DG Systems Reports Second Quarter Revenues of $15.2 Million.DALLAS Dallas, city (1990 pop. 1,006,877), seat of Dallas co., N Tex., on the Trinity River near the junction of its three forks; inc. 1871. The second largest Texas city, after Houston, and the eighth largest U.S. -- DG Systems, Inc. (Nasdaq: DGIT), the leading provider of digital media distribution services to the advertising and broadcast industries, today reported operating results for the three-month and six-month periods ended June June: see month. 30, 2005. The table below summarizes the financial results:
Summary of Fiscal 2005 Second Quarter and Six-Months Results
(in thousands, except per-share data)
Three Months
Ended Six Months Ended
June 30, June 30,
---------------------------------------------------- -----------------
2005 2004 2005 2004
------------------------------------------- -------- -------- --------
Revenues $15,157 $14,890 $30,860 $28,272
------------------------------------------- -------- -------- --------
EBITDA (1) 2,105 4,037 5,728 7,362
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Operating income (2) 251 2,498 2,457 4,624
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Net Income (loss) (2) (350) 1,586 775 2,903
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Diluted income per share (2) 0.00 0.02 0.01 0.04
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Weighted average shares - Diluted 73,946 73,227 73,475 73,698
------------------------------------------- -------- -------- --------
(1) EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become is earnings before interest, taxes, 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. , restructuring charges restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. , depreciation and amortization. In the three months ended June 30, 2005 DG Systems recorded $0.4 million of acquisition and transition costs. Excluding the effect of these items for the three months ended June 30, 2005, DG Systems would have reported adjusted EBITDA of approximately $2.5 million. The first quarter 2005 results include a one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. $0.5 million reduction of operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. related to the re-negotiation of an existing service agreement. (2) In the three months ended June 30, 2005, DG Systems recorded a non-recurring pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta acquisition charge of $0.4 million, or $0.2 million after tax, pre-tax restructuring charges of $0.3 million or $0.2 million after tax, and loan fee write-off Write-Off A reduction in the value of an asset or earnings by the amount of an expense or loss. Companies are able to write off certain expenses that are required to run the business, or have been incurred in the operation of the business and detract from retained revenues. charge of $0.3 million, or $0.2 million after tax that reduced 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. , net income and diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. income per share. Excluding the effect of these items for the three months ended June 30, 2005, DG Systems would have reported adjusted net income of approximately $0.2 million. When excluding these items for the six months ended June 30, 2005, DG Systems would have reported adjusted net income of approximately $1.3 million and adjusted net income per diluted share of approximately $0.02. The following tables summarize sum·ma·rize intr. & tr.v. sum·ma·rized, sum·ma·riz·ing, sum·ma·riz·es To make a summary or make a summary of. sum the effect of these charges.
Summary of Adjustments to Fiscal 2005 Second Quarter and
Six-Months Results
(in thousands, except per share data)
Three Months
Ended Six-Months Ended
June 30, June 30,
----------------------------------------------------------------------
2005 2004 2005 2004
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Net Income (loss) $(350) $1,586 $775 $2,903
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Add back:
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Acquisition and other
transition costs (1) (4) 226 - 226 -
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Restructuring costs (2) (4) 169 - 169 -
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Loan fee write-off (3) (4) 165 - 165 -
----------------------------------------------------------------------
----------------------------------------------------------------------
Adjusted Net Income 210 $1,586 1,335 $2,903
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----------------------------------------------------------------------
Reported EBITDA $2,105 $4,037 $5,728 $7,362
----------------------------------------------------------------------
Add back:
----------------------------------------------------------------------
Acquisition and other transition
costs (1) 365 - 365 -
----------------------------------------------------------------------
----------------------------------------------------------------------
Adjusted EBITDA $2,470 $4,037 $6,093 $7,362
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(1) Includes transition costs related to the relocation RELOCATION, Scotch law, contracts. To let again to renew a lease, is called a relocation. 2. When a tenant holds over after the expiration of his lease, with the consent of his landlord, this will amount to a relocation. of the Media DVX DVX Digital Voice Exchange DVX Dvd Extended DVX Device Driver operations to DG's Dallas facility, the elimination of approximately 25 Media DVX contract employees and the integration of the New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of facilities (2) Restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). costs are related to acquisitions completed in the last twelve months. (3) As a result of the Company's debt refinancing Refinancing An extension and/or increase in amount of existing debt. during the 2005 second quarter, approximately $0.27 million of deferred loan fees were written off, which were recorded as additional interest expense for the period. (4) Amount shown is net of taxes For the three months ended June 30, 2005, DG Systems reported consolidated revenues of $15.2 million, compared to consolidated revenues of $14.9 million in the year-ago second quarter. The year ago second quarter included over $400,000 in revenue from political advertising and approximately $625,000 of deferred revenue in the Company's StarGuide division, which did not recur in the 2005 second quarter. Second quarter 2005 revenues were impacted by a more competitive rate environment and a decrease in distribution volume by current and ongoing customers. The Company improved the percentage of electronic delivery volume over its digital network to 87% in 2005 second quarter vs. 76% in the 2004 second quarter which had the impact of lowering the revenue generated from the Company's higher margin dub and ship operations. DG Systems' 2005 second quarter EBITDA (earnings before interest, taxes, depreciation and amortization Earnings before interest, taxes, depreciation and amortization (EBITDA) is a non-GAAP metric that can be used to evaluate a company's profitability.
