Celebrate Express, Inc. Announces Fourth Quarter and Full Year
Fiscal 2005 Results KIRKLAND, Wash., July 25 /PRNewswire-FirstCall/
-- Celebrate Express, Inc. (NASDAQ:BDAY), a leading online and
catalog retailer of celebration products for families, today
reported financial results for its fourth quarter and full year
fiscal 2005 ended May 31, 2005. Celebrate Express reported net
sales of $19.5 million in the fourth quarter of fiscal 2005 ended
May 31, 2005, an increase of 25% from net sales of $15.6 million
during the same period last year. Net income before income taxes
was $1.7 million for the fourth quarter of fiscal 2005, an increase
of 127% from $732,000 for the fourth quarter of fiscal 2004. Net
income for the fourth quarter of fiscal 2005 was $1.0 million, or
$0.13 per diluted share, compared with net income of $9.7 million,
or $1.86 per diluted share in the fourth quarter of fiscal 2004.
Net income for the fourth quarters of fiscal 2005 and 2004 are not
directly comparable as a result of the accounting for income taxes.
Net income for the fourth quarter of fiscal 2005 included income
tax expense of $621,000. Net income for the fourth quarter of
fiscal 2004 included an income tax benefit of $9.0 million due to
the reversal of the valuation allowance against the deferred tax
asset in May 2004. Weighted average diluted shares outstanding were
8.0 million for the fourth quarter of fiscal 2005, compared with
5.2 million for the fourth quarter of fiscal 2004. For the fiscal
year ended May 31, 2005, net sales increased 33% to $69.1 million
from $51.9 million for the prior fiscal year. Net income before
income taxes was $4.0 million for the fiscal year ended May 31,
2005, an increase of 728% from $480,000 for the fiscal year ended
May 31, 2004. For the year just ended, net income was $2.5 million,
or $0.35 per diluted share, compared with net income of $9.5
million or $1.85 per diluted share for fiscal 2004. Net income for
fiscal years 2005 and 2004 are not directly comparable as a result
of the accounting for income taxes. Net income for fiscal 2005
included income tax expense of $1.5 million. Net income for fiscal
2004 included an income tax benefit of $9.0 million due to the
reversal of the valuation allowance against the deferred tax asset
in May 2004. Weighted average diluted shares outstanding were 7.0
million for fiscal 2005, compared with 5.1 million for fiscal 2004.
During fiscal 2005, the Company attracted approximately 415,000 new
customers, while revenue from repeat customers represented
approximately 51% of corporate revenue. In addition, net sales per
order increased 4.2% from the previous year due primarily to
expanded merchandising efforts. The company increased its selling
and marketing expenses by 30.8% in fiscal 2005 from fiscal 2004,
including increased on-line and catalog marketing efforts, which
contributed to the growth in net sales. Mike Jewell, chief
executive officer of Celebrate Express, stated, "We are excited
about the progress that we have made this year including our 33%
year- over-year increase in sales and our 200% increase in
operating profits. Our customers have responded positively as we
continue to expand our proprietary and exclusive product offerings,
as well as provide the most complete solutions for their
celebration needs." In the fourth quarter of fiscal 2005 gross
margin improved to 51.7% of net revenue, up from 49.2% in the
fourth quarter of fiscal 2004. For fiscal 2005, gross margin was
50.8%, up from 48.8% in fiscal 2004. The year-over-year
improvements in gross margin percentage for both the most recent
quarter and fiscal year are due primarily to increases in the
percentage of the Company's revenue coming from proprietary
products, as well as leverage of fixed design and production costs
included in gross margin. For the fourth quarter of fiscal 2005,
fulfillment costs decreased to 11.7% of net sales, compared with
12.1% in the same period last year. The decrease in fulfillment
costs is due primarily to a reduction of labor-related costs as a
percentage of revenue. General and administrative costs increased
to 9.1% of net sales for the quarter just ended, up from 7.8% in
the same quarter last year, due primarily to increased headcount in
the technology and administrative areas, as well as costs related
to operating as a public company. Selling and marketing costs
increased to 23.5% of net sales for the quarter just ended, up from
22.4% in the same quarter last year, remaining within the expected
range of 23% to 25% of net sales. The change as a percentage of net
sales is due primarily to increases in our direct marketing
expenses as a percentage of revenue. For the fiscal year ended May
31, 2005, fulfillment costs decreased to 11.6% of net sales
compared with 12.8% during fiscal 2004. The decrease in fulfillment
costs is due primarily to a reduction of labor-related costs as a
percentage of revenue. General and administrative costs increased
to 9.4% in fiscal 2005, up from 8.9% in fiscal 2004, primarily due
to increased headcount in the technology and administrative areas
and costs related to operating as a public company. Selling and
marketing costs decreased to 24.3% of net sales in the fiscal year
just ended, compared with 24.7% in fiscal 2004. This decrease as a
percentage of net sales is due primarily to leverage of personnel
and other fixed costs associated with our internal corporate
marketing and creative departments. Mr. Jewell added, "Looking
forward to fiscal 2006, we will continue to focus on providing our
customers with the most complete and convenient solutions for their
