UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) March 29, 2012
DREAMS, INC.
(Exact name of registrant as specified in its charter)
Utah | 001-33405 | 87-0368170 | ||
(State or other jurisdiction of incorporation) |
(Commission File Number) | (IRS Employer Identification No.) | ||
2 South University Drive, Plantation, Florida | 33324 | |||
(Address of principal executive offices) | (Zip Code) |
Registrants telephone number, including area code: (954) 377-0002
Registrants facsimile number, including area code: (954) 475-8785
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
ITEM 2.02 | Results of Operations and Financial Condition |
On March 29, 2012, Dreams, Inc. issued a press release regarding it earnings for the year and quarter ended December 31, 2011, and financial guidance for 2012. A copy of the press release is furnished as Exhibit 99.1.
The information furnished herein, including Exhibit 99.1, shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the Exchange Act), or otherwise subject to the liability of that Section. This information shall not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the registrant specifically incorporates any such information by reference.
ITEM 9.01 | Financial Statements and Exhibits |
(d) | Exhibits |
99.1 | Copy of press release dated March 29, 2012. |
1
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: March 29, 2012 | DREAMS, INC. | |||||
By: | /s/ Ross Tannenbaum | |||||
Ross Tannenbaum | ||||||
Chief Executive Officer |
2
Exhibit Index
Exhibit No. | Description | |
99.1 | Copy of press release dated March 29, 2012 |
1
Exhibit 99.1
Dreams Reports Fourth Quarter and Full Year 2011 Financial Results
$75.2 Million in Fourth Quarter Revenues Drives 26% Increase in Net Income of $5.2 Million or $0.12 per Share
PLANTATION, Fla., March 29, 2012 Dreams, Inc. (NYSE Amex: DRJ), a technology driven, multi-channel retailer focused on the licensed sports products industry, reported financial results for the fourth quarter and full year ended December 31, 2011.
Q4 2011 vs. Q4 2010 Financial Highlights:
| Revenues up 24% to $75.2 million; |
| E-commerce revenues up 27% to $64.6 million; |
| Net income up 26% to $5.2 million or $0.12 per share; and |
| Adjusted EBITDA up 23% to $10.2 million. |
Fourth Quarter 2011 Financial Results
Total revenues in the fourth quarter of 2011 increased 24% to $75.2 million, compared to $60.7 million in the fourth quarter of 2010. This was primarily attributable to a 27% increase in e-commerce revenues to $64.6 million. E-commerce revenues were driven by a 27% increase in organic growth of the companys owned brands to $37.8 million, led by www.FansEdge.com, and Dreams web syndication platform, which generated a 24% increase in revenues to $26.8 million.
Income from operations was $9.7 million in the fourth quarter of 2011, compared to $7.9 million in the year-ago quarter. The growth in income from operations was primarily attributable to the aforementioned increase in e-commerce revenues.
Net income in the fourth quarter of 2011 increased 26% to $5.2 million or $0.12 per share, compared to net income of $4.1 million or $0.10 per share in the year-ago quarter.
Adjusted EBITDA increased 23% to $10.2 million in the fourth quarter of 2011, compared to adjusted EBITDA of $8.3 million in the year-ago quarter (see definition and important discussion of this non-GAAP measure, below).
2
Fourth Quarter 2011 Operational Highlights:
| Web syndication client portfolio increased to 77; and |
| Established a $35 million credit facility with PNC Bank with an additional $5 million seasonal over-advance, which expands the companys liquidity by $12.5 million. |
Full Year 2011 Financial Results
Total revenues in 2011 increased 27% to $141.7 million from $111.4 million in 2010. This increase was primarily attributable to a 33% increase in e-commerce revenues to $113.0 million. E-commerce revenues were driven by a 35% increase in organic growth of the companys owned brands to $69.0 million, led by www.FansEdge.com, and Dreams web syndication platform, which generated a 29% increase in revenues to $44.0 million.
Income from operations was $2.8 million in 2011, compared to $3.9 million in 2010. The decrease in income from operations was due primarily to one-time charges associated with the settlement and related costs of two legal cases in addition to write-offs and expenses associated with the closure of four Field of Dreams stores during the year. Depreciation and amortization also increased due to the expansion of the companys distribution capacity.
Net income in 2011 was $1.2 million or $0.03 per share, compared to net income of $1.3 million or $0.03 per share in 2010.
Adjusted EBITDA increased 9% to $7.5 million in 2011, compared to adjusted EBITDA of $6.9 million in 2010 (see definition and important discussion of this non-GAAP measure, below).
