K-tel International Inc. Reports Fiscal 1999 Second-Quarter Results; Company Advised It Now Meets Nasdaq National Market Listing Requirements

Business Wire, Feb 11, 1999

MINNEAPOLIS--(BUSINESS WIRE)--Feb. 10, 1999--K-tel International Inc. (Nasdaq/NM:KTEL) Wednesday reported financial results for the six months and quarter ended Dec. 31, 1998, of its fiscal year ending June 30, 1999.

Additionally, the company has been advised by Nasdaq that it now meets the requirements for continued listing on the Nasdaq National Market.

On Feb. 8, 1999, the company was notified of the decision by the Nasdaq hearing panel that the company's common stock will continue to be listed on the Nasdaq National Market as the company evidenced compliance with all requirements for continued listing.

In the company's 10-Q for the quarter ended Sept. 30, 1998, the company had reported that it received notification by Nasdaq that it failed to meet certain requirements necessary for continued listing on the Nasdaq National Market.

Net sales for the six months ended Dec. 31, 1998, were $39.8 million, compared with $48.3 million for the comparable six months of fiscal 1998. K-tel reported a net loss of $5.1 million for the first six months of fiscal 1999, or a loss of 60 cents per basic and diluted share, compared with net income of $1.6 million, or 43 cents per basic share and 40 cents per diluted share, for the six months of fiscal 1998.

Net sales for the quarter ended Dec. 31, 1998, were $21 million, compared with $23.2 million for the comparable quarter of fiscal 1998. K-tel reported a net loss of $2.0 million for the quarter ended Dec. 31, 1998, or a loss of 23 cents per basic and diluted share, compared with net income of $.4 million, or 11 cents per basic and diluted share, for the comparable quarter last year.

The company attributed a significant portion of its net sales decline in both the quarter and six-month periods to its third-party media buying operations, which were curtailed as of June 30, 1998.

Contributing to the loss for the six-month period was a $1.6 million charge incurred by the company when it discontinued marketing and distribution activities of certain marginal business lines, including its retail home video product line, and write-offs of remaining assets from its curtailed third-party media buying operations.

In addition, in the six months the company incurred a $1.2 million loss from continued investments in its e-commerce operations and a $1.3 million loss from its nonmusic consumer products group due to delayed shipments and product shortages. In the second quarter, results were also adversely impacted by e-commerce and consumer products.

Philip Kives, K-tel's CEO and chairman, stated: "I am pleased with the results of the restructuring we have made in the past few quarters which support our long-term strategic objectives. We have eliminated certain marginal business lines and we are now focusing on improving profitability and reducing costs in our core businesses.

"We continue to invest in our Internet operations while seeking to find the best combination of products and services to optimize our customer base. We have been pleased with the custom CD results on our Internet site. Our financial results this quarter show an improvement over the results for the first quarter of fiscal 1999, reflecting the improvement we had anticipated through our restructuring."

The company's president, Larry Kieves, commented: "In addition to our improved financial results in the second quarter of fiscal 1999 as compared to the first quarter the fiscal year, we are also pleased that Nasdaq has advised K-tel that we are in full compliance with Nasdaq National Market listing requirements, and our common stock will continue to be traded on this exchange."

K-tel International is a vertically integrated developer, marketer and distributor of entertainment and consumer products worldwide.

The company markets its product lines either to retailers, wholesalers, distributors or licensees throughout the world, or directly to the consumer via television and other forms of direct response media, including the company's Internet site (www.ktel.com), which was introduced on May 1, 1998. K-tel has active operations in the United States, Canada, the United Kingdom, Germany and Finland.

The statements in this news release may contain forward-looking statements relating to future results of the company (including certain projections and business trends) that are "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Actual results and performance may differ materially from expressed forward-looking statements because of certain risks and uncertainties, including, but not limited to, changes in political and economic conditions; demand for and market acceptance of new and existing products; the impact from competition for Internet content, merchandise and recorded music; dependence on strategic alliance partners, suppliers and distributors; market acceptance of the Internet for commerce and as a medium for advertising; technological changes and difficulties; availability of financing; and other risks detailed in the company's Securities and Exchange Commission filings. The company undertakes no obligation to publicly release the result of any revisions to these forward-looking statements. -0-