celebration needs. As we consider the growing needs of our
customers, we plan to expand our selection to include additional
celebration brands to further leverage our database and our
infrastructure." The Company has recently made a strategic decision
to re-focus its Storybook Heirlooms brand going forward with less
emphasis on sportswear and everyday clothing and more emphasis on
special occasion girls' apparel. The Company intends to continue to
evaluate its Storybook Heirlooms' merchandising and creative
efforts with the objective of strengthening the financial
performance of the brand. "We are excited about concentrating our
efforts on the special occasion, celebration focused apparel
market, which was the original foundation of the Storybook
Heirlooms brand," said Mr. Jewell. "Our goal is to strengthen this
brand's point of difference in the marketplace." As a result of
this strategic change, the Company has severed its employment
relationship with its chief marketing and merchandising officer,
Lori Liddle, as well as two other personnel in merchandising and
creative, effective July 22, 2005. Mr. Jewell continued, "Lori
Liddle has made a valuable contribution to Celebrate Express over
the past two years. We wish her all the best in her future
endeavors." Other Highlights -- Gross margin for the fourth quarter
of fiscal 2005 was $10.1 million, compared with $7.7 million in the
fourth quarter of fiscal 2004, an increase of 32%. -- Revenue from
the Company's websites represented approximately 64% of total net
sales in the fourth quarter of fiscal 2005, up from 57% in the
fourth quarter of fiscal 2004. -- In the fourth quarter of fiscal
2005, revenue from the Birthday Express brand grew 30% and revenue
from the Storybook Heirlooms brand was down 0.5%, compared with the
fourth quarter of fiscal 2004. -- The Company shipped 851,000
orders during fiscal 2005, an increase of 28% from 666,000 orders
shipped in fiscal 2004. -- Cash and marketable securities were
$30.8 million, and the Company had no bank debt at May 31, 2005. --
The Company added 20 new proprietary party themes to its offering
during fiscal 2005, bringing the total proprietary and third party
theme offering to 125 at May 31, 2005. Financial Guidance The
following forward-looking statements reflect Celebrate Express'
expectations as of July 25, 2005. Actual results may be materially
affected by many factors, such as consumer spending, economic
conditions and numerous other factors. See Forward-Looking
Statements below. Management's expectations for the full fiscal
year ending May 31, 2006: -- Net Sales are expected to be between
$84 million and $87 million. -- Net income is expected to be in a
range of $0.55 to $0.59 per diluted share. -- Weighted average
diluted shares outstanding are expected to be approximately 8.1
million. Conference Call Company management will be holding a
conference call to discuss financial results for its fourth quarter
and full year fiscal 2005 on Monday July 25, 2005 at 4:30 p.m. ET/
1:30 p.m. PT. The conference call will be broadcast via live
webcast and may be accessed at
http://investor.celebrateexpress.com/ . Listeners may also access
the call by dialing 1-866-800-8652 and entering password 34410680.
A replay of the call will be available for 30 days by dialing
1-888-286-8010, password 43576104. Forward-looking Statements This
press release contains forward-looking statements, including,
without limitation, all statements related to plans, future events
and financial performance. Forward-looking statements are
identifiable by words such as "believe," "anticipate," "expect,"
"intend," "plan," "will," "may" and other similar expressions. In
addition, any statements that refer to expectations, projections or
other characterizations of future events or circumstances are
forward-looking statements. Forward-looking statements involve
risks and uncertainties, which could cause actual results to vary
materially from those expressed in or indicated by the
forward-looking statements. Our actual results and timing of events
could differ materially, including demand for our products, our
ability to manage our costs and fulfill orders, competition from
other retailers, the strength of our brands, and other risks
detailed in our filings with the Securities and Exchange
Commission, including our Quarterly Report on Form 10-Q for the
quarterly period ended February 28, 2005 and the prospectus with
respect to our initial public offering filed pursuant to Rule
424(b)(4) on October 20, 2004. You are cautioned not to place undue
reliance on these forward-looking statements, which reflect only an
analysis and speak only as of the date of this press release.
Celebrate Express undertakes no obligation to revise or update any
forward-looking statements to reflect events or circumstances after
the date hereof. About Celebrate Express, Inc. Celebrate Express is
a leading online and catalog retailer of celebration products
serving families with young children. The Company currently
operates three brands: Birthday Express markets children's party
products, Storybook Heirlooms markets girls' special occasion
apparel and accessories, and Costume Express markets children's
costumes and accessories. The Company utilizes its branded
websites, BirthdayExpress.com, Storybook.com and
CostumeExpress.com, complemented by its branded catalogs to offer
products as complete coordinated solutions. The Company's goal is
to help busy parents celebrate the special moments in their
children's lives. For more information, please visit
http://www.celebrateexpress.com/. CONTACT: Celebrate Express, Inc.
