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 OAKHURST, Calif., July 28 /PRNewswire/ -- Sierra On-Line Inc. (NASDAQ: SIER) today announced results for its first quarter ended June 30, 1993, and completion of an agreement with AT&T and General Atlantic Partners to acquire an equity position in The Sierra Network.
 Revenues for the quarter increased approximately 12 percent, to $10,648,000, compared with $9,539,000 for the same period a year ago. Net loss for the quarter was ($3,603,000), or ($0.49) per share, vs. net income of $127,000, or $0.02 per share, last year. Company revenues rose primarily as a result of growth in The Sierra Network.
 During the quarter, the company released 10 new products, which included six new education and entertainment titles and one CD, many of which were shipped in the final weeks of the quarter. As a result, the company entered the second quarter with a healthy backlog of orders for currently shipping products.
 According to Ken Williams, president and chief executive officer of Sierra On-Line, "Revenues from our core entertainment and educational business were essentially flat, compared to the same period last year. This was the case even though the prior year included the highly successful release of `Aces Over The Pacific,' which generated approximately 35 percent of revenues in that quarter. During this quarter, we did not have a comparable hit, as no single product accounted for more than 12 percent of revenues. However, the sequel, `Aces Over Europe,' is expected to ship during the second quarter, and we hope it will enjoy similar success."
 Sierra continues to invest heavily in developing new 3DO and CD-ROM products and platforms. In fact, the company sold more CD-ROM units during the quarter than anticipated, including the CD version of "King's Quest VI," reflecting significant growth in this emerging platform. To further support the growing CD market, Sierra is striving to release CD-ROM versions of new titles within 30 days of releasing the floppy disk versions.
 Revenues for The Sierra Network, the company's on-line, interactive, multiparty entertainment network, increased more than five times to $1.9 million during the first quarter, compared with $377,000 during the same period a year ago. However, The Sierra Network posted a pre-tax loss of ($1.8 million) during the period as it continues developing new network content and pursuing an aggressive marketing program to increase the number of network subscribers.
 During the quarter, The Sierra Network signed a joint development and marketing agreement with Prodigy Services Co., the nation's largest on-line service. Prodigy is a partnership of IBM and Sears with more than 2 million subscribers. This joint venture substantially increases the potential market for Sierra and Prodigy. Under terms of the agreement, The Sierra Network will receive revenues generated by Prodigy Service members who access the network, anticipated to begin in September 1993.
 On July 27, 1993, AT&T, a global communications and computer company, and General Atlantic Partners, a New York-based investment firm, signed an agreement to purchase a 20 percent interest each in The Sierra Network for a total of $10 million. The agreement calls for The Sierra Network to be renamed The ImagiNation(TM) Network Inc. Under the agreement, AT&T will provide $3 million in development funding for The ImagiNation Network to support access from Sega's Genesis(TM) game system, via AT&T's planned peripheral device code-named The Edge 16, and from 3DO's Interactive Multiplayer(TM). In addition, The ImagiNation Network will pay up to $5 million to Sierra On-Line to develop content for the network.
 Sierra On-Line Inc. develops and publishes interactive entertainment and educational software for IBM PCs and PC-compatibles, Apple Macintosh computers and Sega-CD systems.
 Consolidated Statements of Operations
 (In thousands, except per share data)
 Three Months
 Ended June 30,
 1993 1992
 Net sales $9,723 $8,904
 Other 925 635
 Total revenues 10,648 9,539
 Cost of sales
 Manufacturing costs 3,909 3,032
 Amortization of software
 development costs 2,493 1,535
 Royalties 286 305
 Total cost of sales 6,688 4,872
 Gross profit 3,960 4,667
 Operating expenses
 Selling, general and
 administrative 6,245 4,317
 Research and development 2,848 424
 Total operating
 expenses 9,091 4,741
 Earnings (loss) from
 operations (5,131) (74)
 Non-operating income
 Interest income (net) 219 357
 Amortization of goodwill (145) (98)
 Total non-operating income
 (expenses) 74 259
 Earnings (loss) before
 income taxes (5,057) 185
 Provision (benefit) for
 income taxes (1,454) 58
 Net income (loss) ($3,603) $127
 Earnings (loss) per
 common and common
 equivalent share ($0.49) $0.02
 Average number of
 common and common
 equivalent shares 7,290,462 7,449,574
 Consolidated Condensed Balance Sheets
 (In thousands, except per share data)
 June 30, March 31,
 1993 1993

 Current assets:
 Cash and cash equivalents $1,380 $3,461
 Marketable investment
 securities 20,217 23,129
 Accounts receivable (net) 6,233 6,231
 Refundable income taxes 3,337 2,787
 Inventories 3,547 3,317
 Deferred income tax benefit 2,912 2,912
 Other current assets 2,187 2,195
 Total current assets 39,813 44,032
 Property, plant &
 equipment (net) 8,083 7,750
 Software development costs 5,765 6,659
 Goodwill 2,656 2,801
 Other assets 365 413
 Total assets $56,682 $61,655
 Liabilities and stockholders'
 Current liabilities
 Accounts payable and other
 accrued expenses $4,742 $6,273
 Royalties payable 524 710
 Total current liabilities 5,266 6,983
 Deferred income
 tax liability 3,841 3,846
 Other liabilities
 Total liabilities 9,107 10,829
 Stockholders' equity 47,575 50,826
 Total liabilities
 and stockholders equity $56,682 $61,655
 -0- 7/28/93
 /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/

CO: Sierra On-Line Inc.; Prodigy Services Co.; General Atlantic
 Partners; AT&T ST: California IN: CPR SU: ERN JVN

BP-LM -- LA031 -- 6629 07/28/93 09:06 EDT
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Publication:PR Newswire
Date:Jul 28, 1993

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