Quarterly Shareholders Conference Call
February 11, 2016, 01:00 PM ET
Haig Bagerdjian - Chairman, President and CEO
Alan Steel - Chief Financial Officer
Good day, everyone. And welcome to today's Quarterly Shareholders Conference Call. At this time participants are in a listen-only mode. Later you will have the opportunity ask questions, during the question-and-answer session. [Operator Instructions] Please note this call is being recorded.
It is now my pleasure to turn today’s program over to Haig Bagerdjian. Please go ahead sir.
Thank you. Good morning. And thank you for joining us today. With me is Alan Steel, our Chief Financial Officer. Before we answer any questions, you may have regarding the press release, I will ask Alan to discuss forward-looking statements and to briefly review the numbers that were released this morning. Then, I will make few comments, and we'll open the lines for your questions. Alan?
Thanks, Haig. Certain statements in this conference call may contain forward-looking statements concerning the company’s projected revenues, earnings and cash flow, the planned focus on internal and external growth, new markets, sales initiatives, steps to reduce costs, improving customer service, and new business. Now such statements are inherently subject to known and unknown risks, uncertainties, and other factors that may cause actual results to be materially different from those expected or anticipated in the forward-looking statements.
In addition to the factors described in the company’s SEC filings, the following among others could cause actual results to differ materially from those expressed in this conference. Lower-than-expected new sales, operating income and earnings; less-than-expected growth; actions of competitors including business combinations, technological breakthroughs, new product offerings and promotional successes; the risks that anticipated new business may not occur or will be delayed and general economic conditions that may adversely impact our business.
Hopefully, all of you have had a chance to see the press release, so I’ll only cover a few items. Sales for the second quarter were $9.7 million and for the first half of the fiscal – of fiscal 2016 were $20.5 million, each of those numbers is about double that of the prior year due to the July, 2015 acquisition of Modern VideoFilm.
The quarter in six months variations in gross margin was due to continuing improvement in Point.360, offset by a lower margin associated with Modern. Modern margins were affected by some costs which have since been eliminated and Haig will talk more about these in a minute.
From a financial reporting perspective, the acquisition of Modern's assets were treated as a bargain purchase. This is the result of the appraised value of the purchased assets being greater than the appraised fair value of the stock and warrants paid for those assets. Bottom line, we reported net income for the six month period of $3.1 million. Haig?
Thank you, Alan. As Alan mentioned, our quarterly revenues were $9.7 million in the second quarter of fiscal 2016, compared to $5.5 million in the same period last year. $4.2 million of the increase was due to addition of Modern VideoFilm operations which were acquired in early July.
For the six months period Modern accounted for $9.4 million of the total increase of $10 million over the same period last year. Since the Modern purchase, we have concentrated on the integration of Point.360 and Modern facilities, personnel, administration and customer relations.
We continue to evaluate work processes and deployment of acquired assets. So far on annualized basis we have eliminated $3.2 million of rent and about $5 million personal related cost.
Modern's footprint has been reduced from 138,000 square foot to 38,000 square foot and are currently consolidating some light operations in Point.360 to other facility. The later is expected to be completed this summer. Operating losses in a three and six month’s period relating to those efforts.
The statement of operations also includes $6.8 million of income which represents for the positive difference between a fair market value of the purchase amount on assets and the stock and warrants given up for the assets. Including the gain, net income for the first half of fiscal 2016 was $3.1 million.
Operator, you can open the line for question-and-answer session.
Thank you, everyone that is online and those of you that are going to listen later, the recording will be on our website, Alan, for how long?
So, we will have it for 90 days and those of you who want to make comment and call us on a ride, please feel free. Thank you very much and have a good day.
This does conclude today's program. Thank you for your participation. You may disconnect at any time.
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