our customers by enabling us to take orders later in the night for next day delivery. This location also strengthens our relationships with certain key distributors, many of whom are located in or plan to be located in Memphis." Creative to Introduce DataCom Mall Creative is currently preparing to conduct an initial mailing of its new DataCom Mall catalog, which features networking and data communications-related hardware and software products. Product sales associated with this catalog are expected to contribute to the Company's fourth quarter financial results. As announced on August 24, 1995, Creative completed a secondary stock offering of 500,000 shares of common stock at $26.25 per share. The net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). of more than $12 million generated by the offering will be used for general corporate purposes, including capital expenditures, working capital and possible future acquisitions. Creative Computers is a direct marketer of personal computer hardware, software and peripheral Any input, output or storage device connected externally or internally to the computer's CPU, such as a monitor, keyboard, printer, disk, tape, graphics tablet, scanner, joy stick, paddle or mouse. products for users of Apple Macintosh Apple Macintosh - Macintosh and DOS/Windows (1) Refers to a PC computer environment that uses DOS or Windows in contrast with Mac or Unix. (2) Refers specifically to a DOS and Windows 3.1 environment, in contrast with Windows 95/98, etc. personal computers. The Company offers over 14,500 products to its customers through its distinctive, full-color MacMall and PC Mall catalogs, and other promotional materials. The Company's staff of over 300 knowledgeable telemarketing telemarketing, the practice of selling goods or services to customers by means of the telephone or of surveying consumer preferences in telephone conversations. , customer service and technical support personnel work together to provide high level customer service and gain customer loyalty. Customers may call MacMall telemarketing representatives at (800) 222-2808 and PC Mall representatives at (800) 555-MALL, or shop Creative on 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 at http://www.macmall.com or http://www.pc-mall.com. For more information on Creative Computers via facsimile at no cost, simply call 1-800-PRO-INFO and dial client code 066. -0-
CREATIVE COMPUTERS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except share data)
(Unaudited)
For the For the
three months ended nine months ended
September 30, September 30,
1995 1994 1995 1994
Net sales $119,546 $45,025 $290,354 $96,043
Cost of goods sold 103,562 38,263 250,186 82,292
Gross Profit 15,984 6,762 40,168 13,751
Selling, general and
administrative
expenses 13,119 4,649 31,956 12,549
Costs associated with
the relocation of the
Company's
distribution center 150 -- -- --
Income from operations
before interest and
income taxes 2,715 2,113 8,212 1,202
Interest income
(expense), net 224 (184) 303 (527)
Income before
income taxes 2,939 1,929 8,515 675
Provision (benefit)
for income taxes 1,155 771 3,318 270
Net income $ 1,784 $ 1,158 $ 5,197 $ 405
Net income per share $ 0.19 $ 0.17 $ 0.60 $ 0.06
Weighted average
number of
shares
outstanding 9,633 6,983 8,639 6,983
CREATIVE COMPUTERS, INC.
CONSOLIDATED BALANCE SHEET
(in thousands except share data)
September 30, 1995 December 31, 1994
(unaudited)
ASSETS
Current Assets: Cash and cash equivalents $ 6,986 $ 3,348 Investments available for sale 15,649 -- Accounts receivable, net of allowance for doubtful accounts 16,920 5,727 Inventories 50,945 25,639 Prepaid expenses and other current assets 4,505 1,236 Deferred income taxes 791 1,398
Total current assets 95,796 37,348
Property, plant and equipment, net 9,954 3,865 Related party note receivable 140 1,646 Other assets 436 83
$106,326 $ 42,942
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities: Accounts payable $ 41,198 $ 29,446 Accrued expenses 8,255 2,457 Line of credit -- 3,279 Income taxes payable 12 1,094 Capital leases - current portion 242 350 Notes payable - current portion 29 397 Notes payable - related parties -- 164
Total current liabilities 49,736 37,187
Capital leases 580 1,146 Notes payable 63 732 Deferred income taxes 37 37 Subordinated debt -- 2,950
Total liabilities 50,416 42,052
Stockholders' Equity:
Common stock, $.001 par value;
Authorized 15,000,000 shares;
9,750,000 and 4,900,000
shares issued and outstanding 10 5
Preferred stock, $.001 par value;
Authorized 5,000,000; none issued
and outstanding 51,547 52
Additional paid in capital
Retained earnings 4,353 833
Total stockholders' equity 55,910 890
$106,326 $42,942
-0- October 30, 1995
REMINDER
Management of Creative Computers, Inc. will hold a conference call today, Monday, October 30, 1995 to discuss 3rd Quarter results:
TIME: 8:00 a.m. PST
10:00 a.m. CST
11:00 a.m. EST
If you have not already registered for the call, you may do so by
dialing:
310-442-0599
Please be sure to call at least 10 minutes before the scheduled start time to ensure all parties are connected.
Thank you for your cooperation.
CONTACT: Creative Computers, Inc., Torrance Frank Khulusi or Grant Trexler, 310/787-4500 or Financial Relations Board Jody Martin or Tom Ekman Noun 1. Ekman - Swedish oceanographer who recognized the role of the Coriolis effect on ocean currents (1874-1954) Vagn Walfrid Ekman , 310/442-0599 |
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