The Company recently closed its dub and ship facility in Wilmington, Ohio For other places with the same name, see Wilmington (disambiguation). Wilmington is a city in Clinton County, Ohio, United States. The population was 11,921 at the 2000 census. It is the county seat of Clinton County. and completed its integration of the Media DVX assets acquired in the second quarter by relocating operations to Dallas and eliminating approximately 25 contract employees. Additionally, DG will complete the integration of its two Los Angeles Los Angeles (lôs ăn`jələs, lŏs, ăn`jəlēz'), city (1990 pop. 3,485,398), seat of Los Angeles co., S Calif.; inc. 1850. facilities in September September: see month. . Scott K. Ginsburg Gins·burg , Ruth Bader Born 1933. American jurist who was appointed an associate justice of the U.S. Supreme Court in 1993. , Chairman and Chief Executive Officer of DG Systems, commented, "Second quarter revenue levels were in line with the preview of operating results we issued last month. The good news in this quarter is that we continued to make progress to upgrade and expand our network as well as DG's service offerings. DG's efforts have focused on creating a robust digital network that allows advertisers to reach every relevant media outlet in the U.S. While it has taken slightly longer than initially projected to incorporate all of the advanced features and functionality into our system, we are certain that the network's reach and capabilities are now unrivalled. "With increased competition in the digital delivery space, it is important to take note of DG System's initiatives to fuel future growth. The Universal Deployment program has been a huge success with over 1,500 new video points of presence added in just the last year. At this time, the DG network electronically reaches 99% of all TV stations, 98% of the cable systems, and more than 75% of all the broadcast and cable networks in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. . This corporate initiative has already been instrumental in our ability to retain current customers and acquire new ones. "Existing clients are embracing the fact that the DG network can meet their diverse delivery needs, and we are winning new clients who also recognize the benefits of our enhanced platform. During the second quarter, we firmed up several new strategic relationships with existing customers and with post-production houses that are driving solid gains in our network traffic. "On another front, the company's higher percentage of electronic deliveries and recent acquisitions present several opportunities to realize cost synergies Cost Synergy In the context of mergers, cost synergy is the savings in operating costs expected after two companies, who compliment each other's strengths, join. Notes: The savings in operating costs usually come in the form of laying off employees. and significant fixed cost reductions. These include consolidating jobs and personnel and closing redundant facilities. While we endured slight delays in realizing these synergies, it was necessary to take an appropriate amount of time with each acquisition to ensure high quality, uninterrupted client care and customer service. In the second half of 2005, DG Systems will benefit from a 13% reduction in personnel from December December: see month. 31, 2004 levels. We are confident that over time our enhanced network offerings and streamlined structure will reward our shareholders. "We also continue to invest in our network in advance of the broadcast industry's pending HDTV (High Definition TV) A set of digital television (DTV) standards that offer the highest resolution and sharpest picture. Although some HDTV sets are available in standard (rather square) screen sizes, the overwhelming majority of sets are wide screen, which eliminates transition. The upgrade of our satellite capacity and reach, which will be completed in the fourth quarter, is a key element in positioning the DG network for the digital future. As we enter 2006, DG will be fully prepared to distribute these data-intensive files in a timely, reliable and cost-effective cost-effective, n the minimal expenditure of dollars, time, and other elements necessary to achieve the health care result deemed necessary and appropriate. manner. Importantly, the upgrade will reduce overhead while tripling the satellite bandwidth available to our customers. It will also help us pursue new customers through greater service options and geographic reach." DG finished the 2005 second quarter with net debt of $19.4 million, comprised of debt totaling $22.5 million and cash of $3.1 million. Non-GAAP Reconciliation EBITDA is defined as earnings before interest, taxes, restructuring, depreciation and amortization. Although EBITDA is not a measure of performance or liquidity calculated in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting , the Company believes that it may be useful to an investor in evaluating its performance. However, investors should not consider this measure in isolation or as substitutes for operating income, cash flows from operating activities or any other measure for determining the Company's operating performance or liquidity that is calculated in accordance with generally accepted accounting principles. In addition, because EBITDA is not calculated in accordance with generally accepted accounting principles, it may not necessarily be comparable to similarly titled measures employed by other companies. A reconciliation of the EBITDA figures included herein can be made by deducting operating expenses, excluding impairment, depreciation and amortization from the Company's revenues (see attached financial table). Adjusted