Entertainment Distribution Company Announces First Quarter 2008 Results

Entertainment Distribution Company Announces First Quarter 2008 Results

NEW YORK, May 8 /PRNewswire-FirstCall/ -- Entertainment Distribution Company, Inc. (NASDAQ:EDCI) ("EDCI"), the majority shareholder of Entertainment Distribution Company, LLC ("EDC, LLC") a global and independent provider of supply chain services to the home entertainment market, today reported first quarter financial results for the period ending March 31, 2008.

Highlights (for EDCI and its subsidiaries (the "Company") on a consolidated basis unless noted):

   -- Revenue of $83.1 million for the first quarter compared to $84.0      million for the same quarter last year.   -- Net loss of $(6.2) million, or $(0.09) per diluted share, for the first      quarter compared to net loss of $(5.9) million, or $(0.09) per diluted      share, for the first quarter of last year.   -- First quarter EBITDA from continuing operations of $2.2 million,      compared to EBITDA from continuing operations of $(1.2) million for the      same quarter last year.   -- As of March 31, 2008, total unrestricted cash and short-term      investments of $84.6 million, of which $54.1 million is held at EDCI      and $30.5 million is held at EDC, LLC.   -- As of March 31, 2008, total long-term debt of $46.9 million, net of      unamortized discount.    

Jordan M. Copland, Interim Chief Executive Officer and Chief Financial Officer of EDCI, stated, "During the first quarter, we effectively executed on our operating strategy. While we faced a difficult business environment as a result of industry and macro economic challenges, our operating performance was slightly ahead of plan. We benefited from the elimination of several non-recurring expenses and made solid strides in our efficiency and cost containment efforts, which are reflected in our improved gross profit and EBITDA results. We are proactively managing our business to ensure we have the proper infrastructure to service our customers and maximize our cash flow generation. EDCI continues to review strategic acquisition opportunities."

Conference Call

The Company will host a conference call to discuss its first quarter 2008 financial results today at 4:30 p.m. ET. To access the conference call, please dial 973-582-2854 and reference pass code 45500254. A live webcast of the conference call will also be available on the Company's corporate Web site, located at www.edcllc.com. A replay of the conference call will be available through midnight ET on Thursday, May 15, 2008. The replay can be accessed by dialing 706-645-9291. The pass code for the replay is 45500254.

Summary of First Quarter 2008

For the first quarter of 2008, the Company reported revenue of $83.1 million compared to $84.0 million for the first quarter of 2007. The decrease is primarily attributable to a decline in volumes from our U.S. operations, offset by the impact of favorable exchange rate fluctuations.

The Company had EBITDA from continuing operations of $2.2 million in the first quarter of 2008, as compared to EBITDA from continuing operations of $(1.2) million in the first quarter of 2007. EBITDA is a non-GAAP financial measure. A reconciliation between EBITDA and the most directly comparable GAAP financial measure is provided following the Consolidated Financial Statements included in this release. The reconciliation also includes a description of how the Company calculates EBITDA. EBITDA from continuing operations in the first quarter of 2007 included approximately $1.9 million of non-recurring costs associated with stock option investigation and litigation legal expenses and consulting costs.

The Company reported a net loss from continuing operations of $(7.4) million for the first quarter of 2008, or $(0.11) per diluted share. This compares to a net loss from continuing operations of $(6.7) million, or $(0.10) per diluted share, for the first quarter of 2007.

For the first quarter, the Company reported net loss of $(6.2) million, or ($0.09) per diluted share, which compares to net loss $(5.9) million, or $(0.09) per diluted share, for the first quarter of 2007.

Guidance

The Company is reconfirming its previously issued guidance for the full-year 2008. For 2008 the Company expects EBITDA to be at the same level or slightly higher than 2007 EBITDA. The Company's guidance assumes global industry decline rates for the full-year to be approximately 10%-12%. In addition, this guidance is largely based on the current release schedules from customers and the Company's expectation that current cost initiatives will deliver savings of approximately $10 million in 2008. Any changes in these assumptions could materially impact the Company's expectations.

