Damark Announces First Quarter Results; Membership Business Substantially Ahead of Expectations.Business Editors MINNEAPOLIS--(BUSINESS WIRE)--April 26, 2000 DAMARK International, 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 :DMRK) today announced its financial results for the first quarter ended April 1, 2000. These results reflect the adoption of SEC Staff Accounting Bulletin No. 101 which affected the Company's accounting for certain membership programs and extended warranties The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. . A one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. , non-cash charge Non-Cash Charge A charge off, made by a company against earnings, that does not require an initial outlay of cash. Notes: Non-cash charges are typically against the depreciation, amortization, and depletion accounts on a company's balance sheet. of $22.9 million ($14.2 after taxes) was taken as of January January: see month. 1, 2000 to record the cumulative effect of this change in accounting principle. Under the new revenue and expense recognition policy, the Company's membership services business produced net revenue of $36.1 million and earned a record first quarter operating profit Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. of $11.4 million. On a pro-forma basis, after giving effect to the adoption of SEC Staff Accounting Bulletin No. 101 for the first quarter last year, membership revenue would have increased by 160 percent, from $13.9 million in 1999 to $36.1 million. 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. would have increased by $18.1 million, from 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 $6.7 million a year ago to an operating profit of $11.4 million, a 270 percent increase. At quarter end, the Company had nearly 2.3 million members as compared to 1.8 million at the end of the first quarter 1999, an increase of 27.8 percent. Total revenues were $75.5 million, down from $109.4 million during the first quarter last year, a 31 percent decline. The Company reported an operating loss of $18.5 million and a net loss of $26.2 million or $4.64 per share compared to a net loss of $906,000 or $0.15 per share 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. First quarter results were significantly impacted by a series of previously announced one time charges, including pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta 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. 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. of $6.7 million, operating losses associated with the catalog retail wind-down, and the pre-tax charge of $22.9 million related to the adoption of SEC Staff Accounting Bulletin No. 101 discussed above. "We are extremely pleased with our first quarter results. Momentum continues to build in our ongoing business units. In fact, for our membership and e-fulfillment business activities, we delivered record first quarter operating profits," said Mark A. Cohn, DAMARK's chairman and chief executive officer. "Our results substantially exceeded analysts' expectations. On the membership side, our growth was well ahead of plan while our recently created ClickShip Direct, Inc. (CSDI CSDI Computer Systems Development, Inc. CSDI Contract Status Data Input CSDI Compressed Serial Digital Interface ) subsidiary recorded net revenues of nearly $8.5 million for the last two months of the quarter. Earlier this month, CSDI announced new relationships with strategic partners as well as a new client. Additionally, the wind-down of our catalog activities is on schedule to be substantially completed by the end of the second quarter." "Our membership results reflect the fourth successive quarter where we have demonstrated the ability to grow both revenues and operating income simultaneously si·mul·ta·ne·ous adj. 1. Happening, existing, or done at the same time. See Synonyms at contemporary. 