Dreams, Inc. (NYSE Amex: DRJ), a technology
driven, multi-channel retailer focused on the licensed sports
products industry, reported financial results for the fourth
quarter and full year ended December 31, 2011.
Q4 2011 vs. Q4 2010 Financial Highlights:
- Revenues up 24% to $75.2 million;
- E-commerce revenues up 27% to $64.6
million;
- Net income up 26% to $5.2 million or
$0.12 per share; and
- Adjusted EBITDA up 23% to $10.2
million.
Fourth Quarter 2011 Financial Results
Total revenues in the fourth quarter of 2011 increased 24% to
$75.2 million, compared to $60.7 million in the fourth quarter of
2010. This was primarily attributable to a 27% increase in
e-commerce revenues to $64.6 million. E-commerce revenues were
driven by a 27% increase in organic growth of the company’s owned
brands to $37.8 million, led by www.FansEdge.com, and Dreams’ web
syndication platform, which generated a 24% increase in revenues to
$26.8 million.
Income from operations was $9.7 million in the fourth quarter of
2011, compared to $7.9 million in the year-ago quarter. The growth
in income from operations was primarily attributable to the
aforementioned increase in e-commerce revenues.
Net income in the fourth quarter of 2011 increased 26% to $5.2
million or $0.12 per share, compared to net income of $4.1 million
or $0.10 per share in the year-ago quarter.
Adjusted EBITDA increased 23% to $10.2 million in the fourth
quarter of 2011, compared to adjusted EBITDA of $8.3 million in the
year-ago quarter (see definition and important discussion of this
non-GAAP measure, below).
Fourth Quarter 2011 Operational Highlights:
- Web syndication client portfolio
increased to 77; and
- Established a $35 million credit
facility with PNC Bank with an additional $5 million seasonal
over-advance, which expands the company’s liquidity by $12.5
million.
Full Year 2011 Financial Results
Total revenues in 2011 increased 27% to $141.7 million from
$111.4 million in 2010. This increase was primarily attributable to
a 33% increase in e-commerce revenues to $113.0 million. E-commerce
revenues were driven by a 35% increase in organic growth of the
company’s owned brands to $69.0 million, led by www.FansEdge.com,
and Dreams’ web syndication platform, which generated a 29%
increase in revenues to $44.0 million.
Income from operations was $2.8 million in 2011, compared to
$3.9 million in 2010. The decrease in income from operations was
due primarily to one-time charges associated with the settlement
and related costs of two legal cases in addition to write-offs and
expenses associated with the closure of four Field of Dreams stores
during the year. Depreciation and amortization also increased due
to the expansion of the company’s distribution capacity.
Net income in 2011 was $1.2 million or $0.03 per share, compared
to net income of $1.3 million or $0.03 per share in 2010.
Adjusted EBITDA increased 9% to $7.5 million in 2011, compared
to adjusted EBITDA of $6.9 million in 2010 (see definition and
important discussion of this non-GAAP measure, below).
Management Commentary
“2011 was another record year for Dreams and was largely driven
by our fully integrated e-commerce platform allowing our company to
take market share in the licensed sports products industry,” said
Ross Tannenbaum, president and CEO of Dreams. “In our fourth
quarter, we generated record revenue, EBITDA and net income in what
has historically been our high watermark for the year due to the
holiday shopping season. During the year, we launched 19 new web
syndication sites and nearly doubled the growth rate of our organic
revenues, led by FansEdge.com.
“As we advance through 2012, we are in a strong position to
sustain our financial and operational momentum. The proactive
investments we made in our professional talent over the past two
years will help support our robust organic growth within our owned
brands, invigorate the sales of our current web syndication
partners, as well as our pipeline of new business. In fact, I am
pleased to announce that we’ve recently entered into a partnership
with Modell’s Sporting Goods, which marks our third partnership
with a sporting goods retailer in the past four months.
“In addition to our previously reported expectations of
approximately $175 million in revenues for 2012, we are introducing
EBITDA guidance for the year. Our revenue base has reached a level
in which we are able to more effectively leverage our operating
expenses and generate meaningful profitability. This, combined with
our expectations of continued organic growth, pipeline of business,
and the culmination of significant one-time expenses in 2011, gives
us confidence in our expectations of $12-$13 million in EBITDA for
2012.”