About Entertainment Distribution Company

Entertainment Distribution Company, Inc. (NASDAQ:EDCI) is the majority shareholder of Entertainment Distribution Company, LLC ("EDC, LLC"), a global and independent provider of supply chain services to the home entertainment market. EDC, LLC 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, LLC'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, as amended. These factors include, but are not limited to restructuring activities; potential intellectual property infringement claims; potential acquisitions and strategic investments; volatility of stock price; ability to attract and retain key personnel; competition; variability of quarterly results and dependence on key customers; potential market changes resulting from rapid technological advances; proprietary technology; potential changes in government regulation; international business risks; continuation and expansion of third party agreements; sensitivity to economic trends and customer preferences; increased costs or shortages of raw materials or energy; dependence on Universal Music Group; potential inability to manage successful production; advances in technology and changes in customer demands; variability in production levels; and development of digital distribution alternatives including copying and distribution of music and video files. 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 STATEMENTS OF OPERATIONS                                  (Unaudited)                                                 Three Months Ended March 31,                                                     2008           2007                                                   (In thousands, except per                                                        share amounts)   REVENUES:      Product revenues                              $62,328        $64,469      Service revenues                               20,802         19,541         Total Revenues                              83,130         84,010   COST OF REVENUES:      Cost of product revenues                       56,203         57,763      Cost of service revenues                       15,690         15,403         Total Cost of Revenues                      71,893         73,166   GROSS PROFIT                                      11,237         10,844   OPERATING EXPENSES:      Selling, general and administrative expense    12,727         15,232      Amortization of intangible assets               2,383          2,034         Total Operating Expenses                    15,110         17,266   OPERATING LOSS                                    (3,873)        (6,422)   OTHER INCOME (EXPENSE):      Interest income                                 1,112          1,157      Interest expense                               (1,119)        (1,299)      Loss on currency swap, net                     (2,625)          (357)      Gain (loss) on currency transaction, net         (561)           109      Other income, net                                  12             11        Total Other Income (Expense)                 (3,181)          (379)   LOSS FROM CONTINUING OPERATIONS BEFORE INCOME      TAXES AND MINORITY INTEREST                    (7,054)        (6,801)      Income tax expense (benefit)                      483            (86)      Minority interest income                         (150)             -   LOSS FROM CONTINUING OPERATIONS                   (7,387)        (6,715)   DISCONTINUED OPERATIONS, NET OF TAX:      INCOME (LOSS) FROM DISCONTINUED OPERATIONS      1,167           (304)      GAIN ON SALE OF MESSAGING BUSINESS                  -          1,088   NET LOSS                                         $(6,220)       $(5,931)   LOSS PER WEIGHTED AVERAGE COMMON SHARE (1):   Loss from continuing operations                    (0.11)         (0.10)      Discontinued Operations:         Income (loss) from discontinued operations    0.02              -         Gain on sale of Messaging business               -           0.02   Net loss per weighted average common share        $(0.09)        $(0.09)   LOSS PER DILUTED COMMON SHARE   Loss from continuing operations                    (0.11)         (0.10)      Discontinued Operation:         Income (loss) from discontinued operations    0.02              -         Gain on sale of Messaging business               -           0.02   Net loss per diluted weighted average    common share                                     $(0.09)        $(0.09)    (1)  Loss 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 BALANCE SHEETS                                                       March 31,   December 31,                                                       2008          2007                                                   (unaudited)                                            (In thousands, except share data)                                   ASSETS   Current Assets:      Cash and cash equivalents                       $63,200     $63,850      Restricted cash                                   2,003       1,940      Investments                                      21,401      29,589      Accounts receivable, net of allowances for       doubtful accounts of $3,873 and $3,328 for       2008 and 2007, respectively                     29,913      35,577      Current portion of long-term receivable             477         515      Inventories, net                                  7,981       9,111      Prepaid expenses and other current assets        19,381      16,180      Deferred income taxes                               287         277           Total Current Assets                       144,643     157,039   Restricted cash                                     27,540      26,015   Property, plant and equipment, net                  54,350      55,245   Long-term receivable                                 4,471       4,244   Intangible assets                                   44,691      44,604   Deferred income taxes                                1,817       1,934   Other assets                                         7,191       6,940    TOTAL ASSETS                                     $284,703    $296,021                     LIABILITIES AND STOCKHOLDERS' EQUITY    Current Liabilities:      Accounts payable                                $25,963     $33,287      Accrued expenses and other liabilities           35,313      37,503      Income taxes payable                                193       3,697      Deferred income taxes                               126         126      Loans from employees                              1,281       1,267      Current portion of long-term debt                25,143      24,364           Total Current Liabilities                   88,019     100,244   Other non-current liabilities                       13,677      12,185   Loans from employees                                 2,628       3,646   Long-term debt                                      21,726      21,589   Pension and other defined benefit obligations       39,315      36,155   Deferred income taxes                               10,766      10,195           Total Liabilities                          176,131     184,014   Minority interest in subsidiary company              5,621       5,771   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:   March 31, 2008 -- 70,158,052 shares; December    31, 2007 -- 70,155,940 shares                       1,403       1,403      Additional paid in capital                      369,705     369,665      Accumulated deficit                            (279,553)   (273,333)      Accumulated other comprehensive income           12,071       8,501      Treasury stock at cost: March 31, 2008 --      1,500,000 shares; December      31, 2007 -- 0 shares                               (675)          -           Total Stockholders' Equity                 102,951     106,236   TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY        $284,703    $296,021                      Entertainment Distribution Company, Inc.                  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 EBITDA from continuing operations, a non-GAAP measure.

EBITDA is defined as 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                                                     March 31,                                             2008                2007    Loss from continuing operations         (7,387)             (6,715)    Income tax provision (benefit)             483                 (86)   Loss on currency swap, net               2,625                 357   (Gain) loss on currency     transaction, net                         561                (109)   Interest expense, net                        7                 142   Depreciation and amortization            5,882               5,268   Other income, net                          (12)                (11)    EBITDA from continuing operations       $2,159             $(1,154)  

Source: Entertainment Distribution Company, Inc.

CONTACT: Media, Jennifer Gery, or investors, Mike Smargiassi, or Dianne
Pascarella, 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