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SIERRA ON-LINE REPORTS FOURTH QUARTER AND FISCAL YEAR-END RESULTS

 OAKHURST, Calif., May 20 /PRNewswire/ -- Sierra On-Line Inc. (NASDAQ: SIER) today announced results of its fourth quarter and fiscal year ended March 31, 1993.
 For the 1993 fiscal year, revenues increased 15 percent to $49.7 million, compared to $43.2 million for the same period last year. Net loss for the year was ($8.4) million, or ($1.16) per share, vs. net income of $3.7 million, or $0.65 per share, last year.
 Revenues for the fourth quarter were $11.9 million, an increase of 21 percent over the $9.9 million reported for the same period of fiscal 1992. Net loss for the period was ($6.2) million, or ($0.86) per share, compared with net income of $0.3 million, or $0.05 per share, during the fourth quarter of the prior fiscal year.
 Revenues for the company's software business, which excludes The Sierra Network, increased 9 percent for both the fiscal year and the fourth quarter. During the year, the company experienced reduced shelf life for its entertainment products. The company believes the reason for this reduced shelf life is that the industry experienced an increase in the number of new titles, additional new formats in the entertainment and educational areas, and a dramatic drop in market demand for 5 1/4-inch diskettes.
 Despite the increased competition in the marketplace, PC Research, which tracks sales in mall-based software specialty stores, indicated that Sierra achieved the largest market share of any publisher of PC-based software entertainment products during the critical holiday season and continued this trend into the fourth quarter of fiscal 1993. Many of the company's products, such as "King's Quest VI," "Aces Over the Pacific," "Front Page Sports Football," "Laura Bow 2," and, most recently, "Space Quest V," were frequently mentioned on retailer best-seller lists. Sierra also increased its presence within the educational software market with products such as "Alphabet Blocks" and "The Island of Dr. Brain."
 Revenues for The Sierra Network, the company's on-line interactive, multiparty, entertainment network, increased from $0.3 million during fiscal 1992, to $3.0 million for fiscal 1993. During the fourth quarter, revenues were approximately $1.4 million, almost double the prior quarter. Revenue increases during the fourth quarter resulted from the growing number of new members and continued usage for a full quarter by members added in the prior quarter. Nevertheless, The Sierra Network experienced a pre-tax operating loss of ($1.9) million for the fourth quarter and ($5.4) million for fiscal 1993. The company believes the major contributing factors were the costs associated with expanding The Sierra Network, aggressive marketing programs to attract new subscribers, and providing additional customer support.
 On April 21, 1993, Sierra announced its intent to enter into a strategic alliance for The Sierra Network with AT&T, a global communications and computer company and General Atlantic Partners, a New York-based private investment firm. According to Sierra President Ken Williams, "Today, The Sierra Network is the only on- line service that has as its primary focus delivering entertainment and educational multiplayer games. I believe The Sierra Network has a technological lead in this very important category. This category has such potential, substantial competition from major cable television, telephone companies, and others, is inevitable. AT&T has some of the financial, marketing, operating experience, and technology resources required to give The Sierra Network its best possible chance to capture a significant market share in one of the most exciting, emerging businesses today."
 In addition to the operating loss at The Sierra Network, a number of other factors contributed to the company's operating loss. The company dramatically increased its product development and marketing efforts to exploit new market segments such as sports and education and accelerated efforts to develop products for new CD platforms.
 Moreover, as previously announced in a release dated Dec. 16, 1992, the company accelerated amortization of software development costs for certain titles that were discontinued or experienced shortened shelf life; expensed development costs of certain products for new markets and new platforms where market acceptance is less predictable; and amortized new titles over a shorter life to address the new market realities. Amortization of software exceeded deferral of software development costs by $2.2 million, reducing deferred costs of software development from $8.8 million on the balance sheet for fiscal 1992, compared to $6.6 million in fiscal 1993.
 Other factors contributing to the operating loss were the liquidation of older titles and discontinued Amiga products, which negatively impacted earnings by more than an aggregate of $1 million during the second and third quarters of the fiscal year. During the fourth quarter, the company reduced its staff by almost 10 percent and incurred a charge of approximately $800,000 for severance pay and other related benefits. As part of the staff reduction, the company realigned its resources to maintain market share in its traditional PC software entertainment categories and to grow in its new categories of education and sports. The company is also expanding resources to support the development of emerging platforms.
 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, Apple Macintosh computers and Sega CD players.
 SIERRA ON-LINE INC. AND SUBSIDIARIES
 Consolidated Statements of Operations
 (In thousands, except per share data)
 Three months ended Year ended
 March 31, March 31,
 1993 1992 1993 1992
 (Unaudited)
 Revenues
 Net sales $11,461 $9,437 $47,955 $41,681
 Other 477 415 1,761 1,507
 Total revenues 11,938 9,852 49,716 43,188
 Cost of sales
 Manufacturing costs 4,638 3,871 17,550 14,913
 Amortization of software
 development costs 3,472 1,116 11,572 5,569
 Royalties 371 290 1,579 1,502
 Total cost of sales 8,481 5,277 30,701 21,984
 Gross profit 3,457 4,575 19,015 21,204
 Operating expenses
 Selling, general and
 administrative 8,151 3,440 23,633 13,621
 Research and development 3,880 743 7,692 2,208
 Total operating expenses 12,031 4,183 31,325 15,829
 Earnings (loss)
 from operations (8,574) 392 (12,310) 5,375
 Non-operating income
 (expenses)
 Interest income (net) 192 134 1,122 397
 Amortization of goodwill (145) (125) (504) (355)
 Total non-operating
 income (expenses) 47 9 618 42
 Earnings (loss) before
 income taxes (8,527) 401 (11,692) 5,417
 Provision (benefit)
 for income taxes (2,320) 120 (3,293) 1,730
 Net income (loss) ($6,207) $281 ($8,399) $3,687
 Earnings (loss) per
 common and common
 equivalent share ($0.86) $0.05 ($1.16) $0.65
 Average number of
 outstanding common
 and common
 equivalent shares 7,225,074 5,689,504 7,225,074 5,689,504
 Consolidated Condensed Balance Sheets
 (In thousands, except per share data)
 March 31, March 31,
 1993 1992
 Assets
 Current assets
 Cash and cash equivalents $3,461 $32,296
 Marketable investment securities 23,130 3,353
 Accounts receivable (net) 6,231 5,288
 Refundable income taxes 2,787 1,451
 Inventories 3,317 4,354
 Deferred income tax benefit 2,912 1,802
 Other current assets 2,194 595
 Total current assets 44,032 49,139
 Property, plant & equipment (net) 7,750 6,970
 Software development costs 6,659 8,816
 Goodwill 2,801 2,116
 Other assets 413 257
 Total assets $61,655 $67,298
 Liabilities and stockholders' equity
 Current liabilities
 Accounts payable and
 other accrued expenses $6,273 $4,053
 Royalties payable 710 768
 Total current liabilities 6,983 4,821
 Deferred income tax liability 3,846 4,131
 Other liabilities --- 6
 Total liabilities 10,829 8,958
 Stockholders' equity 50,826 58,340
 Total liabilities and
 stockholders' equity $61,655 $67,298
 -0- 5/20/93
 /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/
 (SIER)


CO: Sierra On-Line Inc. ST: California IN: CPR SU: ERN

JL-BP -- LA014 -- 0610 05/20/93 09:04 EDT
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Date:May 20, 1993
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