2. Mathematics , and by large double or triple digit A single character in a numbering system. In decimal, digits are 0 through 9. In binary, digits are 0 and 1. digit - An employee of Digital Equipment Corporation. See also VAX, VMS, PDP-10, TOPS-10, DEChead, double DECkers, field circus. percentages. This success was coupled with an opportunity to accelerate prospecting, resulting in continued member count growth," said George S George, river, c.345 mi (560 km) long, rising in a lake on the Quebec-Labrador boundary, E Canada. It flows N through Indian Lake (125 sq mi/324 sq km) to Ungava Bay (an arm of Hudson Strait). . Richards Rich·ards , Dickinson Woodruff 1895-1973. American physician. He shared a 1956 Nobel Prize for developing cardiac catheterization. , DAMARK's president and chief operating officer Chief Operating Officer (COO) The officer of a firm responsible for day-to-day management, usually the president or an executive vice-president. . "Moreover, we successfully tested several new member acquisition strategies and membership program concepts in our consumer channel business, which offer great promise for member growth during the second half of this year and beyond," Richards added. DAMARK International, Inc., develops, markets, and manages leading edge membership programs that provide purchase price discounts and other benefits related to consumer and small business needs in the areas of shopping, travel, hospitality, entertainment, health/fitness, and finance. As of April 1, 2000, consumers enjoyed benefits provided through nearly 2.3 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. and was founded in 1986. ClickShip Direct, Inc. provides corporate clients in the "e-tailing (Electronic-reTAILING) Selling online. See e-commerce. ", "clicks & mortar mortar, in building mortar, in building, mixture of lime or cement with sand and water, used as a bedding and adhesive between adjacent pieces of stone, brick, or other material in masonry construction. " retailing, and consumer goods consumer goods Any tangible commodity purchased by households to satisfy their wants and needs. Consumer goods may be durable or nondurable. Durable goods (e.g., autos, furniture, and appliances) have a significant life span, often defined as three years or more, and manufacturing industries manufacturing industries npl → industrias fpl manufactureras manufacturing industries npl → industries fpl de transformation with enabling business-to-consumer Business-to-consumer (B2C), describes activities of commercial organizations serving the end consumer with products and/or services. It is usually applied exclusively to electronic commerce. 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. services including order management, product fulfillment ful·fill also ful·fil tr.v. ful·filled, ful·fill·ing, ful·fills also ful·fils 1. To bring into actuality; effect: fulfilled their promises. 2. , and customer care. These services are provided from a headquarters facility in Minneapolis, Minnesota; customer care centers in Junction City, Kansas Junction City is a city in Geary County, Kansas, United States. The population was 18,886 at the 2000 census. It is the county seat of Geary CountyGR6. Fort Riley, a major U.S. Army post, is nearby. and Fayetteville, North Carolina Fayetteville is a city located in Cumberland County, North Carolina. As of the 2000 census, the city had a total population of 121,015. It is the county seat of Cumberland County GR6, and is best known as the home of Fort Bragg, a U.S. ; and a distribution center in Brooklyn Park, Minnesota Brooklyn Park is a city in Hennepin County, Minnesota, United States. As of 2005, it had a population of 66,408. It is a northwestern suburb of Minneapolis, Minnesota. Geography According to the United States Census Bureau, the city has a total area of 68.8 km² (26. . ClickShip is currently a wholly owned subsidiary Wholly Owned Subsidiary A subsidiary whose parent company owns 100% of its common stock. Notes: In other words, the parent company owns the company outright and there are no minority owners. of DAMARK International, Inc. incorporated in January 2000. Any statements herein regarding the business of DAMARK International, Inc. that are not historical facts 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. " that are 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. For a discussion of risks and uncertainties that could cause actual results to differ from those implied Inferred from circumstances; known indirectly. In its legal application, the term implied is used in contrast with express, where the intention regarding the subject matter is explicitly and directly indicated. by any forward looking statement, see "Forward-Looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. Information" in the Company's most recent Annual Report on 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. as filed with the Securities and Exchange Commission.
