| MONTREAL, CANADA -- March 30, 2000
-- Grand Toys International, Inc.
(Nasdaq: GRIN) today announced results
for its fourth quarter and year ended
December 31, 1999. Net sales for the
fourth quarter of 1999 were $9.9 million
compared to $14.2 million for the fourth
quarter of 1998. The Company posted a net
loss of $1.8 million, or $0.60 per basic
and fully diluted share, for the fourth
quarter of 1999. The fourth quarter loss
reflects a $1.3 million benefit from the
reversal of taxes previously provided for
as well as the application in the current
year of a tax loss carryforward. The loss
also included $815,000 ($470,000 after
tax) of one-time charges related to the
closure of the Ark Creations subsidiary’s
U.S. manufacturing plant due to a shift
to overseas manufacturing and related
severance costs, and the paring down of
underperforming product categories. Grand
also experienced margin pressure in the
quarter as a result of the clearance of
inventory, including reducing the number
of stock keeping units (SKUs) carried. In
the fourth quarter of 1998, the Company
reported a net loss of $1.0 million, or
$0.63 per basic share, which included a
pretax foreign exchange loss of $1.3
million.
Grand had adjusted EBITDA of
approximately $3.0 million in 1999.
Adjusted EBITDA is EBITDA before (a)
unusual items and (b) the losses
resulting from inventory reductions.
Grand took an unusually aggressive
position with regard to inventory
balances in 1999 in order to position
itself for fiscal 2000 and strengthen its
focus on proprietary products. Management
believes adjusted EBITDA is therefore
more indicative of normalized operations.
For fiscal 1999, net sales increased
12% to $37.2 million, compared to $33.2
million in fiscal 1998. The net loss for
the 1999 fiscal year was $710,000, or
$0.36 per basic share, compared to a net
loss of $318,000, or $0.20 per basic
share, in 1998. Notwithstanding the
fourth quarter loss, significant cash
inflows provided by the exercise of stock
options and warrants during the third
quarter enabled Grand to pay down
virtually all bank debt by the 1999
fiscal year end. From early January 2000
to date, Grand has had no new bank
borrowings and has been able to maintain
cash balances on hand as high as $2.5
million.
Steve Altro, Chairman and President of
Grand Toys, commented, "Despite
ending 1999 in the strongest financial
position in our history, sales in the
fourth quarter were disappointing,
particularly after we reported record
nine-month sales results. Furby, our best
selling product line during holiday 1998
and throughout most of 1999, saw its
popularity decline in the fourth quarter.
Despite Furby accounting for a
significant portion of the Company’s
revenue last year, we do not expect to
incur any losses selling off the balance
of the Furby inventory in the first
quarter of 2000, thanks to successful
inventory management. Grand ceased to be
a distributor of Furby at the end of
1999. In addition, Pokemon products were
definitely a force in the toy market this
holiday season, cannibalizing demand for
our non-Pokemon-related merchandise while
only marginally adding to sales due to
the limited availability of our Pokemon
products."
Mr. Altro continued, "The actions
we took in the quarter reflect the hard
decisions we believe are necessary to
transform Grand from its origins as a
distributor into a vendor with a broad
portfolio of proprietary product lines
targeted at the North American toy and
gift markets. To accelerate this
transition, we elected to source Ark’s
manufacturing overseas and to absorb the
related one-time restructuring costs in
the fourth quarter. We also took the
steps necessary to clear out
underperforming or low margin product
categories as we pursue a higher margin
revenue mix. We have reduced Ark’s
expense base substantially and will
continue to reduce expenses wherever
possible. We also eliminated virtually
all of our bank debt, which will reduce
the Company’s interest costs going
forward."
"For 2000, we have introduced a
newly redesigned Ark Creations product
line, which we believe was well received
at Toy Fair in February. Ark, the first
of our acquisitions, should begin to
contribute to our top line this year. We
also announced today a letter of intent
to acquire Limited Treasures, Inc., of
Rancho Cordova, California, a
privately-held creator of proprietary,
plush, bean-bag bears. The bears display
team logos as well as player names and
numbers, licensed from the National
Football League and the National
Basketball Association (the latter
licensed from Mattel, Inc.). Limited
Treasures generated over $12.0 million in
revenues in 1999 (unaudited) and should
benefit from our plans for expanded
distribution of its products. This
transaction is expected to be accretive
to our financial results in fiscal
2000."
"The acquisition of new
proprietary product lines is part of our
strategy to own more of the products we
distribute, and to concentrate on higher
margin product lines. This acquisition
strategy, if successful, is expected to
substantially boost overall margins and
profitability," added Mr. Altro.
Mr. Altro concluded, "At year
end, we had working capital of nearly
$11.0 million, a $17.5 million line of
credit of which of less than $1.5 million
was utilized and a committed management
team. We are in the process of recreating
Grand Toys, transforming it into a
company more in control of its destiny.
While 2000 looks to be a transitional
year as we work to replace our lost Furby
revenue, we expect proprietary products
to represent a growing portion of our
revenue as we execute on our stated
strategy."
Grand
Toys International, Inc.
Financial Highlights
(in US$)
Founded in 1960, Grand Toys
International, Inc. is a premier licensee
and distributor of a wide variety of toys
and ancillary items in Canada and since
January 1999, a supplier of proprietary
products in the United States.
This news release
contains certain forward looking
statements within the meaning of the
Private Securities Litigation Reform Act
of 1995, and is subject to risk and
uncertainties that could cause actual
results to differ materially. Such risks
and uncertainties include, but are not
limited to, those related to business
conditions and the financial strength of
the retail industry, particularly for toy
and toy-related products; the level of
consumer spending for such products; the
ability of the Company to successfully
obtain its products from suppliers; and
the success of advertising, marketing and
promotional campaigns.
SOURCE: Grand Toys International, Inc.
|
| McFarlane is quickly
becoming the modern action figure guru,
here is what he has on tap for the
future... Akira
Figures based on the popular anime, the
first American anime figures?!
Princess Mononoke
Figure based on the Anime translated by
Neil Gaiman (Sandman) and brought to our
shores by Miramax.
Where the wild things are.
Figures based on the popular children's
book.
NHLPA Hockey Figures
Figures of modern and past hockey greats.
Ultima Online Figures
Figures based on the immensely popular
online RPG.
Spawn
This great amid innovative action figure
line continues in the new millennium.
Movie Maniacs
Another great and popular line continues,
this time with Ash from the Evil Dead
Trilogy.
Austin Powers Series Two
Mike Myers and crew return with figures
of Elizabeth Hurly and Scott Evil.
Bob and Doug McKenzie
The problems the new film seem to be
having did not deter McFarlane from
releasing the Canadian comedy greats.
WOW, that a lot of Canadian content. I
just have to say way to go McFarlane.
Hockey, Bob and Doug, Mike Myers, what
more could a Canuk want. And congrats on
the Grammy nod!
|
