Egghead Software reports fiscal year 1995 results.

ISSAQUAH, Wash.--(BUSINESS WIRE)--May 25, 1995--Egghead Software (NASDAQ:EGGS) today announced operating results and sales for its fiscal year 1995.

During the year which ended April 1, 1995, Egghead reported net income of $2.7 million, or 15 cents per share, on sales of $862.6 million. The net loss for fiscal year 1994 was $0.5 million, or 3 cents per share, on sales of $778.3 million.

Sales of $862.6 million in fiscal 1995 increased $84.3 million, or 11 percent, compared to $778.3 million a year ago.

Retail sales of $434.0 million in fiscal 1995 increase $60.5 million, or 16 percent, compared to $373.5 million in fiscal 1994. Comparable store sales increased 21 percent. Comparable stores sales for the fourth quarter increased 13 percent. Comparable store sales increases by month for the fourth quarter of fiscal 1995 and the first month of fiscal 1996 were as follows: January, 24 percent; February, 15 percent; March, 2 percent; and April, 8 percent.

The fiscal 1995 comparable store sales increase was partially offset by the closure of 20 stores during fiscal 1995. The company operated 169 stores at the end of fiscal 1995, compared to 189 at the end of fiscal 1994.

Corporate, government, and education (CGE) sales of $428.5 million in fiscal 1995, increased $23.7 million, or 6 percent, compared to $404.8 million last year. CGE sales of $107.9 million in the fourth quarter of fiscal 1995, increased $8.0 million, or 8 percent, compared to the fourth quarter last year. The changes in CGE sales by month for the fourth quarter of fiscal 1995 and the first month of fiscal 1996 were as follows: January, 8 percent; February, negative 2 percent; March, 16 percent; and April, negative 7 percent.

Gross margin as a percentage of sales was 11.8 percent in fiscal 1995, compared to 13.2 percent in fiscal 1994. The company lowered prices in both its retail and CGE businesses near the end of the second quarter of fiscal 1994 to improve its competitive position. The fiscal 1995 gross margin reflects a full year of the lower prices, compared to approximately one half year of lower prices in fiscal 1994. Gross margin as a percentage of sales continues to be affected by industry-wide pricing related to both competitors' pricing and vendors' pricing.

Selling, general, and administrative (SG&A) expense was 10.5 percent of sales in fiscal 1995, compared to 11.5 percent in fiscal 1994. Selling, general, and administrative (SG&A) expense for the fourth quarter of fiscal 1995 was 10.1 percent of sales, compared to 10.8 percent in the fourth quarter of fiscal 1994.

On May 1, 1995, the company announced plans to consolidate the remainder of its customer service operations in Issaquah and Kalispell, Mont., to its Spokane Solutions Center during June and July 1995. Relocation, severance, and related costs will be reflected in the company's first and second quarter results for fiscal 1996. Those costs are estimated to be $1.8 - $2.0 million, and will primarily affect the first quarter which ends July 1, 1995.

The company expects to report a loss in the first quarter of fiscal 1996 because of the Spokane consolidation costs and the trend of declining sales growth in both retail and CGE. -0-

                          FINANCIAL HIGHLIGHTS
                    (In thousands, except per share data)

                           13 Weeks Ended          52 Weeks Ended
                         April 1,      April 2,    April 1,   April 2,
                          1995          1994         1995      1994

Net sales              $220,108     $209,527      $862,550   $778,327
Gross Margin/a           25,738       25,695       102,119    102,950
Selling, general,
 and administrative
 expense                 22,216       22,733        90,677     89,496
Depreciation and
 amortization, net of
 amount included in
 cost of sales           2,348         2,439         9,348      8,681
Provision for
 restructuring costs         -             -             -      4,400
Provision for
 shareholder litigation      -         1,100             -      1,200
Operating income
 (loss)                  1,174          (577)        2,094       (827)
Theft insurance
 recovery/b                  -             -         1,650          -
Other income
 (expense), net            356           (91)          629        (15)
Income (loss) before
 income taxes            1,530          (668)        4,373       (842)
Income tax (provision)
 benefit                  (596)          261        (1,705)       328
Net income (loss)       $  934      $   (407)     $  2,668   $   (514)
Earnings (loss) per
 share                 5 cents       2 cents      15 cents   (3 cents)
Weighted average
 common shares and
 common equivalent
 shares outstanding     17,445        17,121        17,281     17,088

a/ Cost of sales includes certain buying, occupancy, and distribution costs.

b/ Theft insurance recovery of $1.65 million represents settlement of an insurance claim, net of expenses, for inventory stolen from numerous retail stores during fiscal years 1991, 1992, and 1993 by members of a multi-state shoplifting ring.

CONTACT: Egghead Software, Issaquah

Terence Strom, 206/557-3530