Entertainment Distribution Company Announces Second Quarter 2007 Results

Entertainment Distribution Company Announces Second Quarter 2007 Results

NEW YORK, Aug. 7 /PRNewswire-FirstCall/ -- Entertainment Distribution Company, Inc. (NASDAQ:EDCI) , a global and independent provider of supply chain services to the home entertainment market, today reported second quarter financial results for the period ending June 30, 2007.

   Highlights:   -- Revenue of $80.2 million for the second quarter compared to $73.6      million for the same quarter last year.   -- Revenue of $164.2 million for the first six months compared to $143.7      million for the same period last year.   -- Net loss from continuing operations of $4.7 million for the second      quarter compared to a net loss of $2.9 million for the same quarter      last year.   -- Net loss from continuing operations of $11.4 million for the first six      months compared to a net loss of $6.7 million for the same period last      year.   -- Second quarter EBITDA from continuing operations of $0.9 million,      compared to $4.8 million for the same quarter last year.   -- First six months EBITDA loss from continuing operations of $0.3      million, compared to positive EBITDA of $6.2 million for the same      period last year.   -- As of June 30, 2007, the Company had total unrestricted cash and short-      term investments of $74.5 million.   -- Debt was reduced in the second quarter by $14.1 million and currently      stands at $53.2 million, net of unamortized discount.   

EDC's President and Chief Executive Officer Jim Caparro stated, "We continue to operate in a difficult environment. In the second quarter of 2007 revenues improved 9.0% driven by the inclusion of revenue from our Blackburn, UK manufacturing facility, the capture of our remaining reversionary business and an expanding third party customer base. While we are disappointed in our EBITDA performance, I would note that EBITDA in the second quarter of 2006 included a one-time contract pricing benefit of $1.1 million, net of a customer volume rebate cost. Excluding this $1.1 million one-time benefit in the second quarter of 2006, the decline in EBITDA in the second quarter of 2007 would have only been $2.8 million. Continued weakness across the industry and seasonally lower margins were the key cause for the decline in profitability, while the Blackburn operations and continued cost improvements helped reduce the impact of industry conditions on our bottom line. Despite year-to-date industry declines in the US of nearly 20% by some measures, we remain cautiously optimistic that the strength of the upcoming release schedule coupled with the seasonality of our business will provide us with a strong second half, in which we expect to generate approximately $1 to $2 million less in EBITDA compared to the final six months of 2006. We have taken many steps to both grow the business in the face of the industry decline as well as to reduce current and future costs. We expect these actions will allow us to stabilize our EBITDA without undertaking undue execution risk."

Management will host a conference call to discuss its second quarter 2007 financial results today at 4:30 p.m. ET. To access the conference call, please dial 973-582-2706; the reference pass code for the call is 9016186. A live webcast of the conference call will also be available on the Company's corporate website, located at www.edcllc.com. A replay of the conference call will be available through Tuesday, August 14, 2007. The replay can be accessed by dialing 973-341-3080. The pass code for the replay is 9016186.

Summary of Second Quarter 2007

For the second quarter of 2007, the Company reported revenue of $80.2 million compared to $73.6 million for the second quarter of 2006. The increase is primarily attributable to the inclusion of the additional volumes from our Blackburn acquisition which was not part of EDC in the second quarter of 2006. The additional revenue generated by Blackburn, delivered break even EBITDA in the second quarter of 2007, as it did in the first quarter of 2007.

The Company had EBITDA of $0.9 million in the second quarter of 2007, as compared to EBITDA of $4.8 million in the second quarter of 2006, although our second quarter 2006 EBITDA included a one-time contract pricing benefit of $1.1 million, net of a customer volume rebate cost. EBITDA is a non-GAAP financial measure. A reconciliation between EBITDA and the most directly comparable GAAP financial measure is provided following the Condensed Consolidated Financial Statements included in this release. The reconciliation also includes a description of how the Company calculates EBITDA.

The Company reported a net loss from continuing operations of $4.7 million for the second quarter of 2007, or ($0.07) per diluted share, which compares to a net loss from continuing operations of $2.9 million, or ($0.04) per diluted share, for the second quarter of 2006.

Six Months Ended June 30, 2007

For the six months ended June 30, 2007, the Company reported revenue of $164.2 million compared to $143.7 million for the first six months of 2006. The increase was primarily attributed to the inclusion of the additional volumes from our Blackburn acquisition, offset partially by declines in our primary customer's business.

