Genesis Direct Announces Strategic Repositioning to Focus On Web-based Sports Businesses.SECAUCUS, N.J.--(BUSINESS WIRE)--Feb. 3, 1999-- -- Board Approves Name Change to PROTEAM.com, Inc. -- -- Signs Agreement to Sell Institutional Catalogs for $23 Million; Intends to Sell Other Non-sports Assets -- -- Signs Letter of Intent to Receive $10 Million in Debt Financing Debt Financing When a firm raises money for working capital or capital expenditures by selling bonds, bills, or notes to individual and/or institutional investors. In return for lending the money, the individuals or institutions become creditors and receive a promise to repay to Fuel e-commerce Growth -- -- Reports Third Quarter Financial Results -- Genesis Direct, Inc. (Nasdaq:GEND GEND General Electric Neutron Devices ) today announced a major strategic repositioning repositioning Laparoscopic surgery The changing of a Pt's position during a procedure to improve access or visualization of the operative field, which may be linked to complications, as it changes anatomic planes of operation. Cf Laparoscopic surgery. of its business designed to capitalize on Cap´i`tal`ize on` v. t. 1. To turn (an opportunity) to one's advantage; to take advantage of (a situation); to profit from; as, to capitalize on an opponent's mistakes s>. its prominence as a leading direct marketer and e-tailer of sports products, to leverage its sports brands and operating infrastructure and to facilitate the Company's further development as a web-based sports products superstore su·per·store n. A very large retail store that stocks highly diversified merchandise, such as groceries, toys, and camera equipment, or a wide variety of mechandise in a specific product line, such as computers or sporting goods. . In connection with this initiative, the Company plans to reallocate Verb 1. reallocate - allocate, distribute, or apportion anew; "Congressional seats are reapportioned on the basis of census data" reapportion allocate, apportion - distribute according to a plan or set apart for a special purpose; "I am allocating a loaf of its resources in order to focus on significantly building its existing web presence, and will utilize its Internet and 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. infrastructure as well as its portal and professional sports 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. league relationships to capitalize on the ongoing strength of the Company's nine sports brands. These brands primarily include Hot off The Ice(TM), Nothin' But Hoops(TM), Redline red·line v. red·lined, red·lin·ing, red·lines v.intr. 1. To refuse home mortgages or home insurance to areas or neighborhoods deemed poor financial risks. 2. (TM) Nascar 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. and Manny's Baseball Land(TM), which are all the official catalogs of their respective leagues, and 1-800-Pro-Team, the Company's largest all-sports brand. To signify sig·ni·fy v. sig·ni·fied, sig·ni·fy·ing, sig·ni·fies v.tr. 1. To denote; mean. 2. To make known, as with a sign or word: signify one's intent. the importance of this move, Genesis Direct stated that its Board of Directors has approved the name change of the Company to PROTEAM.com, pending shareholder approval, and the Company's ticker symbol Ticker Symbol An arrangement of characters (usually letters) representing a particular security listed on an exchange or otherwise traded publicly. When a company issues securities to the public marketplace, it selects an available ticker symbol for its securities which investors to "PRTM PRTM Parks, Recreation, and Tourism Management PRTM Printing Response Time Monitor PRTM Pittiglio, Robin, Todd and McGrath (management consulting firm) ", effective immediately. As part of the repositioning, Genesis Direct has retained New York-based investment bank Gruppo Levey & Co., which specializes in the direct marketing industry. The Company is actively involved in discussions to sell its non-sports assets, and will substantially reduce the fixed cost structure of the Company. In total, proceeds raised from the sale of all non-sports assets are expected to be in excess of $60 million, and will be used to fund ongoing business operations Business operations are those activities involved in the running of a business for the purpose of producing value for the stakeholders. Compare business processes. The outcome of business operations is the harvesting of value from assets as well as aggressive expansion of the existing Internet sports businesses. The Company announced that it has already signed a definitive agreement, subject to certain conditions including Hart-Scott-Rodino approval, to sell its four Institutional/Business-to-Business catalog titles for $23 million to