MONTREAL, March 30 /PRNewswire/ -- Grand Toys International, Inc. (Nasdaq: GRIN - news) 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 $1.5 million was utilized and a committed management team. We are in the process of recreating Grand Toys, transforming it into a company more in control of its destiny. While 2000 looks to be a transitional year as we work to replace our lost Furby revenue, we expect proprietary products to represent a growing portion of our revenue as we execute on our stated strategy.''
Founded in 1960, Grand Toys International, Inc. is a premier licensee and distributor of a wide variety of toys and ancillary items in Canada and since January 1999, a supplier of proprietary products in the United States.
This news release contains certain forward-looking statements, including estimates for sales and potential benefits from the Company's acquisition strategy, which are within the meaning of the Private Securities Litigation Reform Act of 1995, and are subject to risk and uncertainties that could cause actual results to differ materially. Such risks and uncertainties include, but are not limited to, those related to business conditions and the financial strength of the retail industry, particularly for toy and toy-related products; the level of consumer spending for such products; the effect of currency translations; the ability of the Company to successfully obtain its products from suppliers; and the success of advertising, marketing and promotional campaigns.
Note: Further information on Grand Toys International, Inc. is available through the Company's website on the World Wide Web at http://www.grand.com .
To receive additional information on Grand Toys International, Inc., via
fax, at no charge, dial 1-800-PRO-INFO and enter code GRIN.
Grand Toys International, Inc.
Financial Highlights
(in US$)
Quarter Ended Year Ended
December 31, December 31,
1999 1998 1999 1998
unaudited unaudited audited audited
Net sales $9,917,173 $14,197,365 $37,260,250 $33,177,529
Cost of goods sold 8,658,613 10,018,316 26,481,341 22,085,981
Gross profit 1,258,560 4,179,049 10,778,909 11,091,548
Operating expenses 3,523,874 4,046,715 10,195,715 9,053,676
(Gain) loss on
foreign exchange (179,544) 1,291,925 (177,982) 1,299,050
Unusual items 814,669 --- 814,669 ---
Interest expense 35,236 297,109 438,653 698,840
Depreciation and
amortization 209,476 74,077 511,404 227,041
(Loss) before
taxes (3,145,152) (1,159,591) (1,003,550) (187,059)
Income taxes
(recoverable)
payable (1,277,241) (171,738) (294,084) 131,243
Net (loss) $(1,867,910) $(987,853) $(709,466) $(318,302)
Earnings (loss)
per share, basic $(0.60) $(0.63) $(0.36) $(0.20)
Earnings (loss)
per share,
diluted $(0.60) $(0.63) $(0.36) $(0.20)
Weighted average
common shares
outstanding, basic 3,103,401 1,577,597 2,132,582 1,577,597
December 31, December 31,
1999 1998
Balance Sheet Data:
Total assets $19,118,517 $13,889,317
Working capital $10,955,614 $3,374,528
Total stockholders' equity $12,003,783 $3,961,727
SOURCE: Grand Toys International, Inc.
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