The Company had an EBITDA loss of $0.3 million in the first six months of 2007, as compared to positive EBITDA of $6.2 million in the first six months of 2006, although our 2006 EBITDA included a one-time charge of ($0.3) million, consisting of a customer volume rebate cost partially offset by a contract pricing benefit. Our 2007 EBITDA included stock-option investigation and litigation legal expenses as well as consulting expenses of approximately $2.0 million.

The Company reported a net loss from continuing operations of $11.4 million for the first six months of 2007, or ($0.16) per diluted share, which compares to a net loss from continuing operations of $6.7 million, or ($0.10) per diluted share, for the first six month period of 2006.

Guidance

With industry decline rates currently 3 to 5 percentage points above the assumptions in our prior guidance, or down 10% to 12%, we now expect our full- year 2007 EBITDA to be down by approximately 20% from 2006 levels, excluding the options-related and consulting costs of approximately $2.0 million in 2007. However, approximately 77% of this year-over-year decline is due to the year-to-date results. We remain cautiously optimistic that the strength of the upcoming release schedule coupled with the seasonality of our business will provide us with a strong second half in which we expect to generate approximately $1 to $2 million less in EBITDA than the final six months of 2006.

About Entertainment Distribution Company

Entertainment Distribution Company, Inc. (NASDAQ:EDCI) is a global and independent provider of supply chain services to the home entertainment market. EDC serves every aspect of the manufacturing and distribution process and is one of the largest providers in the industry. Its clients include some of the world's best-known music, movies and gaming companies. Headquartered in New York, EDC's operations include manufacturing and distribution facilities throughout North America and in Hannover, Germany, and a manufacturing facility in Blackburn, UK. For more information, please visit www.edcllc.com.

Safe Harbor Statement

This news release contains statements that may be forward-looking within the meaning of applicable securities laws. The statements may include projections regarding future revenues and earnings results, and are based upon the Company's current forecasts, expectations and assumptions, which are subject to a number of risks and uncertainties that could cause the actual outcomes and results to differ materially. Some of these results and uncertainties are discussed in the Company's most recently filed Annual Report on Form 10-K and the Company's most recently filed Quarterly Reports on Form 10-Q. These factors include, but are not limited to potential intellectual property infringement claims; internal control deficiencies, litigation; potential acquisitions and strategic investments; environmental laws and regulations; ability to attract and retain key personnel; volatility of stock price; competition; variability of quarterly results and dependence on key customers; international business risks; sensitivity to economic trends and consumer preferences; increased costs or shortages of raw materials or energy; advances in technology and changes in customer demands; development of digital distribution alternatives including copying and distribution of music and video files; continuation and expansion of third-party agreements; proprietary technology; potential changes in government regulation; potential market changes resulting from rapid technological advances; restructuring activities; variability in production levels; and compliance with Senior Secured Credit Facility covenants. The Company assumes no obligation to update any forward- looking statements and does not intend to do so except where legally required.

