Prolong International Corporation Reports Second-Quarter Results
12 August 1999
Prolong International Corporation Reports Second-Quarter Results
IRVINE, Calif.--Aug. 12, 1999--Prolong International Corp. (AMEX:PRL) Thursday reported record revenues of $12.0 million for the second quarter ended June 30, 1999.Due to a variety of factors -- notably higher-than-anticipated start-up costs associated with the roll-out of the company's new line of automotive appearance products -- the company reported a loss of $1.6 million, or $0.06 per diluted share, on net sales of $12.0 million. In the second quarter of 1998, the company earned $116,000, or $0.01 per diluted share, on net sales of $8.4 million.
Gross profit as a percentage of net sales -- which was $9.0 million, or 74.8 percent of net sales, compared to gross profit of $6.8 million, or 80.5 percent of net sales, in the second quarter of 1998 -- declined primarily due to the higher cost of new packaging and to sales of automotive appearance products (approximately 32 percent of net sales); appearance products, which did not exist a year ago, yield lower gross margins than lubricants.
The increase in selling expenses -- to $9.1 million from $5.2 million in the same period a year ago -- was mainly attributable to the aforementioned start-up costs associated with the launch of the appearance products line, as well as one-time slotting fees associated with expanding the company's distribution channels.
General and administrative expenses, which were $2.2 million compared to $1.4 million in the second quarter of 1998, included higher legal expenses and one-time costs related to the design of the company's new e-commerce Web site that was launched at the end of July.
"We are certainly pleased with the record revenues achieved during the quarter," said Elton Alderman, president and chief executive officer of Prolong International. "Our success here can be credited in large part to a program that in the last year has almost doubled the number of retail outlets carrying the company's products. The expansion of this distribution system, like the launch of the new automotive appearance products line, does not come without a near-term cost, but both are vital investments in the company's long-term success."
"The biggest single factor in the disappointing bottom-line results," continued Alderman, "was the substantial increase in selling expenses relative to top-line growth, due largely to the fact that the seasonality of the automotive appearance products segment of the market dictated that we earmark substantial resources in the second quarter to the airing of the appearance products infomercial. Also a major factor in the second quarter results were substantial slotting fees that are an inherent part of any new product introduction among retail aftermarket stores."
"As announced last month," concluded Alderman, "we have taken steps to reduce selling, general and administrative expenses as a percentage of sales. The program -- which includes the more efficient purchase of television air-time; a reallocation of promotional dollars among advertising media; a review of sponsorships and motorsports promotional activities; a curtailment of legal expenses; and across-the-board reductions in corporate overhead -- will, we believe, return the company to profitability."
Prolong International , through its operating subsidiaries, manufactures, markets and distributes a complete line of patented lubricant and proprietary automotive appearance products. The company's products are marketed and sold under the 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
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
(unaudited) (unaudited) (unaudited) (unaudited)
Net sales $12,001,207 $8,399,828 $21,751,079 $19,248,570
Cost of sales 3,029,505 1,641,800 5,687,444 3,647,214
Gross profit 8,971,702 6,758,028 16,063,635 15,601,356
Selling expenses 9,113,702 5,158,486 14,687,597 9,899,087
General and
administrative
expenses 2,150,561 1,383,109 3,815,576 2,725,813
Research and
development 0 0 0 0
Other income
(expense) (102,941) (7,709) (151,855) 51,836
Income (loss) before
taxes (2,395,502) 208,724 (2,591,393) 3,028,292
Provision (benefit)
for income taxes (839,000) 93,000 (907,000) 1,306,000
Net income (loss) ($1,556,502) $115,724 ($1,684,393) $1,722,292
Net income (loss)
per common share
Basic ($0.06) $0.01 ($0.06) $0.07
Diluted ($0.06) $0.01 ($0.06) $0.07
Weighted average
shares outstanding
Basic shares
outstanding 28,445,835 25,464,500 28,445,835 25,464,500
Diluted shares
outstanding 28,445,835 25,756,829 28,445,835 25,827,125
June 30, December 31,
1999 1998
(unaudited) (audited)
Cash and cash equivalents $356,788 $1,127,861
Accounts receivable, net 8,616,918 4,950,055
Inventories, net 4,717,104 2,915,249
Other current assets 3,369,383 2,760,139
Total current assets 17,060,193 11,753,304
Non current assets 11,521,757 11,457,568
Total assets $28,581,950 $23,210,872
Accounts payable $4,452,588 $1,878,418
Accrued expenses 2,227,223 1,502,114
Loans payable bank 3,735,000 0
Total current liabilities 10,414,811 3,380,532
Notes payable, noncurrent 2,353,196 2,376,005
Shareholders' equity 15,813,943 17,454,335
Total liability and shareholders'
equity $28,581,950 $23,210,872