Prolong International Corp. Posts Q2 and Six-Month Results
11 August 1998
Prolong International Corp. Reports Second-Quarter and Six-Month Results
IRVINE, Calif.--August 11, 1998--Prolong International Corp. (AMEX:PRL) Tuesday announced results for its second quarter and first six months ended June 30, 1998.For the quarter, the company reported record second-quarter sales of $8.4 million vs. $7.0 million for the comparable period a year ago
-- the 10th consecutive increase compared with the same quarter of the prior year. Net income for the quarter was $116,000, or 1 cent per diluted share, compared with $507,000, or 2 cents per diluted share, in the second quarter a year ago.
Product sales from retail stores were $6.2 million, or 73.2 percent of total sales, for the quarter vs. $2.4 million, or 34.5 percent of total sales, for the comparable period a year ago. Direct response television infomercial (DRTV) sales were $1.4 million, or 16.5 percent of sales, in the most recent period compared with $3.6 million, or 52.2 percent of total sales, in the 1997 second quarter.
Other non-retail and international sales accounted for the balance of sales for the respective second quarters.
For the first six months of 1998, the company reported record sales of $19.2 million compared with $12.8 million for the prior year's first half. For the 1998 period, net income increased to $1.7 million from $787,000 in the first half of 1997.
For the first six months of 1998, product sales from retail stores accounted for $14.2 million, or 73.8 percent of total sales, vs. $3.8 million, or 29.5 percent of sales, during the comparable period a year ago. DRTV sales were $3.3 million, or 17.4 percent of sales, in the most recent six months compared with $7.4 million, or 58.0 percent of total sales, for the 1997 period.
Other non-retail and international sales accounted for the balance of sales in the respective six-month periods.
The company said that earnings were impacted for the quarter by increased selling, general and administrative (SG&A) expenses primarily related to the increased costs associated with its expanding retail store distribution channel.
Other increased operating expenses also included costs for the build-up of staff to handle business growth, relocation costs associated with a new facility, expenses for redesign of existing product packaging and in-store displays, costs for new product research, development and test-marketing, and sponsorship fees for new motorsports-related marketing programs.
The company reduced costs in the DRTV program by decreasing broadcast time purchased to air the "Prolong World Challenge" DRTV infomercial. The company anticipates that a new and dynamic Prolong II infomercial will air before the end of the year.
Commenting on the quarter, Prolong President and Chief Executive Officer Elton Alderman said: "We are pleased with the growth of the company and of retail store sales during the second quarter and first half of 1998. The rise in SG&A spending, which will probably remain somewhat elevated in the third quarter, is a direct result of our commitment to growth.
"These are costs associated with building a sufficient infrastructure and sales force capable of sustaining and expanding Prolong product sales in the retail store distribution channel and the cost of expanding the brand. The expenses were a necessary part of the company's business plan for 1998.
"We do not expect to sustain SG&A spending at this percentage level indefinitely. We anticipate that the elevated second and third quarter SG&A expenditures will prove to be money well spent from which the company will begin to reap benefits by the fourth quarter and into 1999," added Alderman.
On June 12, 1998, Prolong's common stock began trading on the American Stock Exchange (AMEX) under the ticker symbol PRL. Said Alderman: "We feel this is a positive step in the growth of the company. The AMEX listing provides immediate and improved liquidity for our shareholders.
"There is also tremendous value from Prolong gaining increased exposure and visibility with institutional investors throughout the financial community.
"Overall, the outlook remains positive. Retail acceptance of the Prolong Super Lubricants line of products has continued among automotive after-market consumers. We have seen demand and sell-through in retail stores remain strong, and this channel has become the dominant source of revenues.
"In addition, we believe that the wide TV exposure of the new infomercial expected to air by the end of the year will further strengthen the brand and drive top-line growth. We anticipate that the increased visibility will bolster overall marketing and advertising efforts moving into 1999," Alderman concluded.
Prolong International through its operating subsidiary, Prolong Super Lubricants, manufactures, markets and distributes a complete line of patented lubricants.
The company's products are marketed and sold under the trademarked brand name, "Prolong Super Lubricants(R)," and are used in automotive, industrial and consumer applications. Prolong products are sold throughout the United States and in selected international markets.
Certain statements in this news release that relate to financial results, projections, future plans, events or performance, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and involve significant risks and uncertainties, including but not limited to the following: competition, cost of components, product concentration and risk of declining selling prices.
The company's actual results could differ materially from those anticipated in such forward-looking statements as a result of a number of factors. These risks and uncertainties, and certain other related factors, are discussed in the company's Form 10-K, Form 10-Q and other filings with the Securities and Exchange Commission.
These forward-looking statements are made as of the date of this release, and the company assumes no obligation to update such forward-looking statements.
PROLONG INTERNATIONAL CORPORATION
Summary Consolidated Statements of Operations
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
Net sales $ 8,399,828 $ 6,987,753 $ 19,248,570 $ 12,771,842
Cost of sales 1,641,800 1,235,259 3,647,214 2,654,283
Gross profit 6,758,028 5,752,494 15,601,356 10,117,559
Selling expenses 5,158,486 4,047,077 9,899,087 7,390,318
General and
administrative
expenses 1,383,109 858,274 2,725,813 1,449,834
Other income
(expense) (7,709) 58,575 51,836 110,004
Income before taxes 208,724 905,718 3,028,292 1,387,411
Provision
for income taxes 93,000 398,705 1,306,000 600,749
Net income $ 115,724 $ 507,013 $ 1,722,292 $ 786,662
Net income per
common share
Basic $ 0.01 $ 0.02 $ 0.07 $ 0.03
Diluted $ 0.01 $ 0.02 $ 0.07 $ 0.03
Weighted average
shares
outstanding
Basic shares
outstanding 25,464,500 25,556,200 25,464,500 25,518,175
Diluted shares
outstanding 25,756,829 25,644,846 25,827,125 25,595,039
Summary Consolidated Balance Sheet
June 30, Dec. 31,
1998 1997
(unaudited) (audited)
Cash and cash equivalents $ 2,377,620 $ 6,180,983
Accounts receivable, net 5,257,834 3,880,571
Inventories, net 3,859,682 1,300,691
Other current assets 2,234,822 1,961,282
Total current assets 13,729,958 13,323,527
Total assets $17,259,325 $13,748,650
Accounts payable $ 1,935,296 $ 1,074,098
Accrued expenses 1,494,278 1,663,321
Income taxes payable 23,693 1,302,377
Total current liabilities 3,453,267 4,039,796
Notes payable non-current 2,374,912 --
Shareholders' equity 11,431,146 9,708,854
Total liability and shareholders' equity $17,259,325 $13,748,650