           ENTERTAINMENT DISTRIBUTION COMPANY, INC. AND SUBSIDIARIES                     CONDENSED CONSOLIDATED BALANCE SHEETS                                                  June 30,       December 31,                                                   2007             2006                                               (Unaudited)                  ASSETS                                                         (In thousands,                                                       except share data)   Current Assets:      Cash and cash equivalents                   $74,516           $96,088      Restricted cash                               1,658             1,972      Accounts receivable, net of       allowances for doubtful accounts       of $634 and $558 for 2007 and 2006,       respectively                                35,973            43,677      Current portion of long-term receivable         385             1,933      Inventories, net                              8,451             8,684      Prepaid expenses and other current assets    17,966            15,850      Current assets, discontinued operations         416               946           Total Current Assets                   139,365           169,150   Restricted cash                                 23,849            22,390   Property, plant and equipment, net              56,770            59,219   Long-term receivable                             4,166             4,078   Goodwill                                           -               2,382   Intangible assets                               54,886            58,164   Deferred income taxes                            2,520             2,943   Other assets                                     6,329             5,910    TOTAL ASSETS                                 $287,885          $324,236    LIABILITIES AND STOCKHOLDERS' EQUITY   Current Liabilities:      Accounts payable                            $28,597           $30,233      Accrued and other liabilities                32,263            35,799      Income taxes payable                          1,591            13,981      Deferred income taxes                           267               262      Loans from employees                          1,159             1,250      Current portion of long-term debt            22,258            22,157      Accrued liabilities, discontinued       operations                                     986             5,594           Total Current Liabilities               87,121           109,276   Other non-current liabilities                    9,090             4,151   Loans from employees                             3,135             4,216   Long-term debt                                  30,954            43,959   Pension and other defined benefit obligations   37,438            35,774   Deferred income taxes                            8,827             8,663           Total Liabilities                      176,565           206,039   Minority interest in subsidiary company          5,850             5,412   Commitments and contingencies   Stockholders' Equity:      Preferred stock, $.01 par value;       authorized: 5,000,000 shares, no       shares issued and outstanding                  -                 -      Common stock, $.02 par value;       authorized: 200,000,000 shares,       issued and outstanding: 2007 --       70,123,180 shares; 2006 --       69,325,780 shares                            1,402             1,387      Additional paid in capital                  369,762           368,493      Accumulated deficit                        (268,212)         (258,199)      Other comprehensive income                    2,518             1,104           Total Stockholders' Equity             105,470           112,785   TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY    $287,885          $324,236              ENTERTAINMENT DISTRIBUTION COMPANY, INC. AND SUBSIDIARIES                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS                                   (Unaudited)                                                Three Months Ended June 30,                                                   2007              2006                                                    (In thousands, except                                                     per share amounts)   REVENUES:      Product sales                               $62,798           $54,962      Service revenues                             17,358            18,624         Total Revenues                            80,156            73,586   COST OF REVENUES:      Cost of sales                                56,227            45,689      Cost of services                             14,112            14,818         Total Cost of Revenues                    70,339            60,507   GROSS PROFIT                                     9,817            13,079   OPERATING EXPENSES:      Selling, general and administrative expense  12,244            11,468      Amortization of intangible assets             2,080             2,025         Total Operating Expenses                  14,324            13,493   OPERATING LOSS                                  (4,507)             (414)   OTHER INCOME (EXPENSE):      Interest income                               1,195             1,032      Interest expense                             (1,337)           (1,563)      Loss on currency swap, net                     (391)           (1,650)      Gain on currency transaction, net               230               633      Other gain, net                                  56                21        Total Other Income (Expense)                 (247)           (1,527)   LOSS FROM CONTINUING OPERATIONS BEFORE INCOME    TAXES, MINORITY INTEREST AND DISCONTINUED    OPERATIONS                                     (4,754)           (1,941)      Income tax provision (benefit)                  (30)            1,118      Minority Interest                               -                (114)   LOSS FROM CONTINUING OPERATIONS                 (4,724)           (2,945)   DISCONTINUED OPERATIONS, NET OF TAX:      INCOME (LOSS) FROM DISCONTINUED OPERATIONS      554            (1,883)      GAIN ON SALE OF MESSAGING BUSINESS               88               -   NET LOSS                                       $(4,082)          $(4,828)   INCOME (LOSS) PER WEIGHTED AVERAGE    COMMON SHARE (1):      Loss from continuing operations               (0.07)            (0.04)      Discontinued Operations:         Income (loss) from discontinued operations  0.01             (0.03)         Gain on sale of Messaging business           -                 -   Net loss per weighted average common share      $(0.06)           $(0.07)   INCOME (LOSS) PER DILUTED COMMON SHARE      Loss from continuing operations               (0.07)            (0.04)      Discontinued Operations         Loss from discontinued operations           0.01             (0.03)         Gain on sale of Messaging                                      -   Net loss per diluted weighted average    common share                                   $(0.06)           $(0.07)     (1) Income per weighted average common share amounts are rounded to the       nearest $.01; therefore, such rounding may impact individual amounts       presented.              ENTERTAINMENT DISTRIBUTION COMPANY, INC. AND SUBSIDIARIES                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS                                   (Unaudited)                                                  Six Months Ended June 30,                                                   2007              2006                                                    (In thousands, except                                                     per share amounts)   REVENUES:      Product sales                              $127,267          $104,653      Service revenues                             36,899            39,009         Total Revenues                           164,166           143,662   COST OF REVENUES:      Cost of sales                               113,990            90,280      Cost of services                             29,515            30,198         Total Cost of Revenues                   143,505           120,478   GROSS PROFIT                                    20,661            23,184   OPERATING EXPENSES:      Selling, general and       administrative expense                      27,476            23,193      Amortization of intangible assets             4,114             3,780         Total Operating Expenses                  31,590            26,973   OPERATING LOSS                                 (10,929)           (3,789)   OTHER INCOME (EXPENSE):      Interest income                               2,352             2,080      Interest expense                             (2,636)           (2,974)      Loss on currency swap, net                     (748)           (2,377)      Gain on currency transaction, net               339             1,046      Other gain, net                                  67                13        Total Other Income (Expense)                 (626)           (2,212)   LOSS FROM CONTINUING OPERATIONS BEFORE    INCOME TAXES, MINORITY INTEREST AND    DISCONTINUED OPERATIONS                       (11,555)           (6,001)      Income tax provision (benefit)                 (116)              855      Minority Interest                               -                (114)   LOSS FROM CONTINUING OPERATIONS                (11,439)           (6,742)   DISCONTINUED OPERATIONS, NET OF TAX:      INCOME (LOSS) FROM DISCONTINUED OPERATIONS      250            (5,008)      GAIN ON SALE OF MESSAGING BUSINESS            1,176               -   NET LOSS                                      $(10,013)         $(11,750)   INCOME (LOSS) PER WEIGHTED AVERAGE    COMMON SHARE (1):      Loss from continuing operations               (0.16)            (0.10)      Discontinued Operations:         Income (loss) from discontinued          operations                                  -               (0.07)         Gain on sale of Messaging business          0.02               -   Net loss per weighted average common share      $(0.14)           $(0.17)   INCOME (LOSS) PER DILUTED COMMON SHARE      Loss from continuing operations               (0.16)            (0.10)      Discontinued Operations         Loss from discontinued operations            -               (0.07)         Gain on sale of Messaging                   0.02               -   Net loss per diluted weighted average    common share                                   $(0.14)           $(0.17)     (1) Income per weighted average common share amounts are rounded to the       nearest $.01; therefore, such rounding may impact individual amounts       presented.              ENTERTAINMENT DISTRIBUTION COMPANY, INC. AND SUBSIDIARIES                  Summary Schedule of Non-GAAP Financial Data                            (In thousands) Unaudited    