School Specialty, Inc. (Nasdaq:SCHS SCHS Santa Cruz High School (California) SCHS Supreme Court Historical Society SCHS San Clemente High School SCHS Sand Creek High School (Colorado Springs, CO) ). Genesis Direct also noted it has undertaken a significant reduction in its fixed cost structure, which includes the elimination of approximately 150 salaried positions at the Company. This action, coupled with the decrease in personnel related to the planned divestiture The breakup of AT&T. By federal court order, AT&T divested itself on January 1, 1984 of its 23 operating companies, which became known as the Regional Bell Operating Companies (RBOCs). of non-sports businesses, is expected to result in a total reduction of approximately 30% of the Company's current workforce. The corporate repositioning, cost reduction program and layoffs are expected to generate approximately $35 million in annual fixed cost savings. Accordingly, the Company expects to incur a one-time pre-tax 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. of approximately $12 million in the fourth quarter ending March 31, 1999, excluding any possible losses incurred from the sale of the businesses. This amount includes the previously announced charge for inventory writedowns and 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 originally expected to be recorded in the third quarter. The Company also announced that concurrent with the repositioning, it has signed letters of intent, subject to the approval of the Company's bank, to receive a total of $10 million in additional debt financing: $5 million from GE Investment Private Placement Partners II and $5 million from the Global Internet Fund. Warren Struhl, Genesis Direct's President and Chief Executive Officer, is a partner in the Global Internet Fund. In connection with this financing, the Company has agreed to issue to the lenders warrants to purchase a total of one million shares of the Company. Mr. Struhl stated, "We have carefully evaluated many options for the future direction of our company, and feel that we have created and established a compelling business model designed to assist in enhancing shareholder value. This model is based on historical product margins of approximately 55%, has extensive barriers to entry, and taps into sports fans' demand for differentiated products. Our sports brands continue to demonstrate strong growth both domestically and internationally through the web and direct marketing. Indeed, studies have shown that sports fans and enthusiasts are among the most frequent users of the web, as they pursue their passion for news and information through the many sports websites available today. Consequently, we believe that redirecting our resources to this high-growth area, where we already have an established presence, will enable us to effectively position the Company for success over the long term. E-tailing has always been a key element of the Genesis Direct operating model Operating Model is a term that is used in many contexts. In essence an operating model describes how an organization operates across both business and technology domains. The Operating Model describes what is important for the organization. , and we believe the steps we have announced today -- combined with our expertise as a superior sports marketer -- will assist us in building upon our success in selling a most comprehensive assortment assortment /as·sort·ment/ (ah-sort´ment) the random distribution of nonhomologous chromosomes to daughter cells in metaphase of the first meiotic division. as·sort·ment n. of fan-oriented sports merchandise through PROTEAM.com and other e-commerce sites we operate." Mr. Struhl continued, "The licensed sports product market currently accounts for over $14 billion in sales annually, and the size of the overall market for sports products, including apparel, footwear and hard goods, is nearly $50 billion a year. We see a real opportunity to expand our presence in this area, and are confident that our established sports brands, unique Internet relationships and existing fulfillment infrastructure will enable us to continue as a leading Internet sports products superstore and pursue our goal of becoming a `category killer'. As we reposition the Company, we think it is particularly appropriate to change our name to PROTEAM.com, as it more accurately reflects our present position and future commitment to offering the broadest array of sports merchandise on the web." "Genesis Direct has a proven track record of successfully creating concepts that effectively leverage multiple distribution channels, such as Hot off the Ice(TM) and Nothin' but Hoops(TM). In addition, the Company has already established itself as a leader in electronic commerce through