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SIERRA ON-LINE REPORTS SECOND QUARTER AND SIX-MONTH RESULTS

 SIERRA ON-LINE REPORTS SECOND QUARTER AND SIX-MONTH RESULTS
 OAKHURST, Calif., Nov. 12 /PRNewswire/ -- Sierra On-Line (NASDAQ: SIER) today announced its second quarter and six-month results for the period ended Sept. 30, 1992. As previously announced, Sierra attributes the revenue decline and much of the loss for the quarter primarily to the delay in shipping "King's Quest VI." This highly anticipated product, originally expected to ship in September, was instead shipped Oct. 6, 1992. While late shipment of product lowered overall revenue, Sierra's U.K. operation also took a large, one-time charge to liquidate older titles and reduce warehouse inventories in preparation for the coming season's new titles. In addition, Sierra shortened the lives on certain titles, which is reflected in a much higher amortization of software development costs.
 Revenues for the quarter declined 6 percent to $9,923,900 compared to $10,520,300 for the same quarter of the prior year. Net loss for the quarter was $986,600, or ($.13) per share, vs. net income of $767,300, or $.14 per share, for the second quarter of last year.
 For the six-month period, revenues increased 14 percent to $19,462,500 from $16,998,100 for the same period last year. Net loss for the period was $859,900, or ($.12) per share, compared to net income of $809,200, or $.14 per share, for the prior year.
 The core entertainment software business continues to perform well at the retail level, as indicated by the four titles that were added to the list of top 25 sellers published by PC Research. Although "King's Quest VI" shipped early in the third quarter, it represents the single-largest shipment ever made by the company. In addition, "Aces of the Pacific" won the award for the best simulation product for 1992 from Compute Magazine.
 The company increased its investment in its on-line, multiplayer, interactive gaming service, The Sierra Network. After introducing a new, flat-rate pricing structure in June, the company lost a major portion of those members who infrequently used the service. The company has initiated a major marketing program using radio and print advertisements, magazine inserts of a one-disk starter kit, and pre- loading software. The program kicked off in October and has, as of this date, resulted in a membership exceeding 16,000, including trial members. The company feels the recent marketing success, combined with improved product, should increase its chances of achieving break even by the end of the fiscal year.
 According to Sierra's President and Chief Executive Officer, Ken Williams, "Only a small percentage of the total number of products Sierra will ship this year have been reflected in our revenues. I do not believe our first-half financial results are indicative of the year I expect. We look forward to a strong third quarter for both our entertainment and educational product lines."
 In July, Sierra completed its strategic acquisition of Bright Star Technology Inc., which produces award-winning language learning products and positions Sierra in the educational software market. Bright Star Technology also offers a unique, patented lip-synching technology that should provide major improvements in Sierra's entertainment and educational products.
 Also within the second quarter, Sierra strengthened management, adding Dana Berkman, who joined Sierra as managing director of Sierra On-Line Ltd.; and James Stanley, who became the new executive vice president of Marketing & Sales. Both men have strong backgrounds in sales and marketing, most recently with Sega and Gallo, respectively. Alan Higginson will continue in his position as president of Sierra's newest member company, Bright Star Technology Inc.
 Sierra On-Line Inc., along with its wholly owned subsidiaries Dynamix Inc. and Bright Star Technology Inc., publishes entertainment and educational software for IBM PCs and PC-compatibles and Apple Macintosh computers.
 SIERRA ON-LINE INC. AND SUBSIDIARIES
 Consolidated Statements of Earnings
 (Unaudited)
 (In thousands, except per share data)
 Three months Six months
 ended Sept. 30, ended Sept. 30,
 1992 1991 1992 1991
 Revenues
 Net sales $9,582 $10,251 $18,486 $16,288
 Other 342 269 977 710
 Total revenues $9,924 10,520 19,463 16,998
 Cost of sales
 Manufacturing costs 3,436 3,650 6,468 6,100
 Amortization of software
 development costs 2,030 1,282 3,565 2,031
 Royalties 305 422 610 646
 Total cost of sales 5,771 5,354 10,643 8,777
 Gross profit 4,153 5,166 8,820 8,221
 Operating expenses
 Selling, general and
 administrative 4,944 3,412 9,261 6,114
 Research and development 815 503 1,239 825
 Total operating
 expenses 5,759 3,915 10,500 6,939
 Earnings (loss) from
 operations (1,606) 1,251 (1,680) 1,282
 Non-operating income
 (expenses)
 Interest income (net) 279 80 636 192
 Amortization of goodwill (128) (75) (226) (153)
 Total non-operating income
 (expenses) 151 5 410 39
 Earnings (loss) before
 income taxes (1,455) 1,256 (1,270) 1,321
 Provision (benefit) for
 income taxes (468) 489 (410) 512
 Net income (loss) ($987) $767 ($860) $809
 Earnings (loss) per
 common and common
 equivalent share ($0.13) $0.14 ($0.12) $0.14
 Average number of
 outstanding
 common and common
 equivalent shares 7,376,976 5,561,307 7,427,079 5,618,201
 Consolidated Condensed Balance Sheet
 (In thousands, except per share data)
 Sept. 30, March 31,
 1992 1992
 (Unaudited)
 Assets
 Current assets:
 Cash and cash equivalents $1,622 $32,296
 Marketable investment
 securities 25,153 3,353
 Accounts receivable (net) 6,911 5,288
 Refundable income taxes 1,665 1,451
 Inventories 5,384 4,354
 Deferred income tax benefit 1,802 1,802
 Other current assets 2,185 595
 Total current assets 44,722 49,139
 Property, plant &
 equipment (net) 7,203 6,970
 Software development costs 11,605 8,816
 Goodwill 2,816 2,116
 Other assets 448 257
 Total assets $66,794 $67,298
 Liabilities and stockholders'
 equity:
 Current liabilities
 Accounts payable and other
 accrued expenses $4,338 $4,053
 Royalties payable 681 768
 Total current liabilities 5,019 4,821
 Deferred income
 tax liability 4,138 4,131
 Other liabilities --- 6
 Total liabilities 9,157 8,958
 Stockholders' equity 57,637 58,340
 Total liabilities
 and stockholders equity $66,794 $67,298
 -0- 11/12/92
 /CONTACT: Richard Gelhaus, executive VP/finance & operations of Sierra On-Line, 209-683-2598; or Eugene G. Heller of Silverman, Heller Associates, 310-208-2550, for Sierra On-Line/
 (SIER) CO: Sierra On-Line ST: California IN: CPR SU: ERN


LS-JB -- LA012 -- 9997 11/12/92 08:04 EST
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