Sierra On-Line reports 53 percent growth in revenues

Business Wire, Jan 30, 1996

BELLEVUE, Wash.--(BUSINESS WIRE)--Jan. 30, 1996--Sierra On-Line Inc. (NASDAQ:SIER) today announced its results of operations for the three and nine months ended Dec. 31, 1995.

As a result of the company's acquisitions, all numbers have been restated in accordance with the pooling-of-interests method of accounting for business combinations.

Revenues increased 53 percent during the third quarter to $63.2 million, as compared to $41.2 million in the prior-year quarter. Net income was $12.3 million, or 58 cents per share, for the quarter ended Dec. 31, 1995. On a comparable basis, the company earned $3.6 million, or 19 cents per share, for the same period last year.

The prior-year amounts exclude the gain of $14.2 million from the sale of Sierra's remaining equity interest in The ImagiNation Network. Including the gain recognized on the sale of The ImagiNation Network, the company earned $17.8 million, or 97 cents per share, during the prior-year quarter.

For the nine months ended Dec. 31, 1995, revenue increased 62 percent to $122.6 million from $75.7 million in the prior-year period. Net income was $16.7 million, or 80 cents per share, for the nine months ended Dec. 31, 1995. On a comparable basis, the company earned $.2 million, or 1 cent per share, for the same period last year. The prior-year amounts exclude the negative results of operations and gain from the sale of Sierra's remaining equity interest in The ImagiNation Network. Including these amounts, the company earned $12.3 million, or 68 cents per share, during the prior-year period.

International revenues increased over 80 percent during the third quarter ended Dec. 31, 1995, accounting for approximately 31 percent of Sierra's net revenues as compared to 25 percent in the prior-year quarter. Strong international market growth and efficient localization development capabilities contributed to the increase.

The company's gross profit margin was 72 percent during the third quarter as compared to 60 percent during the prior-year quarter. The improvement is due primarily to a reduction in amortization of capitalized software expense.

The company released 15 new products during the third quarter, including: Shivers, Police Quest 5:SWAT, Torin's Passage, Gabriel Knight: The Beast Within, FPS: Football '96, Trophy Bass Fishing, Indy Car Racing II, Conqueror, Last Dynasty, Thexder, Loderunner: On-Line, Hoyles Classics 5.0, MasterCook II, MasterCook II Deluxe and MasterCook Cooking Light. CD-ROM titles represented 85 percent of the company's software revenues during the nine months ended Dec. 31, 1995, as compared to 61 percent during the same period last year.

On Nov. 30, 1995, Sierra announced the acquisition of Papyrus Design Group Inc. Papyrus, developers of the successful NASCAR Racing and Indy Car Racing series, is located in Watertown, Mass., and employs approximately 100 people primarily in research and development. Sierra's mass distribution and marketing, both domestically and overseas, should enhance the worldwide success of current and future motorsport titles.

"Sierra's successful quarter can be attributed to its quality products and first-rate internal development capabilities," said Ken Williams, chairman and CEO. "Customer feedback from our holiday lineup has been overwhelmingly positive. With four of the top 20 game titles (PC Data-December 1995), including Front Page Sports: Football '96, NASCAR Racing, Phantasmagoria and Police Quest 5: SWAT, our earnings and top-line growth are reflective of our position as the market share leader in PC entertainment.

"In addition, our productivity and education titles, particularly the MasterCook series, Print Artist 3.0 and The Lost Mind of Dr. Brain 3, did exceptionally well during the holiday season."

In its ranking of the best education software products for kids, Consumer Reports (December 1995) rated Dr. Brain the No. 1 kid's software title based on quality, educational content and entertainment value.

"Our acquisitions have played a key role in our success so far and they should continue to have a positive impact in the future," said Michael Brochu, president and COO. "More importantly, we are very pleased with the effectiveness with which we have been able to integrate these newly acquired operations to increase our overall consistent profitability."

Founded in 1979, Sierra On-Line is one of the original developers and largest worldwide publishers of interactive entertainment, educational and home productivity software. The company's corporate headquarters are located in Bellevue.

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