1st QUARTER 2000
----------------
CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, in thousands except per share data)
----------------------------------------------------------------------
Quarters Ended
-------------------
Apr 1, Apr 3,
CONSOLIDATED STATEMENTS OF OPERATIONS 2000 1999
--------- ---------
Product and other revenues......................... $39,383 $84,350
Membership and related revenues.................... 36,139 25,078
--------- ---------
Total net revenues............................... 75,522 109,428
Cost of products sold.............................. 36,592 61,571
Operating and marketing expenses................... 39,078 35,574
Restructuring charges.............................. 6,739 -
General and administrative expenses................ 11,588 13,355
--------- ---------
Total costs and expenses......................... 93,997 110,500
--------- ---------
Operating loss................................... (18,475) (1,072)
Interest expense, net.............................. 198 289
Other expense, net................................. 129 12
--------- ---------
Loss before income taxes and cumulative
effect of change in accounting................. (18,802) (1,373)
Income tax benefit................................. (6,842) (467)
--------- ---------
Loss before cumulative effect of change
in accounting.................................. (11,960) (906)
Cumulative effect of change in accounting
net of income tax benefit......................... (14,201) -
--------- ---------
Net loss.........................................($26,161) ($906)
========= =========
Per basic and diluted share:
----------------------------
Loss before cumulative effect of change
in accounting..................................... ($2.12) ($0.15)
Cumulative effect of change in accounting.......... (2.52) 0.00
--------- ---------
Net loss........................................... ($4.64) ($0.15)
========= =========
Weighted average basic and diluted shares
outstanding....................................... 5,643 5,993
========= =========
Apr 1, Dec 31, Apr 3,
CONDENSED CONSOLIDATED BALANCE SHEETS 2000 1999 1999
--------- --------- ---------
Cash and cash equivalents................ $689 $3,927 $400
Trade accounts receivable, net........... 35,340 43,847 38,257
Merchandise inventories, net............. 15,926 30,739 39,048
Deferred membership solicitation and
catalog costs........................... 35,250 15,186 20,172
Deferred income taxes.................... 1,360 1,360 -
Other current assets..................... 3,169 1,366 5,245
--------- --------- ---------
Total current assets................... 91,734 96,425 103,122
Net property and equipment............... 20,483 25,464 29,453
Net other assets......................... 117 2,098 2,144
Deferred income taxes.................... 17,604 2,059 2,909
--------- --------- ---------
Total assets...........................$129,938 $126,046 $137,628
========= ========= =========
Accounts payable......................... $20,352 $30,568 $39,110
Accrued liabilities...................... 42,930 41,312 31,177
Deferred membership income, net.......... 48,067 24,749 21,560
Deferred income taxes.................... - - 493
Borrowings under revolving credit
facility................................ 13,731 - 13,732
--------- --------- ---------
Total current liabilities.............. 125,080 96,629 106,072
Deferred income taxes.................... - - -
Common Stock............................. 57 55 59
Paid-in capital.......................... 56,210 54,610 58,889
Accumulated deficit...................... (51,409) (25,248) (27,392)
--------- --------- ---------
Total shareholders' equity............. 4,858 29,417 31,556
--------- --------- ---------
Total liabilities and shareholders'
equity.............................$129,938 $126,046 $137,628
========= ========= =========
Quarters Ended
-------------------
Apr 1, Apr 3,
CONDENSED CONSOLIDATED STATEMENTS 2000 1999
OF CASH FLOWS --------- ---------
Net loss...........................................($26,161) ($906)
Cumulative effect of change in
accounting, net................................... 14,201 -
Depreciation and amortization...................... 5,101 2,091
Changes in deferred income taxes................... (6,842) (467)
Loss (gain) on disposal of property................ 67 (16)
Net decrease in non-cash current assets............ 27,421 4,303
Net decrease in non-interest bearing
current liabilities............................... (31,758) (8,805)
--------- ---------
Cash used for operations......................... (17,971) (3,800)
Additions to property and equipment, net........... (587) (1,329)
Additions to other assets, net..................... (13) (1,512)
--------- ---------
Cash used for investments........................ (600) (2,841)
Net repayments under revolving
credit facility................................... 13,731 8,592
Repurchases and retirements of
Common Stock...................................... - (1,741)
Net proceeds from exercise of options
and issuance of stock............................. 1,602 141
--------- ---------
Cash provided by financing....................... 15,333 6,992
--------- ---------
Net increase (decrease) in cash
and equivalents............................... ($3,238) $351
========= =========
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 Annual Report on Form 10K and most recent Quarterly Reports
on Form 10-Q as filed with the Securities and Exchange Commission.