2012 Outlook
As previously disclosed on the company’s full year 2011
pre-announcement press release issued and effective March 12, 2012,
Dreams expects fiscal year 2012 revenues to be approximately $175
million, with the e-commerce channel expected to grow 30% to $147
million. The company also expects EBITDA in 2012 to range between
$12-$13 million, representing an increase between 116%-134%.
Conference Call
Dreams will host a conference call today at 5:00 p.m. Eastern
time to discuss its results for the fourth quarter and full year
ended December 31, 2011. The company’s senior management will host
the presentation, which will be followed by a question and answer
period.
Please call the conference telephone number 5-10 minutes prior
to the start time. An operator will register your name and
organization. If you have any difficulty connecting with the
conference call, please contact Liolios Group at 949-574-3860.
Date: Thursday, March 29, 2012 Time: 5:00 p.m. Eastern time (2:00
p.m. Pacific time) Dial-In Number: 888-669-0684 International:
201-604-0469
To listen to the live Webcast, please go to
http://www.visualwebcaster.com/event.asp?id=85893. A replay of the
Webcast will be available for the next 90 days following the
conclusion of the call via Dreams’ Web site at
www.DreamsCorp.com.
Reconciliation of Non-GAAP Financial Measures
Regulation G, “Disclosure of Non-GAAP Financial Measures,” and
other provisions of the Securities Exchange Act of 1934, as
amended, define and prescribe the conditions for use of certain
non-GAAP financial information. The company provides two non-GAAP
financial measures, “EBITDA” and “adjusted EBITDA.”
The company defines EBITDA as net income before non-controlling
interest, interest, net, income tax expense, other income, and
depreciation and amortization. The company defines adjusted EBITDA
as net income before non-controlling interest, interest, net,
income tax expense, other income, depreciation and amortization,
restructuring and severance costs, impairment charges, non-cash
stock option expense, certain legal expenses, settlements and
related costs outside the normal course of business, and one-time
charges and credits. The company uses these non-GAAP financial
measures for financial and operational decision-making and as a
means to evaluate the company’s performance. In the company’s
opinion, these non-GAAP measures provide meaningful supplemental
information regarding the company’s performance. The company
believes that both management and investors benefit from referring
to these non-GAAP financial measures in assessing the company’s
performance and analyzing future periods. These non-GAAP financial
measures also facilitate management’s internal comparisons to the
company’s historical performance. The company believes these
non-GAAP financial measures are useful to investors both because
(1) they allow for greater transparency with respect to key metrics
used by management in its financial and operational decision-making
and (2) they are used by institutional investors and the analyst
community to help them analyze the health of the company’s
business.
The differences between EBITDA, adjusted EBITDA and GAAP net
income are as follows:
DREAMS, INC. AND SUBSIDIARIES RECONCILIATION OF
NET INCOME TO EBITDA AND ADJUSTED EBITDA (Unaudited)
(in thousands) Twelve
Months Ended Three Months Ended December 31, December 31, 2011 2010
2011 2010 Net Income 1,234 1,343 5,135 4,100 Non-controlling
interest (29 ) (2 ) 50 19 Interest, net 978 1,185 388 201 Income
tax expense 729 1,363 3,369 3,156 Other Income (72 ) - - -
Depreciation and amortization 2,709 1,820 708 463 EBITDA
5,549 5,709 9,650 7,939 Restructuring and severance costs 34 - - -
Impairment charges 103 - - -
Stock option expense - non-cash
82 - 30 - Certain legal expenses 508 100 51 - Settlements and
related costs 1,090 25 495 - One-time charges and credits 144
1,075 - 405 Adjusted EBITDA 7,510 6,909
10,226 8,344
About Dreams, Inc.
Dreams, Inc. (NYSE Amex: DRJ) is a technology driven,
multi-channel retailer focused on the sports licensed products
industry. For more information, please visit
www.DreamsCorp.com.
Important Cautions Regarding Forward Looking
Statements
Statements contained in this press release, which are not
historical facts, are forward-looking statements. The
forward-looking statements in this press release are made pursuant
to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Such forward-looking statements involve known
and unknown risks, uncertainties and other factors which may cause
the actual results, performance or achievements of the company to
be materially different from any future results, performance or
achievements expressed or implied by such forward-looking
statements. Such statements are indicated by words or phrases such
as “anticipates,” “projects,” “management believes,” “Dreams
believes,” “intends,” “expects,” and similar words or phrases.