The following summary of financial data shows the reconciliation of loss from continuing operations, as determined in accordance with accounting principles generally accepted in the United States (GAAP), to income (loss) from continuing operations and earnings before interest, taxes, and depreciation and amortization from continuing operations.

EBITDA is income (loss) from continuing operations before interest expense (income), net, income taxes, and depreciation and amortization and is presented because the Company believes that such information is commonly used in the entertainment industry as one measure of a company's operating performance. EBITDA from continuing operations is not determined in accordance with generally accepted accounting principles, it is not indicative of cash provided by operating activities, should not be used as a measure of operating income and cash flows from operations as determined under GAAP, and should not be considered in isolation or as an alternative to, or to be more meaningful than, measures of performance determined in accordance with GAAP. EBITDA, as calculated by the Company, may not be comparable to similarly titled measures reported by other companies and could be misleading unless all companies and analysts calculated EBITDA in the same manner.

                                        Three Months Ended  Six Months Ended                                              June 30,          June 30,                                           2007     2006      2007     2006    Loss from continuing operations        (4,724)  (2,945)  (11,439)  (6,742)    Income tax provision (benefit)            (30)   1,118      (116)     855   Loss on currency swap, net                391    1,650       748    2,377   Gain on currency transaction, net        (230)    (633)     (339)  (1,046)   Interest expense (income), net            142      531       284      894   Depreciation and amortization           5,385    5,134    10,653    9,879   Other gain (loss), net                    (56)     (21)      (67)     (13)    EBITDA from continuing operations        $878   $4,834     $(276)  $6,204  

First Call Analyst:
FCMN Contact:

Source: Entertainment Distribution Company, Inc.

CONTACT: Media, Jennifer Gery, or investors, Mike Smargiassi or Brad
Edwards, all of Brainerd Communicators, Inc., +1-212-986-6667, for
Entertainment Distribution Company, Inc.

Web site: http://www.edcllc.com/

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Profile: International Entertainment