the online stores it helps maintain as part of its relationships with major sports leagues A sports league is an organization that exists to provide a regulated competition for a number of people to compete in a specific sport. At its simplest, it may be a local group of amateur athletes who form teams among themselves and compete on weekends; at its most complex, it can , including the National Basketball Association National Basketball Association (NBA) U.S. professional basketball league. It was formed in 1949 by the merger of two rival organizations, the National Basketball League (founded 1937) and the Basketball Association of America (1946). (www.nba.com) and the National Hockey League National Hockey League (NHL) Organization of professional North American ice-hockey teams. The league was formed in 1917 by five Canadian teams; the first U.S. team, the Boston Bruins, was added in 1924. It today consists of 30 teams in two conferences and six divisions. (www.nhl.com). In recent months we have also formed key strategic alliances with both Yahoo! and Excite, for placement of our PROTEAM.com megastore, as well as the Superbowl Champion Denver Broncos store (http://store.DenverBroncos.com). David Sable sable, species of marten, Martes zibellina, found in Siberia, N European Russia, and N Finland. This carnivorous mammal is highly valued for its thick, soft fur, which is dark brown or black, sometimes with white underparts and sometimes flecked with silver. , the Company's Chief Marketing Officer, has been the driving force in developing these and other alliances and will be spending most of his time and focus pursuing Internet relationships and other strategic partnerships." "Our experience as an e-tailer, coupled with the steps taken as part of this repositioning, will permit Genesis Direct to further capitalize on the explosive growth of e-commerce. As we look ahead, we are also excited by our ability to effectively use our print catalogs and other media, such as TV and radio, to propel pro·pel tr.v. pro·pelled, pro·pel·ling, pro·pels To cause to move forward or onward. See Synonyms at push. [Middle English propellen, from Latin Internet traffic Internet traffic is the flow of data around the Internet. It includes web traffic, which is the amount of that data that is related to the World Wide Web, along with the traffic from other major uses of the Internet, such as electronic mail and peer-to-peer networks. . We plan to mail over 40 million sports catalogs next year, and believe that the resulting contribution to our brand-building efforts will be invaluable as we move `paper-based' catalog buyers to the web." "Importantly, we already have the infrastructure necessary to support the growth we expect in this area. We have spent more than $30 million over the last three years to build our fulfillment distribution facilities, customer service centers and information systems, and currently have the capacity to handle over $500 million in sales. This capacity also provides us with the foundation to handle fulfillment for other on-line retailers on an outsourcing (1) Contracting with outside consultants, software houses or service bureaus to perform systems analysis, programming and datacenter operations. Contrast with insourcing. See netsourcing, ASP, SSP and facilities management. basis, and we are currently in discussions with companies to provide them turnkey See turnkey system. solutions. Many e-commerce companies are discovering that not all aspects of their business are `cyber', and are realizing they lack sufficient fulfillment capabilities. We are substantially ahead of our competition in this regard. As a result, we are very excited at the prospect of leveraging our own assets as a resource to third parties." Separately, the Company reported that net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight for the third quarter ended December 26, 1998 were $117.9 million compared to $55.9 million in the third quarter of last year. The net loss in the third quarter was $18.9 million, compared to a net loss of $32.2 million in the third quarter of last year. The basic net loss per share in the quarter was $0.58 per share compared to a basic net loss per share of $3.63 in the third quarter of last year. Net sales for the nine months ended December 26, 1998 were $192.8 million compared to $81.5 million in the first nine months of last year. The net loss in the nine-month period was $64.1 million, compared to a net loss of $57.9 million in the same period last year. The basic net loss per share excluding an extraordinary charge for the nine months was $2.13 per share compared to a basic net loss per share of $6.57 in the same period a year ago. Mr. Struhl commented, "The retail world has changed dramatically, and we believe that though we could have effectively continued to pursue our original business plan, this would have come at a cost of not focusing adequate management and capital resources on the tremendous opportunity presented by the strategies that comprise our repositioning. We are optimistic op·ti·mist n. 1. One who usually expects a favorable outcome. 