DAMARK Announces Fourth Quarter And Full Year Results As Expected; Cash From Operations, Memberships Results, And Internet Activity At All-Time Highs.MINNEAPOLIS--(BUSINESS WIRE)--Jan. 21, 1999--DAMARK International, Inc. (DMRK - 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 ) today announced that its membership business produced net revenues of $89.4 million in 1998, a 38.9 percent increase from the $64.4 million reported in 1997. 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. net revenues were down 25.5 percent to $395.0 million from $530.3 million. Total 1998 net revenues were $484.4 million, down 18.5 percent from $594.6 million in 1997. As expected, the Company recorded an operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. of $26.1 million and a net loss of $19.6 million or $2.71 per share compared to operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. of $11.4 million, net income of $6.3 million, and earnings per share of $0.74 in 1997. For the full year 1998, cash provided by operations reached $59.5 million or $8.21 per share compared to cash used by operations in 1997 of $30.4 million ($3.59 per share). The 1998 figures include $9.9 million of non-cash impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. of asset charges. Also during the year, DAMARK repaid $39.3 million of revolving debt and repurchased $15.8 million of stock. To date, the Company has bought and retired 1.27 million shares against its September September: see month. 1998 repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. authorization The right or permission to use a system resource; the process of granting access. See access control. of 2.0 million shares. DAMARK's 1998 fourth quarter membership revenues increased to $29.0 million, up 61.5 percent from the $18.0 million reported for the same period in 1997. New members acquired during the period totaled 796,000, up 127 percent from 1997. Catalog net revenues were down 33.2 percent to $110.7 million from $165.7 million in 1997. Fourth quarter total net revenues declined 23.9 percent to $139.7 million from the $183.7 million reported last year. For the quarter, the Company's operating loss totaled $13.5 million compared to operating income of $5.2 million in 1997. Net losses totaled $9.5 million or $1.50 per share in 1998's last quarter compared to net income of $3.0 million or $0.35 per share for fourth quarter 1997, due principally to non-cash impairment of asset charges and other costs related to resizing its catalog business. "In 1998, as promised, we made major strides in transforming DAMARK into a leading marketing solutions provider," said Mark A. Cohn, DAMARK's chairman and chief executive officer. "We paid a price for this progress in the form of our accounting losses. However, our financial performance was consistent with our previously announced strategies and we are a measurably meas·ur·a·ble adj. 1. Possible to be measured: measurable depths. 2. Of distinguished importance; significant: a measurable figure in literature. improved company that is better positioned to compete for the long term. For example, in 1998 we made critical steps toward resizing our catalog retail business, while continuing to invest in the growth of our membership ranks. For our catalog business, these measures produced a 110 basis point improvement in gross margin from 20.4 percent in 1997 to 21.5 percent in 1998. The initiatives also allowed us to reduce investment in receivables Receivables An asset designation applicable to all debts, unsettled transactions or other monetary obligations owed to a company by its debtors or customers. Receivables are recorded by a company's accountants and reported on the balance sheet, and they and include all debts owed and inventories. In 1998, we recovered $62.3 million of investment in net working capital. On the membership side, we invested according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. plan. During the year, we added several new corporate client relationships and introduced four new clubs. We also improved the liquidity and quality of our balance sheet by obtaining a larger and more flexible credit facility and eliminating unprofitable assets." At 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. , DAMARK reported 1.73 million memberships, 25.3 percent of which were originated through the client services channel, a market segment that the Company has pursued aggressively since third quarter 1997. The Company expects to continue to invest in client services membership throughout 1999 and anticipates recovery of these investments through future membership renewals. Throughout 1999, DAMARK will work to restore economic profitability to its retail operations by seeking more profitable customers by both catalog and Internet channels The Internet Channel is a version of the Opera 9 web browser for use on the Wii by Opera Software and Nintendo.[1] On December 22, 2006, a free beta version (promoted as a "trial version") of the browser was released. , solidifying so·lid·i·fy v. so·lid·i·fied, so·lid·i·fy·ing, so·lid·i·fies v.tr. 1. To make solid, compact, or hard. 2. To make strong or united. v.intr. gross margin gains, controlling costs, and improving working capital management. For these and other reasons, in the near term the Company believes that the most valuable tool for measuring its success is cash from operations although it does not expect the same level of performance in 1999 as in 1998. In late December December: see month. 