Egghead announces fourth quarter and year end results.SPOKANE Spokane, city, United States Spokane (spōkăn`), city (1990 pop. 177,196), seat of Spokane co., E Wash., at the spectacular falls of the Spokane River; inc. 1881. , Wash.--(BUSINESS WIRE)-- May 15, 1997--Egghead 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 : EGGS) today released financial results for the fourth quarter and fiscal year ended March 29, 1997. Financial Results The company's consolidated revenue from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the for the fourth quarter of fiscal year 1997 was $88.9 million, a decrease of 8% from $96.8 million last year. Fiscal 1997 fourth quarter revenue includes $9.6 million of liquidation sales liquidation sale liquid (US) n → Verkauf m wegen Geschäftsaufgabe related to the closing of 70 stores as part of the previously announced reorganization. Comparable store sales for the 79 stores to be retained increased 6% in the fiscal 1997 fourth quarter over the prior year comparable period. The net loss for the fourth quarter was $35.9 million, or $2.04 per share, compared to a net loss of $3.1 million or $0.18 per share last year. The loss for the fourth quarter includes a $24.0 million charge for the previously announced restructure and reorganization, a $13.1 million 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. (required by the Statement of Financial Accounting Standards No. 109 (SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System 109)) for the establishment of a valuation allowance against previously recorded deferred tax and tax related assets and $3.8 million of income related to the previously announced sale of the company's Corporate Government and Education (CGE CGE Computable General Equilibrium CGE Conference des Grandes Ecoles (French) CGE Carrier Grade Edition (COTS Linux platform) CGE Classic Gaming Expo (game) ) division. Excluding such charges and income, the company had a loss of $2.6 million from continuing operations in the fourth quarter for 1997 vs. a loss of $6.0 million last year. The company did not record any tax benefit for the losses incurred in the fourth quarter. For fiscal 1997 the company reported consolidated revenue from continuing operations of $360.7 million, a decrease of 11% compared to $403.8 million from continuing operations last year. The total net loss for the year was $39.6 million or $2.25 per share compared to a net loss of $10.7 million or $0.62 per share last year. The loss for fiscal 1997 includes the $24.0 million restructure charge, a net non-cash charge of $10.7 million for the establishment of a deferred tax valuation allowance 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 SFAS 109 and $36.5 million of income related to the sale of the CGE division on May 13, 1996 partially offset by a related loss for discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. of $20.1 million. Excluding such charges and income, the company had a loss from continuing operations for fiscal 1997 of $20.2 million compared to a loss of $18.2 million last year. George 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). Orban Orban, also known as Urban, was a Hungarian engineer. After his offer to make artilery for the defense of Constantinople was rejected by the emperor Constantine XI in 1452, he offered his services to the Ottoman sultan Mehmed II. , Chairman, said "The recent reorganization and related reductions in administration and distribution functions contributed to the 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. improvements in the company's balance sheet. The company reduced its inventory from $92.4 million at the end of the third quarter to $49.1 million as of year-end. Egghead's cash position increased $13.8 million to $83.5 million at year-end vs. $69.7 million at the end of the third quarter." He further stated that the company faces a challenging year and does not expect Egghead to return to profitability until the second half of fiscal 1998. Strategic Realignment re·a·lign tr.v. re·a·ligned, re·a·lign·ing, re·a·ligns 1. To put back into proper order or alignment. 2. To make new groupings of or working arrangements between. and Acquisition The company's fourth quarter and fiscal 1997 results were significantly affected by the strategic realignment and reorganization announced on January January: see month. 31, 1997. This substantial reorganization involved, among other things, closing 70 of the 156 Egghead stores, which reduced the number of markets in which the company operated stores from 54 to 26, a significant reduction in its headquarters staff and the closure of its Lancaster Lancaster, city, England Lancaster (lăng`kəstər), city (1991 pop. 43,902) and district, county seat of Lancashire, NW England, on the Lune River. distribution center. The $24.0 million fourth quarter reorganization charge includes $6.3 million in gross margin expense, $5.8 million for settlement of store and warehouse leases, $3.3 million in store closing costs Closing Costs The numerous expenses (over and above the price of the property) that buyers and sellers normally incur to complete a real estate transaction. Costs incurred include loan origination fee, discount points, appraisal fee, title search, title insurance, survey, taxes, and related fixed asset disposals, $1.3 million for disposal of real estate and $7.3 million for severance The act of dividing, or the state of being divided. The term severance has unique meanings in different branches of the law. Courts use the term in both civil and criminal litigation in two ways: first, when dividing a lawsuit into two or more parts, and second, when , other fixed asset disposals, professional fees and miscellaneous expenses. Management anticipates these changes will reduce headquarters and distribution expense to approximately $17.0 million on an annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. basis from $32.0 million in 1997. Separately, James James, person in the Bible James, in the Gospel of St. Luke, kinsman of St. Jude. The original does not specify the relationship. James, rivers, United States James. F. Kalasky was named Vice President Merchandising merchandising Element of marketing concerned especially with the sale of goods and services to customers. One aspect of merchandising is advertising, which aims to capture the interest of the segment of the population most likely to buy the product. replacing Peter Grossman Grossman is a family name of germanic and Jewish Ashkenazi origin (in German Grossmann or Großmann).