SEGMENT FINANCIAL DATA (unaudited, in thousands)
----------------------------------------------------------------------
Member-
STATEMENTS OF OPERATIONS AND Catalog ship Consoli-
STATEMENTS OF CASH FLOWS DATA Retail Services Corporate dated
--------- --------- --------- ---------
Quarter Ended Apr 1, 2000
-------------------------
Net revenues................... $39,383 $36,139 $0 $75,522
Cost of products sold.......... 36,213 379 - 36,592
Operating and marketing
expenses (1).................. 19,225 19,853 - 39,078
Restructuring charges.......... 6,739 - - 6,739
General and administrative
expenses...................... 7,051 4,537 - 11,588
--------- --------- --------- ---------
Operating income (loss)...... (29,845) 11,370 - (18,475)
Interest expense, net.......... - - 198 198
Other expense, net............. 73 23 33 129
--------- --------- --------- ---------
Income (loss) before taxes
and other................... (29,918) 11,347 (231) (18,802)
Income tax benefit............. - - (6,842) (6,842)
--------- --------- --------- ---------
Income (loss) before
accounting change........... (29,918) 11,347 6,611 (11,960)
Cumulative effect of change in
accounting, net............... - 22,904 (8,703) 14,201
--------- --------- --------- ---------
Net income (loss)............($29,918) ($11,557) $15,314 ($26,161)
========= ========= ========= =========
Net income (loss)..............($29,918) ($11,557) $15,314 ($26,161)
Depreciation and amortization.. 4,807 278 16 5,101
Net changes in working capital
and other..................... 15,155 15,019 (27,085) 3,089
--------- --------- --------- ---------
Cash provided by (used for)
operations.................. (9,956) 3,740 (11,755) (17,971)
Property and equipment
additions, net................ (121) (466) - (587)
Cash used for investments.... (100) (464) (36) (600)
Cash provided by (used for)
financing................... 16,760 17,617 (19,044) 15,333
Quarter Ended Apr 3, 1999
-------------------------
Net revenues................... $84,350 $25,078 $0 $109,428
Cost of products sold.......... 61,571 - - 61,571
Operating and marketing
expenses (1), (2)............. 17,573 18,001 - 35,574
General and administrative
expenses...................... 10,102 3,253 - 13,355
--------- --------- --------- ---------
Operating income (loss)...... (4,896) 3,824 - (1,072)
Interest expense, net.......... - - 289 289
Other expense, net............. - - 12 12
--------- --------- --------- ---------
Income (loss) before
income taxes................ (4,896) 3,824 (301) (1,373)
Income tax (benefit)
provision..................... - - (467) (467)
--------- --------- --------- ---------
Net income (loss)............ ($4,896) $3,824 $166 ($906)
========= ========= ========= =========
Net income (loss).............. ($4,896) $3,824 $166 ($906)
Depreciation and amortization.. 1,543 499 49 2,091
Net changes in working capital
and other..................... 2,367 (6,979) (373) (4,985)
--------- --------- --------- ---------
Cash provided by (used for)
operations.................. (986) (2,656) (158) (3,800)
Property and equipment
additions, net................ (923) (406) - (1,329)
Cash used for investments.... (932) (409) (1,500) (2,841)
Cash provided by (used for)
financing................... (2,978) 6,888 3,082 6,992
-------------------------------
(1) Discounts provided to Preferred Buyers Club(R) and Insiders(R)
members are allocated entirely to Retail and totaled $857,000 and
$3.2 million in the quarters ended April 1, 2000 and April 3,
1999, respectively.
(2) Includes inter-segment transfers to Retail from Membership of
$5,149 in the quarter ended April 3, 1999. In conjunction with the
previously announced wind-down of the Catalog Retail business, the
Company no longer records such intersegment transfers.