Darin White (Investor Relations), 425-250-1064, ext. 186 or Katie
Manning (Media Relations), 425-250-1064, ext. 136 CELEBRATE
EXPRESS, INC. CONDENSED BALANCE SHEETS (unaudited) (in thousands)
May 31, May 31, 2005 2004 ASSETS Current assets: Cash and cash
equivalents $30,769 $2,243 Accounts receivable 213 169 Inventories
8,396 5,926 Prepaid expenses 3,461 1,950 Deferred income taxes 293
266 Total current assets 43,132 10,554 Fixed assets, net $2,517
$962 Deferred income taxes 7,231 8,747 Other assets, net 177 219
Total assets $53,057 $20,482 LIABILITIES AND SHAREHOLDERS' EQUITY
(DEFICIT) Current liabilities: Accounts payable $2,969 $3,030
Accrued liabilities 2,071 1,447 Current portion of long term debt
and capital leases 17 35 Total current liabilities 5,057 4,512
Long-term debt and capital lease obligations -- 4,953 Mandatorily
redeemable convertible preferred stock, -- 28,044 Mandatorily
redeemable convertible preferred stock warrants -- 1,057
Shareholders' equity (deficit): Common stock and additional
paid-in-capital 64,337 879 Contributed capital - common stock
warrants -- 66 Unearned compensation (727) (934) Accumulated
deficit (15,610) (18,095) Total shareholders' equity (deficit)
48,000 (18,084) Total liabilities and shareholders' equity
(deficit) $53,057 $20,482 CELEBRATE EXPRESS, INC. CONDENSED
STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except per
share data) Three months Ended Years Ended May 31, May 31, May 31,
May 31, 2005 2004 2005 2004 Net sales $19,541 $15,619 $69,138
$51,939 Cost of sales 9,438 7,942 33,987 26,574 Gross margin 10,103
7,677 35,151 25,365 Operating expenses: Fulfillment 2,291 1,893
8,039 6,627 Selling and marketing 4,596 3,499 16,787 12,834 General
and administrative 1,771 1,223 6,482 4,636 Total operating expenses
8,658 6,615 31,308 24,097 Income from operations 1,445 1,062 3,843
1,268 Other income (expense), net: Interest income (expense), net
214 (330) 131 (788) Net income before income taxes 1,659 732 3,974
480 Income tax (expense) benefit (621) 9,013 (1,489) 9,013 Net
income 1,038 9,745 2,485 9,493 Accretion to preferred stock
redemption value -- (66) (102) (266) Net income available for
common shareholders' $1,038 $9,679 $2,383 $9,227 Net income per
share: Basic $0.14 $6.27 $0.46 $6.39 Diluted $0.13 $1.86 $0.35
$1.85 Weighted average shares outstanding: Basic 7,478 1,544 5,152
1,445 Diluted 7,999 5,234 7,027 5,127 CELEBRATE EXPRESS, INC.
CONDENSED STATEMENTS OF CASH FLOWS (unaudited) (in thousands) Years
Ended May 31, May 31, 2005 2004 Cash flows from operating
activities: Net income $2,485 $9,492 Adjustments to reconcile net
income to net cash provided by operating activities: Deferred
income taxes 1,489 (9,013) Depreciation and amortization 709 743
Noncash compensation expense-stock options 295 123 Amortization of
deferred financing costs 24 -- Accretion of debt discount 70 302
Changes in operating assets and liabilities: Accounts receivable
(45) (30) Inventories (2,470) (1,807) Prepaid expenses and other
assets (1,511) (252) Accounts payable (62) 1,167 Accrued
liabilities 625 433 Net cash provided by operating activities 1,609
1,158 Cash flows from investing activities: Payments for purchases
of fixed assets (2,247) (564) Purchase of marketable securities
(61,050) -- Sales/maturities of marketable securities 61,050 -- Net
cash used in investing activities (2,247) (564) Cash flows from
financing activities: Principal payments on capital lease
obligations (35) (39) Borrowings on notes payable -- 1,667
Principal payments on notes payable (5,000) (1,667) Net proceeds
from sale of common stock, net of issuance costs 34,012 -- Issuance
of mandatorily redeemable convertible preferred stock-net of
issuance costs -- 1 Employee stock purchase plan shares issued 105
-- Proceeds from exercise of stock options 82 15 Net cash provided
by/(used in) financing activities 29,164 (23) Net increase in cash
and cash equivalents 28,526 571 Cash and cash equivalents:
Beginning of year 2,243 1,672 End of year $30,769 $2,243
DATASOURCE: Celebrate Express, Inc. CONTACT: Darin White, Investor
Relations, +1-425-250-1064, ext. 186, or , or Katie Manning, Media
Relations, +1-425-250-1064, ext. 136, or , both of Celebrate
Express, Inc. Web site: http://www.celebrateexpress.com/
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