The company announced on May 1, 1997 a definitive agreement to acquire closely held A phrase used to describe the ownership, management, and operation of a corporation by a small group of people. In a closely held corporation, the same people often act as shareholders, directors, and officers, and no outside investors exist. Surplus Software, Inc. (dba Surplus Direct) in a transaction, valued at $31.5 million, anticipated to be completed in August 1997. Surplus Direct is a young rapidly growing company engaged in the direct marketing of previous version computer hardware and software. Shareholder approval of both companies is required. A special Egghead shareholder meeting is tentatively ten·ta·tive adj. 1. Not fully worked out, concluded, or agreed on; provisional: tentative plans. 2. Uncertain; hesitant. scheduled in August. Orban said, "Egghead has been through many challenges in recent months. We have aggressively reorganized re·or·gan·ize v. re·or·gan·ized, re·or·gan·iz·ing, re·or·gan·iz·es v.tr. To organize again or anew. v.intr. To undergo or effect changes in organization. the business to reduce risk and become profitable. We are continuing our efforts to improve inventory turn, product margins and further reduce expenses. Effectively, Egghead is becoming a different company. As I have stated earlier the acquisition of Surplus Direct, when approved, will be a good fit. There are clear opportunities to build on synergies in management, product procurement The fancy word for "purchasing." The procurement department within an organization manages all the major purchases. , 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 commerce, marketing and retail distribution. Surplus Direct has invested heavily in its growth. We believe that the infrastructure they have built, which includes their highly ranked Internet commerce site, together with Egghead's resources, will create opportunities to increase long term value for our shareholders." Tax Valuation Allowance Given the company's recent losses, Egghead has determined that its deferred tax and tax related assets no longer meet the realization criteria as required by in SFAS 109. Therefore, Egghead has established a valuation allowance offsetting its previously recorded deferred tax assets. The $13.1 million non-cash charge was recorded as a component of income tax expense in the fourth quarter. Also, the company did not record any tax benefit for the losses incurred in the fourth quarter. In the future, if the realization criteria of SFAS 109 are met, the valuation allowance would be reduced accordingly. Egghead believes the recording of the valuation allowance does not impact the company's liquidity and will not affect pretax pre·tax adj. Existing before tax deductions: pretax income. pretax adj [profit] → vor (Abzug der) Steuern operating results or cash flows. The company's net operating losses Net operating losses Losses that a firm can take advantage of to reduce taxes. could be recovered over a 15-year period for tax purposes, if the company achieves profitability. However any future income or losses will not be tax effected until all existing net operating losses have become realizable. Egghead is a national reseller An organization that sells hardware and software to the general public. Resellers purchase products from software publishers and hardware manufacturers. of personal computer hardware, software, peripherals and accessories through 86 retail stores, 1- 800 Egghead and its Internet site. In November 1996, the company became the first major computer products retailer to deliver software programs over the Internet directly to customers' computers. NOTE: This news 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. that involve risks and uncertainties, including risks related to the highly competitive nature of the computer software, hardware and other related products retailing industry, the seasonality and quarterly fluctuation Fluctuation A price or interest rate change. of financial results, the early stage of the company's new store format, the dependence of the company's sales on the purchase and use of personal computers and software, the development stage of the company's subsidiary ELEKOM, and the risks detailed in the company's SEC reports including the report 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. for the year ended March 30, 1996 and the reports on Form 10-Q Form 10-Q See 10-Q. for the quarters ended June 29, 1996, September 28, 1996, and December 28, 1996. Actual results may differ materially. -0-
EGGHEAD INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Amounts in thousands, except per share data)
Year to Date
---------------------------
1997 1996
---------------------------
Costs
related to
As restructure As
reported activities reported
---------------------------
Net sales $360,715 $9,621 $403,841
Cost of sales, including
certain buying, occupancy
and distribution costs 326,044 16,110 357,373
---------------------------