SEGMENT FINANCIAL DATA (unaudited, in thousands)
----------------------------------------------------------------------
Member-
CONDENSED CONSOLIDATING Catalog ship Consoli-
BALANCE SHEETS Retail Services Corporate dated
--------- --------- --------- ---------
At Apr 1, 2000
--------------
Cash and cash equivalents...... $9 $0 $680 $689
Trade accounts receivable,
net........................... 5,310 24,217 5,813 35,340
Due to (from) parent/
subsidiary.................... (4,174) (1,763) 5,937 -
Merchandise inventories, net... 15,926 - - 15,926
Deferred costs................. 9,533 25,717 - 35,250
Deferred taxes................. 272 - 1,088 1,360
Other current assets........... 787 614 1,768 3,169
--------- --------- --------- ---------
Total current assets......... 27,663 48,785 15,286 91,734
Net property and equipment..... 16,377 4,106 - 20,483
Net other assets............... 117 - - 117
Deferred taxes................. 382 - 17,222 17,604
--------- --------- --------- ---------
Total assets................. 44,539 $52,891 $32,508 $129,938
========= ========= ========= =========
Accounts payable............... $11,871 $8,481 $0 $20,352
Accrued liabilities............ 9,660 33,161 109 42,930
Deferred revenues.............. - 48,067 - 48,067
Borrowings under revolving
credit facility............... - - 13,731 13,731
--------- --------- --------- ---------
Total current liabilities.... 21,531 89,709 13,840 125,080
Investment in segment/
shareholders' equity.......... 23,008 (36,818) 18,668 4,858
--------- --------- --------- ---------
Total liabilities and
equity...................... $44,539 $52,891 $32,508 $129,938
========= ========= ========= =========
At Dec 31, 1999
---------------
Cash and cash equivalents...... $0 $0 $3,927 $3,927
Trade accounts receivable,
net........................... 11,005 31,043 1,799 43,847
Merchandise inventories, net... 30,739 - - 30,739
Deferred costs................. 10,275 4,911 - 15,186
Other current assets........... 914 452 1,360 2,726
--------- --------- --------- ---------
Total current assets......... 52,933 36,406 7,086 96,425
Net property and equipment..... 20,135 5,329 - 25,464
Net other assets............... 138 2 1,958 2,098
Deferred taxes................. - - 2,059 2,059
--------- --------- --------- ---------
Total assets................. 73,206 $41,737 $11,103 $126,046
========= ========= ========= =========
Accounts payable............... $19,806 $10,762 $0 $30,568
Accrued liabilities............ 12,240 26,819 2,253 41,312
Deferred revenues.............. - 24,749 - 24,749
Deferred income taxes.......... - - - -
Borrowings under revolving
credit facility............... - - - -
--------- --------- --------- ---------
Total current liabilities.... 32,046 62,330 2,253 96,629
Deferred income taxes.......... - - - -
Investment in segment/
shareholders' equity.......... 41,160 (20,593) 8,850 29,417
--------- --------- --------- ---------
Total liabilities and
equity...................... $73,206 $41,737 $11,103 $126,046
========= ========= ========= =========
At Apr 3, 1999
--------------
Cash and cash equivalents...... $0 $0 $400 $400
Trade accounts receivable,
net........................... 18,801 15,995 3,461 38,257
Merchandise inventories, net... 39,048 - - 39,048
Deferred costs................. 14,523 5,649 - 20,172
Other current assets........... 1,097 598 3,550 5,245
--------- --------- --------- ---------
Total current assets......... 73,469 22,242 7,411 103,122
Net property and equipment..... 21,631 7,822 - 29,453
Net other assets............... 150 23 1,971 2,144
Deferred taxes................. - - 2,909 2,909
--------- --------- --------- ---------
Total assets................. 95,250 $30,087 $12,291 $137,628
========= ========= ========= =========
Accounts payable............... $35,456 $3,654 $0 $39,110
Accrued liabilities............ 11,062 20,110 5 31,177
Deferred revenues.............. - 21,560 - 21,560
Deferred income taxes.......... - - 493 493
Borrowings under revolving
credit facility............... - - 13,732 13,732
--------- --------- --------- ---------
Total current liabilities.... 46,518 45,324 14,230 106,072
Deferred income taxes.......... - - - -
Investment in segment/
shareholders' equity.......... 48,732 (15,237) (1,939) 31,556
--------- --------- --------- ---------
Total liabilities and
equity...................... $95,250 $30,087 $12,291 $137,628
========= ========= ========= =========
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