DG Systems Reports Third Quarter Operating Results; EPS of $0.03; Nine Months EBITDA Rises 18%; Operating Income Up 69%.Business EditorsDALLAS--(BUSINESS WIRE)--Nov. 19, 2003 - Records Non-Cash Adjustment to 2002 and Six Month 2003 Results - - Adjustments Have No Impact on Previously Reported Revenue, 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 or 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. - DG Systems, Inc. (Nasdaq: DGIT), the leading digital technology provider for managing and delivering short- and long-form audio and video content to broadcasters, today reported operating results for the third quarter and nine-month periods ended September September: see month. 30, 2003 in line with guidance issued by the Company on October October: see month. 16, 2003. The Company also announced non-cash adjustments for the year ended December December: see month. 31, 2002 and six months ended June June: see month. 30, 2003. Consolidated revenues for the three months ended September 30, 2003 totaled $13.4 million, compared to $16.4 million in the comparable year-ago period. For the quarter ended September 30, 2003, DG's 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.
At September 30, 2003, DG reported net debt of approximately $1.3 million, a decrease of more than 65% from the $3.8 million reported at June 30, 2003. The net debt levels at September 30, 2003 reflect an 83% reduction from net debt of $7.5 million at December 31, 2002. Commenting on the financial results, 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, stated, "DG Systems operated successfully through another challenging quarter marked by weaker-than-anticipated television advertising and tough year-over- year political business comparisons, as well as difficult sales comparisons at StarGuide division. Reflecting the resiliency The ability to recover from a failure. The term may be applied to hardware, software or data. of our business model, we again delivered positive EBITDA, operating income and net income during the period. Importantly, despite this market environment, DG maintains its market leadership position in video deliveries with both agencies and brands due to its network reach, breadth of products, and reputation for dependable and attentive at·ten·tive adj. 1. Giving care or attention; watchful: attentive to detail. 2. Marked by or offering devoted and assiduous attention to the pleasure or comfort of others. customer service. "We are actively managing our business through this uncertain economic environment by aggressively reducing 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. , expanding our video network, providing unparalleled customer service and strengthening our balance sheet. And we once again made significant progress on debt reduction, moving DG Systems one step closer to being net debt free. Our goal is to use these strengths to grow our revenues organically and through new acquisitions." Consolidated revenues for the nine months ended September 30, 2003 were $44.3 million, compared to $47.5 million in the comparable year-ago period. EBITDA for the first nine months of 2003 rose 18.0% to $10.4 million, compared to EBITDA of $8.8 million in the first nine months of 2002. Operating income for the nine months ended September 30, 2003 rose 69.4% to $4.6 million, compared to operating income of $2.7 million in the in the comparable 2002 period. DG's net income in the first nine months of 2003 was $3.8 million, or $0.05 per 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. share, compared to a net loss in the 2002 period of $129.3 million, or a loss of $1.83 per diluted share inclusive of inclusive of prep. Taking into consideration or account; including. a $0.8 million pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta restructuring charge 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. and a charge for the cumulative effect of accounting change which amounted to $130.2 million. Mr. Ginsburg continued, "DG is extremely well positioned to participate in the benefits of the expected improvements in the advertising market in 2004, which will be driven by growth in the economy, the cyclical cyclical Of or relating to a variable, such as housing starts, car sales, or the price of a certain stock, that is subject to regular or irregular up-and-down movements. return of some political revenues and a growing customer base. These factors, when combined with our continued efforts to expand our network and customer base, should be positive factors in DG's 2004 operating results." Accounting Adjustment During the third quarter, DG identified an adjustment for non-cash deferred income taxes of approximately $1.8 million which should have been recorded for the year ended December 31, 2002, and that the non-cash cumulative effect of change in accounting principle during 2002 should have been reduced by approximately $1.1 million. The non-cash deferred income tax charge for the six months ended June 30, 2003 was approximately $1.2 million. These non-cash adjustments relate to the utilization of net operating loss carryforwards Net operating loss carryforwards Application of losses to offset earnings in future years. generated by DG prior to the merger with Starguide Digital. As a result, DG will restate re·state tr.v. re·stat·ed, re·stat·ing, re·states To state again or in a new form. See Synonyms at repeat. re·state its financial statements for the year ended our December 31, 2002 and the six-month period ended June 30, 2003. These restatements do not affect previously reported revenues, EBITDA, and operating income for the above mentioned periods. The following table summarizes the effect of the non-cash items mentioned above.
