Prolong International Corp. Reports Second-Quarter Results
11 August 2000
Prolong International Corp. Reports Second-Quarter Results
IRVINE, Calif.--Aug. 11, 2000--Prolong International Corp. (Amex:PRL) Friday reported a loss of $511,000, or $0.02 per diluted share, on net sales of $5.2 million for the second quarter ended June 30, 2000. In the second quarter of 1999, the company reported a loss of $1.6 million, or $0.06 per diluted share, on net sales of $12.0 million.For the six months ended June 30, 2000, the company reported earnings of $130,000, or $0.00 per diluted share, on sales of $13.0 million, compared with a loss of $1.7 million, or $0.06 per diluted share on sales of $21.8 million in the first six months of 1999.
Second-quarter gross profit was $3.9 million, or 73.8% of net sales, compared with $9.0 million, or 74.8% of net sales, a year ago. A reduction in selling and marketing expenses to $3.2 million from $9.1 million in the second quarter of 1999 was primarily the result of lower expenses for endorsement and sponsorship payments, activities to promote product awareness, slotting fees, commissions, expenditures for media and print advertising, and television airtime purchases. A reduction in general and administrative expenses to $1.3 million from $2.2 million in the second quarter of 1999 reflects decreases in legal expenses, bonuses, bad debt, and general insurance expenses.
According to Elton Alderman, president and chief executive officer of Prolong International Corp., lower revenues in the second quarter point to a soft market for specialty lubricants generally, as well as the company's decision to discontinue the direct response television ("DRTV") program for lubricants in lieu of an evaluation of more cost-effective means of promoting the brand. "Also contributing to lower revenues," said Alderman, "were lower sales of automotive appearance products, in part a result of a shift in advertising strategies to accommodate the realities of a marketplace in which we are not able to spend as much as we would like on promotional activities."
"Because our retailers and distributors -- who are among our most valued business partners -- rely on us to generate demand for our products, it is increasingly important that we use every advertising dollar as effectively as possible. For example, in promoting lubricants, which is now a mature category, we are turning from 30-minute programs to one-minute television spots, where we expect to get a better return on our investment by targeting our customers more precisely. Our pursuit of sales to retail stores and mass merchandisers is reflected in retail sales that were 80.0% of total revenues in the second quarter of 2000 compared to 76.7% a year ago," said Alderman.
"On the other hand," continued Alderman, "DRTV will continue to play a role in promoting the appearance products. Following an earlier DRTV campaign that did not meet our expectations, we have revamped the infomercial to emphasize two product categories in particular -- the waterless wash-and-shine and the professional quality paint sealant -- that are unfamiliar to many consumers. We are now airing the new infomercial in select markets." In the second quarter, DRTV appearance product sales of approximately $202,000 were slightly less than 4% of total sales and approximately 73% of all DRTV sales.
"Such ongoing marketing and promotional activities," concluded Alderman, "are essential to the company's future success, and their makeup and distribution will be based on a prudent use of available working capital. Our recently announced agreement with National Automotive Parts Association ("NAPA"), a division of Genuine Parts Co. , is indicative of this trend. In putting us squarely in place with professional installers and auto service centers, it reflects an increased emphasis on opening new distribution channels that will effectively leverage one of the company's greatest assets, the Prolong trademark and the technology that stands behind it."
Prolong International Corp., 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 CORP.
Consolidated Condensed Statements of Operations
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
(unaudited) (unaudited)(unaudited) (unaudited)
Net sales $5,219,521 $12,001,207 $12,976,720 $21,751,079
Cost of sales 1,367,184 3,029,505 3,094,095 5,687,444
Gross profit 3,852,337 8,971,702 9,882,625 16,063,635
Selling and marketing
expenses 3,178,945 9,113,702 6,491,496 14,687,597
General and
administrative
expenses 1,266,933 2,150,561 2,695,086 3,815,576
Other income (expense) (125,524) (102,941) (277,445) (151,855)
Income (loss) before
taxes (719,065) (2,395,502) 418,598 (2,591,393)
Provision (benefit) for
income taxes (207,985) (839,000) 288,858 (907,000)
Net income (loss) ($511,080) ($1,556,502) $129,740 ($1,684,393)
Net income (loss) per
common share
Basic ($0.02) ($0.06) $0.00 ($0.06)
Diluted ($0.02) ($0.06) $0.00 ($0.06)
Weighted average common shares
Basic shares
outstanding 28,445,835 28,445,835 28,445,835 28,445,835
Diluted shares
outstanding 28,445,835 28,445,835 28,520,196 28,445,835
Consolidated Condensed Balance Sheet
June 30, December 31,
2000 1999
(unaudited) (audited)
Assets:
Cash and cash equivalents $398,870 $1,094,779
Accounts receivable, net 4,084,663 2,747,459
Inventories, net 2,319,072 2,171,728
Other current assets 2,347,283 2,112,886
Total current assets 9,149,888 8,126,852
Property and equipment, net 3,369,352 3,554,176
Intangible assets, net 6,783,328 7,036,670
Other assets 983,565 2,661,950
Total assets $20,286,133 $21,379,648
Liabilities and stockholders'
equity
Accounts payable $2,375,201 $2,843,843
Accrued expenses and other current
liabilities 1,574,638 1,256,572
Line of credit bank 2,867,276 3,985,000
Total current liabilities 6,817,115 8,085,415
Notes payable, noncurrent 2,329,559 2,327,048
Total stockholders' equity 11,139,459 10,967,185
Total liabilities and
stockholders' equity $20,286,133 $21,379,648