Net Income is defined as Net Income plus the impact of transition costs, net of taxes, related to the relocation of the Media DVX operations to DG's Dallas facility, the elimination of approximately 25 Media DVX contract employees, the integration of the New York facilities, loan fee write-off and restructuring costs related to acquisitions. The Company believes it to be useful to an investor in evaluating the performance of the Company to report Adjusted Net Income which excludes the impact of the non-recurring charges. About DG Systems, Inc. (www.dgsystems.com) DG Systems and its StarGuide and SourceTV divisions provide the standard in Digital Media Exchange services for the advertising and broadcast industries, featuring dependable satellite and 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 transmission technology and a suite of digital media asset management tools. DG's extensive digital network is the largest in the advertising and broadcasting industries, reaching more than 5,000 advertisers and agencies, over 3,700 television, cable, and network broadcast destinations and over 10,000 radio stations with innovative delivery and management solutions for short-and long-form audio and video content. DG Systems is based in Irving, Texas Irving (pronounced 'er-ving') is a city located in the U.S. state of Texas within Dallas County. According to the 2000 U.S. Census, the city population was 191,615; the 2006 estimate was 201,927 according to the North Central Texas Council of Governments, and 196,084 according to , with offices located in New York City New York City: see New York, city. New York City City (pop., 2000: 8,008,278), southeastern New York, at the mouth of the Hudson River. The largest city in the U.S. , Detroit, Los Angeles, Chicago, Boca Raton Boca Raton (bō`kə rətōn`), city (1990 pop. 61,492), Palm Beach co., SE Fla., on the Atlantic; inc. 1925. Boca Raton is a popular resort and retirement community that experienced significant industrial development in the 1970s and 80s. and Louisville, Kentucky  “Louisville” redirects here. For other uses, see Louisville (disambiguation). . The Company's second quarter conference call will be broadcast live on the Internet at 11:00 a.m. EDT EDT abbr. Eastern Daylight Time EDT Eastern Daylight Time EDT n abbr (US) (= Eastern Daylight Time) → hora de verano de Nueva York EDT today, Wednesday, August 3, 2005. The webcast is open to the general public. Interested parties may access the live call on the Internet via the Company's web site at www.dgsystems.com or www.fulldisclosure.com. Please allow 15 minutes to register and download To receive a file transmitted over a network. In any communications session, "download" means receive, and "upload" means send. The download/upload often implies a big/little scenario, in which data is being downloaded from the "big" server into the "little" user's computer. and install any necessary software. This release contains 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. relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the Company, including the expansion of its digital distribution network, and the demand among certain clients for digital audio and video delivery services. These forward-looking statements involve risks and uncertainties, which could cause actual results to differ materially from those projected. These and other risks relating to DG Systems' business are set forth in the company's Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. filed with the Securities and Exchange Commission on March 31, 2005.
Digital Generation Systems, Inc.
Condensed Consolidated Balance Sheet
(In thousands)
June 30, December 31,
2005 2004
----------- ------------
Cash $3,083 $8,059
Accounts receivable 10,692 12,559
Inventories 1,455 1,475
Property and equipment 16,347 12,453
Investment in Verance Corporation 5,124 -
Goodwill 42,589 34,974
Deferred tax assets 17,603 17,973
Other 20,062 20,024
----------- -----------
TOTAL ASSETS $116,955 $107,517
=========== ===========
Accounts payable and accrued liabilities 10,600 6,998
Deferred revenue 1,839 2,694
Debt and capital leases 22,449 18,393
----------- -----------
TOTAL LIABILITIES 34,888 28,085
TOTAL STOCKHOLDERS' EQUITY 82,067 79,432
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $116,955 $ 107,517
=========== ===========
Digital Generation Systems, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
Three Months Six Months Ended
Ended
June 30, June 30,
----------------- -----------------
2005 2004 2005 2004
-------- -------- -------- --------
Revenues $15,157 $14,890 $30,860 $28,272
Operating expenses, excluding
depreciation and amortization 13,052 10,853 25,132 20,910
-------- -------- -------- --------
EBITDA 2,105 4,037 5,728 7,362
Depreciation & amortization 1,583 1,539 3,000 2,738
Restructuring charge 271 - 271 -
-------- -------- -------- --------
Operating income $251 $2,498 $2,457 $4,624
Interest expense and other, net 765 263 1,157 534
-------- -------- -------- --------
Income (loss) before income taxes (514) 2,235 1,300 4,090
Provision (benefit) for income
taxes (164) 649 525 1,187
-------- -------- -------- --------
Net income (loss) $(350) $1,586 $775 $2,903
======== ======== ======== ========
Basic net income per common share $0.00 $0.02 $0.01 $0.04
======== ======== ======== ========
Diluted net income per common
share $0.00 $0.02 $0.01 $0.04
======== ======== ======== ========
Weighted average outstanding
shares - Basic 73,946 72,630 73,340 72,398
======== ======== ======== ========
Weighted average outstanding
shares - Diluted 73,946 73,227 73,475 73,698
======== ======== ======== ========
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