1998, the Company re-released its 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 site, www.damark.com, recently rated as one of the top 100 shopping sites by www.100hot.com, a rating service. For 1998, DAMARK reported that marketed sales on its e-commerce e-commerce, commerce conducted over the Internet, most often via the World Wide Web. E-commerce can apply to purchases made through the Web or to business-to-business activities such as inventory transfers. site grew by 66.7% to $4.5 million, up from $2.7 million in 1997. The Company continues to await AWAIT, crim. law. Seems to signify what is now understood by lying in wait, or way-laying. issuance of accounting guidelines guidelines, n.pl a set of standards, criteria, or specifications to be used or followed in the performance of certain tasks. by the SEC regarding revenue and expense recognition for its membership business. Such guidelines may have a material non-cash impact on the Company's historical and future financial results. Prior year segment revenues have been re-classified to conform to Verb 1. conform to - satisfy a condition or restriction; "Does this paper meet the requirements for the degree?" fit, meet coordinate - be co-ordinated; "These activities coordinate well" the current year presentation. DAMARK International, Inc., a marketing solutions provider, brings a broad range of products, programs, and services to consumers via direct mail, telesales telesales Noun the selling of a commodity or service by telephone telesales npl → televentas fpl telesales npl → , and the Internet. DAMARK utilizes targeted, information-based strategies and makes offers for the benefit of its own account as well as for the accounts of its corporate clients. The Company develops, markets and manages membership programs that provide purchase price discounts and other benefits related to consumer needs in the areas of shopping, travel, hospitality, entertainment, health/fitness, and household finance. In addition, brand name, value-priced merchandise MERCHANDISE. By this term is understood all those things which merchants sell either wholesale or retail, as dry goods, hardware, groceries, drugs, &c. It is usually applied to personal chattels only, and to those which are not required for food or immediate support, but such as remain is offered through a variety of catalog titles in the categories of computers, home office, consumer electronics, home decor, home improvement, and sports/fitness. As of December 31, 1998, consumers enjoyed opportunities provided through over 1.7 million DAMARK-managed memberships. The Company is headquartered in Minneapolis, Minnesota “Minneapolis” redirects here. For other uses, see Minneapolis (disambiguation). Minneapolis (pronounced IPA: /ˌmɪniˈæpəlɪs/) is the largest city in the U.S. , was founded in 1986, and employs approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 2,000. The matters discussed in this press release, other than historical financial data, are "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. " intended to qualify for the safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. provisions from liability provided by 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. Certain important factors exist that could cause results to differ materially from those anticipated by some of the statements made above. Investors are cautioned that all forward-looking statements involve risks and uncertainties. Among others, factors that could cause actual results to differ materially from expectations include adverse changes in consumer spending Consumer demand or consumption is also known as personal consumption expenditure. It is the largest part of aggregate demand or effective demand at the macroeconomic level. patterns due to actual or perceived per·ceive tr.v. per·ceived, per·ceiv·ing, per·ceives 1. To become aware of directly through any of the senses, especially sight or hearing. 2. To achieve understanding of; apprehend. changes in the national economic outlook and its effect on jobs, employment, credit availability, and interest rates; adverse effects of internally generated changes in marketing strategy, product mix, and margin mix; lower than expected membership renewal rates and higher than expected cancellations and returns; inability to retain existing clients and attract new clients; inability to develop new membership programs; externally mandated changes in accounting guidelines; availability of financing on acceptable terms; failure by the Company or its significant vendors to achieve Year 2000 compliance; pressures on sales and pricing from competitors COMPETITORS, French law. Persons who compete or aspire to the same office, rank or employment. As an English word in common use, it has a much wider application. Ferriere, Dict. de Dr. h.t. ; and increases in costs which cannot be recovered through increased pricing of products and services. Shareholders, potential investors, and other readers are urged to consider these and other factors in evaluating the forward-looking statements made herein. -0-