2. A believer in philosophical optimism. op that the organizational changes, cost reduction programs and strategic focus will enable us to substantially improve our financial performance going forward." PROTEAM.com is a leading e-tailer specializing in the marketing and sales of sports and sports related products to both fans and participants. The Company merchandises products directly to consumers through several targeted websites and complementary catalogs, television and radio advertising and other electronic broadcast and print media. The Company's products are also offered on the following websites: http://sports.yahoo.com/nba, http://sports.yahoo.com/nfl, http://sports.yahoo.com/nhl, http://sports.yahoo.com/mlb, http://sports.yahoo.com/ncaaw, http://sports.yahoo.com/ncaab, www.excite.com/shopping/catalogs and http://store.DenverBroncos.com/. This press 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. within the meaning of the applicable federal securities laws. Such forward-looking statements include, among other things, the Company's plans to implement its growth strategies, increase its Internet website presence, increase its access to Internet users Internet user n → internauta m/f Internet user Internet n → internaute m/f , dispose of its non-sports assets, improve its financial performance, reduce its fixed cost structure and improve its fulfillment capabilities. Such forward-looking statements also include the Company's expectations concerning factors affecting the markets for its products, such as consumer demand, general market conditions and Internet access See how to access the Internet. . Actual results could differ from those projected in any forward-looking statements. Factors that could cause actual results to differ from those anticipated are detailed in Genesis Direct's filings with the Securities and Exchange Commission. The forward-looking statements are made as of February 3, 1999 and the Company assumes no obligation to update the forward-looking statements or to update the reasons why actual results could differ from those projected in the forward-looking statements. Investors should consult all of the information set forth herein and the other information set forth from time to time in the Company's reports filed with the Securities and exchange Commission pursuant to the Securities Act of 1933 and the Securities Exchange Act of 1934.
GENESIS DIRECT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
12/26/98 12/27/97 12/26/98 12/27/97
Net sales $ 117,927 $ 55,915 $ 192,773 $ 81,505
Cost of goods sold 75,722 46,019 127,792 62,143
Gross profit 42,205 9,896 64,981 19,362
Selling, general
and administrative
expenses 59,919 40,351 121,152 73,479
Loss from
operations (17,714) (30,455) (56,171) (54,117)
Interest
expense - net 1,175 677 2,677 2,737
Net loss before
extraordinary item (18,889) (31,132) (58,848) (56,854)
Extraordinary
item (1) -- -- 5,235 --
Net loss $ (18,889) $ (31,132) $ (64,083) $ (56,854)
Dividends accruing
on Series A
Preferred Stock -- 1,032 -- 1,032
Net loss attributable
to common
stockholders $ (18,889) $ (32,164) $ (64,083) $ (57,886)
Basic net loss per share:
Loss before
extraordinary item (0.58) (3.63) (2.13) (6.57)
Extraordinary item -- -- (0.19) --
Net loss $ (0.58) $ (3.63) $ (2.32) $ (6.57)
Weighted average
shares - basic 32,354,018 8,856,723 27,630,445 8,810,175
(1) Represents one time charge incurred on early extinguishment of
debt paid off by proceeds raised in the Company's May 7, 1998
Initial Public Offering.
GENESIS DIRECT, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
(unaudited)
December 26, 1998 March 28, 1998
Assets
Current assets:
Cash and cash equivalents $ 11,662 $ 2,722
Accounts receivable 17,532 5,594
Merchandise inventory, net 62,119 27,350
Other current assets 17,652 11,927
Total current assets 108,965 47,593
Property, equipment and
leasehold improvements, net 46,323 25,639
Other assets 105,599 66,044
Total assets $ 260,887 $ 139,276
Liabilities and common
stockholders' equity
(deficiency)
Total current liabilities 114,725 60,505
Notes payable and long-term debt,
less current portion 21,520 41,154
Other liabilities 2,296 2,717
Series A Preferred Stock -- 96,739
Total common stockholders'
equity (deficiency) 122,346 (61,839)
Total liabilities
and common stockholders'
equity $ 260,887 $ 139,276
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