Twelve Six Nine
(in 000's, except per share Months Months Months
data) Ended Ended Ended
12/31/02 6/30/03 9/30/03
----------------------------------------------
Reported Restated Reported Restated
----------------------------------------------------------------------
Revenues $66,294 $66,294 $30,950 $30,950 $44,307
----------------------------------------------------------------------
EBITDA 14,377 14,377 7,986 7,986 10,429
----------------------------------------------------------------------
Operating income 6,217 6,217 3,605 3,605 4,601
----------------------------------------------------------------------
Net income before taxes
and cumulative effect
of accounting change 4,697 4,697 3,069 3,069 3,838
----------------------------------------------------------------------
Non-cash Income Taxes - 1,848 - 1,166 53
----------------------------------------------------------------------
Net income (loss) (126,594)(127,385) 3,069 1,903 3,785
----------------------------------------------------------------------
Earnings Per Share -
basic and diluted $(1.79) $(1.80) $0.04 $0.03 $0.05
----------------------------------------------------------------------
EBITDA/Non-GAAP Reconciliation EBITDA is defined as earnings before interest, taxes, 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 depreciation and amortization from the Company's Revenues (see attached financial table). About DG Systems, Inc. DG Systems and the Company's StarGuide division provide the standard in Digital Media Exchange services for the advertising and broadcast industries, featuring innovative 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 solutions 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, 7,500 radio stations, and over 1,850 broadcast and cable television destinations with innovative delivery and management solutions for short- and long-form audio and video content. More information is available at www.dgsystems.com. The Company's third quarter 2003 conference call will be broadcast live on the Internet at 11:00 a.m. EST EST electroshock therapy. EST abbr. electroshock therapy on November November: see month. 20, 2003. 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 http://www.vcall.com/CEPage.asp?ID=85084. 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 27, 2003. (table follows)
Digital Generation Systems, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
Three Months Nine Months
Ended Ended
September 30, September 30,
---------------- ------------------
2003 2002* 2003* 2002*
---- ---- ---- ----
Revenues $13,357 $16,421 $44,307 $47,457
Operating expenses, excluding
depreciation & amortization 10,915 12,960 33,878 38,622
------ ------ ------ ------
EBITDA 2,442 3,461 10,429 8,835
Depreciation & amortization 1,447 1,949 5,828 5,348
Restructuring charge - - - 771
------ ------ ------ ------
Operating income $995 $1,512 $4,601 $2,716
Interest expense and other, net 228 330 763 1,215
--- --- ------ ------
Net income before income taxes and
cumulative effect of change in
accounting principle 767 1,182 3,838 1,501
Provision (benefit) for income
taxes (1,113) 465 53 591
------ ------ ------ ------
Net income before cumulative effect
of change in accounting
principle 1,880 717 3,785 910
Cumulative effect of change in
accounting principle - - - 130,234
------ ------ ------ ------
Net income (loss) $1,880 $717 $3,785 $(129,324)
====== ====== ====== =========
Basic and diluted income per common
share before cumulative effect
of change in accounting
principle: $ 0.03 $ 0.01 $ 0.05 $ 0.01
====== ====== ====== ======
Basic and diluted net income (loss)
per common share: $ 0.03 $ 0.01 $ 0.05 $ (1.83)
====== ====== ====== ======
Basic weighted average common
shares outstanding 71,401 70,801 71,074 70,794
====== ====== ====== ======
Diluted weighted average common
shares outstanding 75,405 70,882 74,948 70,898
====== ====== ====== ======
* Reflects restatements as reported herein.
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