Gross margin 34,671 (6,489) 46,468
Selling, general and
administrative expense 60,632 1,914 59,639
Depreciation and amortization
expense, net of amounts included
in cost of sales 6,043 - 7,449
Restructure and impairment costs 15,597 15,597 -
---------------------------
Operating loss (47,601) (24,000) (20,620)
Other (expense) income 3,428 - 2,469
---------------------------
Loss from continuing operations
before income taxes (44,173) (24,000) (18,151)
Income tax (expense) benefit (4,788) - 7,030
---------------------------
Net loss from continuing
operations before discontinued
operations and change in
accounting principle (48,961) (24,000) (11,121)
---------------------------
Discontinued operations (Note 6):
Gain on disposal of discontinued
operations, net of tax expense
of $14,249 22,286 - -
Income from discontinued
operations, net of tax
(benefit) expense of
$(7,833) and $60 (12,254) - 376
---------------------------
Net income before cumulative
effect of change in accounting
principle (38,929) (24,000) (10,745)
Cumulative effect of change in
accounting principle,
net of tax of $454 (711) - -
===========================
Net income (loss) $(39,640)$(24,000)$ (10,745)
===========================
Earnings (loss) per share (Note 4):
Continuing operations $(2.78) $(1.37) $(0.64)
Discontinued operations:
Gain on disposal of
discontinued operations 1.27 - -
Income (loss) from
discontinued operations (0.70) - 0.02
Change in accounting principle (0.04) -
===========================
Earnings (loss) per share $(2.25) $(1.37) $(0.62)
===========================
Weighted average common 17,581 17,581 17,437
shares outstanding ===========================
Quarter to Date
---------------------------
1997 1996
---------------------------
Costs
related
to
As restructure As
reported activities reported
---------------------------
Net sales $88,891 $9,621 $96,839
Cost of sales, including certain
buying, occupancy
and distribution costs 84,623 16,110 86,045
---------------------------
Gross margin 4,268 (6,489) 10,794
Selling, general and
administrative expense 15,321 1,914 15,234
Depreciation and amortization
expense, net of amounts included
in cost of sales 945 - 1,982
Restructure and impairment costs 15,597 15,597 -
---------------------------
Operating loss (27,595) (24,000) (6,422)
Other (expense) income 978 - 458
---------------------------
Loss from continuing operations
before income taxes (26,617) (24,000) (5,964)
Income tax (expense) benefit (11,608) - 2,278
---------------------------
Net loss from continuing
operations before discontinued
operations and change in
accounting principle (38,225) (24,000) (3,686)
---------------------------
Discontinued operations (Note 6):
Gain on disposal of
discontinued operations,
net of tax expense - - 558
Income from discontinued
operations, net of tax
(benefit) expense of $1,467 2,294 - -
===========================
Net income (loss) $(35,931)$(24,000) $(3,128)
===========================
Earnings (loss) per share (Note 4):
Continuing operations $(2.17) $(1.36) $(0.21)
Discontinued operations:
Gain on disposal of
discontinued operations - - .03
Income (loss) from
discontinued operations 0.13 - -
Change in accounting principle
===========================
Earnings (loss) per share $(2.04) $(1.36) $(0.18)
===========================
Weighted average common 17,591 17,591 17,543
shares outstanding
===========================
-0-
EGGHEAD INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollars in thousands)
ASSETS
March 29, March 30, December 28
1997 1996 1996
Current assets:
Cash and cash equivalents $83,473 $49,590 $69,694
Accounts receivables, net 17,917 24,079 29,045
Merchandise inventories, net 49,087 84,712 92,396
Current deferred income taxes -- 4,859 5,612
Other current assets 4,116 9,455 12,247
Discontinued operations - net -- 74,473 909
current assets
Total current assets 154,593 247,168 209,903
Property and equipment, net 19,710 29,495 24,687
Non-current deferred income taxes -- 4,221 4,221
Other assets 1,217 3,348 715
$175,520 $284,232 $239,526
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 43,027 $119,341 $ 71,263
Accrued liabilities 12,727 15,817 16,621
Other current liabilities 19,281 8,622 15,130
Total current liabilities 75,035 143,780 103,014
Long-term liabilities 438 1,183 679
Total liabilities 75,473 144,963 103,693
Shareholders' equity 100,047 139,269 135,833
$175,520 $284,232 $239,526
-0- CONTACT: Brian Bender Sir Brian Geoffrey Bender is the Permanent Secretary, of the Department for Business, Enterprise and Regulatory Reform of the United Kingdom Government. He was previously the Permanent Sectretary of the now defunct Department of Trade and Industry. John Hough n. 1. Same as Hock, a joint. v. t. 1. Same as Hock, to hamstring. [ imp. & p. p. os> r>; p. pr. & vb. n. os> n. 1. An adz; a hoe. v. t. 1. To cut with a hoe. Chief Financial Officer The Rockey Company Egghead, Inc. 509-891-4858 509-891-4851 |
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