Forward looking statements made in the press release include, but
are not limited to, statements made by Mr. Tannenbaum regarding the
future activities and growth of the company, including that the
company expects fiscal year 2012 revenues to be approximately $175
million, with the e-commerce channel expected to grow 30% to $147
million, and that the company also expects EBITDA for fiscal year
2012 to range between $12-$13 million, which represents an increase
between 116%-134% over 2011. Such factors include, among others,
the following: competition; seasonality; success of operating
initiatives; new product development and introduction schedules;
acceptance of new product offerings; franchise sales; advertising
and promotional efforts; adverse publicity; expansion of the
franchise chain; availability, locations and terms of sites for
franchise development; changes in business strategy or development
plans; availability and terms of capital including the continuing
availability of our credit facility with PNC Bank or a similar
facility with another financial institution; labor and employee
benefit costs; changes in government regulations; and other factors
particular to the company.
DREAMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
December 31,2011
December 31,2010
ASSETS
Current assets: Cash $ 1,860 $ 440 Accounts receivable, net 11,590
9,898 Notes receivable, current 131 - Inventories 44,695 32,609
Prepaid expenses and other current assets 3,060 2,166 Deferred tax
asset 1,396 1,340 Total current
assets 62,732 46,453 Property and equipment, net 6,795 5,538
Deferred loan costs 185 234 Notes Receivable 121 - Goodwill, net
8,650 8,650 Other intangible assets, net 5,738 5,821 Other assets
9 9 Total Assets $ 84,230
$ 66,705
LIABILITIES AND
STOCKHOLDERS’ EQUITY
Current liabilities: Accounts payable $ 18,886 $ 14,477 Accrued
liabilities 9,818 9,264 Current portion of long-term debt 275 323
Borrowings against line of credit 10,500 1,128 Capital lease
obligation, current 445 - Deferred credits 1,897
1,622 Total current liabilities 41,821 26,814
Long-term debt, less current portion 1,418 1,694 Capital lease
obligation 698 168 Long-term deferred tax liability 3,581
2,887 Total Liabilities $ 47,518
$ 31,563 Stockholders’ equity: Preferred stock
authorized 10,000,000 shares; issued and 0 outstanding shares as of
December 31, 2011 and December 31, 2010. — — Common stock and
additional paid-in capital, no par value; authorized 100,000,000,
and 100,000,000 shares; issued and outstanding 44,662,579 and
44,107,464 shares as of December 31, 2011, and December 31, 2010,
respectively. 44,179 43,814 Treasury stock 38,400 issued as of
December 31, 2011 and December 31, 2010. (46 ) (46 ) Accumulated
deficit (7,354 ) (8,588 ) Non-controlling interest in subsidiaries
(67 ) (38 ) Total stockholders’ equity
36,712 35,142 Total liabilities and
stockholders’ equity $ 84,230 $ 66,705
DREAMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
OPERATIONS
(In thousands, except share and earnings
per share amounts)
Year endedDecember 31,2011 Year
endedDecember 31,2010 Revenues:
Manufacturing/Distribution $ 10,807 $ 11,107 Retail 130,697 99,798
Other—Fees 216 458 Total
Revenues $ 141,720 $ 111,363 Expenses: Cost of
sales—manufacturing/distribution $ 6,232 $ 6,543 Cost of
sales—retail 69,803 53,172 Operating expenses 60,136 45,939
Depreciation and amortization 2,709 1,820
Total Expenses $ 138,880 $ 107,474
Income from operations $ 2,840 $ 3,889 Interest (expense),
net (978 ) (1,185 ) Other (expense) / income 72
— Income before income taxes $ 1,934 $ 2,704
Provision for Income tax (expense)/benefit: Current (376 ) (295 )
Deferred (353 ) (1,068 ) Net income $ 1,205 $
1,341 Net loss attributable to non-controlling interest 29 2 Net
income attributable to Dreams, Inc. $ 1,234 $ 1,343
Basic income per share $ 0.03 $ 0.03
Basic weighted average common shares outstanding 44,610,838
40,715,535 Dilutive income per share $
0.03 $ 0.03 Potentially dilutive weighted average shares
outstanding 45,087,436 41,636,411
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