4th QUARTER and FULL YEAR 1998
CONSOLIDATED FINANCIAL STATEMENTS
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4th Quarter Ended Year Ended
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--------------------- ---------------------
CONSOLIDATED STATEMENTS
OF OPERATIONS Dec 31, Dec 31, Dec 31, Dec 31,
(unaudited, in thousands
except per share data) 1998 1997 1998 1997
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Product and other
revenues, net $110,663 $165,724 $395,047 $530,271
Membership and related
revenues, net 29,013 17,962 89,369 64,356
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Total revenues, net 139,676 183,686 484,416 594,627
Cost of products sold 83,215 130,836 311,157 423,411
Operating and marketing
expenses 42,679 34,092 130,515 110,086
General and administrative
expenses 27,232 13,515 68,040 49,756
Unusual expenses related
to call center closing -- -- 767 --
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Total costs and expenses 153,126 178,443 510,479 583,253
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---------- ---------- ---------- ----------
Operating (loss) income (13,450) 5,243 (26,063) 11,374
Interest expense, net 924 700 3,210 1,757
Other expense, net 37 0 447 67
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(Loss) income before
income taxes (14,411) 4,543 (29,720) 9,550
Income tax (benefit)
provision (4,900) 1,543 (10,105) 3,245
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Net (loss) income ($9,511) $3,000 ($19,615) $6,305
========== ========== ========== ==========
========== ========== ========== ==========
Basic net (loss) earnings
per share ($1.50) $0.37 ($2.71) $0.78
Weighted average shares
outstanding 6,347 8,027 7,250 8,033
========== ========== ========== ==========
========== ========== ========== ==========
Diluted net (loss) earnings
per share ($1.50) $0.35 ($2.71) $0.74
Weighted average shares
outstanding 6,347 8,465 7,250 8,480
========== ========== ========== ==========
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CONDENSED CONSOLIDATED BALANCE SHEETS Dec 31, Dec 31,
(unaudited, in thousands) 1998 1997
---------- ----------
---------- ----------
Cash and cash equivalents $49 $474
Trade accounts receivable, net 47,795 77,573
Merchandise inventories, net 40,055 70,744
Other current assets 19,175 11,492
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---------- ----------
Total current assets 107,074 160,283
Property and equipment, net 30,150 38,351
Other assets, net and deferred income taxes 3,123 7,555
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========== ==========
Total assets $140,347 $206,189
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========== ==========
Borrowings under revolving credit facility $5,140 $44,400
Accounts payable and accrued liabilities 79,188 70,646
Deferred membership income, net 21,957 20,938
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---------- ----------
Total current liabilities 106,285 135,984
Deferred income taxes -- 1,542
---------- ----------
---------- ----------
Total liabilities 106,285 137,526
Shareholders' equity 34,062 68,663
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Total liabilities and shareholders' equity $140,347 $206,189
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Year Ended
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Dec 31, Dec 31,
(unaudited, in thousands) 1998 1997
---------- ----------
---------- ----------
Net (loss) income ($19,615) $6,305
Depreciation and amortization 20,486 8,716
Changes in deferred income taxes (6,166) 369
Loss (gain) on disposal of property 292 (152)
Changes in non-cash current assets 52,784 (61,336)
Changes in non-interest bearing current
liabilities 11,743 15,650
---------- ----------
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Cash provided by (used for) operations 59,524 (30,448)
Additions to property and equipment, net of
disposals (5,239) (9,999)
Additions to other assets, net of disposals (464) (156)
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Cash used for investments (5,703) (10,155)
Net (repayments) borrowings under revolving
credit facility (39,260) 41,400
Repurchases and retirements of common stock (15,780) (701)
Net proceeds from exercise of options and
issuance of stock 794 376
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Cash (used for) provided by financing (54,246) 41,075
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Net (decrease) increase in cash and equivalents ($425) $472
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The condensed financial statements included herein have been
prepared by the Company without audit in accordance with generally
accepted accounting principles and pursuant to the rules and
regulations of the Securities and Exchange Commission and should be
read in conjunction with the financial statements and notes thereto
included in the Company's 1997 Annual Report and the Forms 10-Q for
1998 as filed with the Securities and Exchange Commission.
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