Management Commentary
2011 was another record year for Dreams and was largely driven by our fully integrated e-commerce platform allowing our company to take market share in the licensed sports products industry, said Ross Tannenbaum, president and CEO of Dreams. In our fourth quarter, we generated record revenue, EBITDA and net income in what has historically been our high watermark for the year due to the holiday shopping season. During the year, we launched 19 new web syndication sites and nearly doubled the growth rate of our organic revenues, led by FansEdge.com.
As we advance through 2012, we are in a strong position to sustain our financial and operational momentum. The proactive investments we made in our professional talent over the past two years will help support our robust organic growth within our owned brands, invigorate the sales of our current web syndication partners, as well as our pipeline of new business. In fact, I am pleased to announce that weve recently entered into a partnership with Modells Sporting Goods, which marks our third partnership with a sporting goods retailer in the past four months.
3
In addition to our previously reported expectations of approximately $175 million in revenues for 2012, we are introducing EBITDA guidance for the year. Our revenue base has reached a level in which we are able to more effectively leverage our operating expenses and generate meaningful profitability. This, combined with our expectations of continued organic growth, pipeline of business, and the culmination of significant one-time expenses in 2011, gives us confidence in our expectations of $12-$13 million in EBITDA for 2012.
2012 Outlook
As previously disclosed on the companys full year 2011 pre-announcement press release issued and effective March 12, 2012, Dreams expects fiscal year 2012 revenues to be approximately $175 million, with the e-commerce channel expected to grow 30% to $147 million. The company also expects EBITDA in 2012 to range between $12-$13 million, representing an increase between 116%-134%.
Conference Call
Dreams will host a conference call today at 5:00 p.m. Eastern time to discuss its results for the fourth quarter and full year ended December 31, 2011. The companys senior management will host the presentation, which will be followed by a question and answer period.
Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Liolios Group at 949-574-3860.
Date: Thursday, March 29, 2012
Time: 5:00 p.m. Eastern time (2:00 p.m. Pacific time)
Dial-In Number: 888-669-0684
International: 201-604-0469
To listen to the live Webcast, please go to http://www.visualwebcaster.com/event.asp?id=85893. A replay of the Webcast will be available for the next 90 days following the conclusion of the call via Dreams Web site at www.DreamsCorp.com.
Reconciliation of Non-GAAP Financial Measures
Regulation G, Disclosure of Non-GAAP Financial Measures, and other provisions of the Securities Exchange Act of 1934, as amended, define and prescribe the conditions for use of certain non-GAAP financial information. The company provides two non-GAAP financial measures, EBITDA and adjusted EBITDA.
The company defines EBITDA as net income before non-controlling interest, interest, net, income tax expense, other income, and depreciation and amortization. The company defines adjusted EBITDA as net income before non-controlling interest, interest, net, income tax
4
expense, other income, depreciation and amortization, restructuring and severance costs, impairment charges, non-cash stock option expense, certain legal expenses, settlements and related costs outside the normal course of business, and one-time charges and credits. The company uses these non-GAAP financial measures for financial and operational decision-making and as a means to evaluate the companys performance. In the companys opinion, these non-GAAP measures provide meaningful supplemental information regarding the companys performance. The company believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing the companys performance and analyzing future periods. These non-GAAP financial measures also facilitate managements internal comparisons to the companys historical performance. The company believes these non-GAAP financial measures are useful to investors both because (1) they allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making and (2) they are used by institutional investors and the analyst community to help them analyze the health of the companys business.
The differences between EBITDA, adjusted EBITDA and GAAP net income are as follows:
5
DREAMS, INC. AND SUBSIDIARIES
RECONCILIATION OF NET INCOME TO EBITDA AND ADJUSTED EBITDA
(Unaudited)
(in thousands)
Twelve Months Ended December 31, |
Three Months Ended December 31, |
|||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Net Income |
1,234 | 1,343 | 5,135 | 4,100 | ||||||||||||
Non-controlling interest |
(29 | ) | (2 | ) | 50 | 19 | ||||||||||
Interest, net |
978 | 1,185 | 388 | 201 | ||||||||||||
Income tax expense |
729 | 1,363 | 3,369 | 3,156 | ||||||||||||
Other Income |
(72 | ) | | | | |||||||||||
Depreciation and amortization |
2,709 | 1,820 | 708 | 463 | ||||||||||||
EBITDA |
5,549 | 5,709 | 9,650 | 7,939 | ||||||||||||
Restructuring and severance costs |
34 | | | | ||||||||||||
Impairment charges |
103 | | | | ||||||||||||
Stock option expense- non-cash |
82 | | 30 | | ||||||||||||
Certain legal expenses |
508 | 100 | 51 | | ||||||||||||
Settlements and related costs |
1,090 | 25 | 495 | | ||||||||||||
One-time charges and credits |
144 | 1,075 | | 405 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Adjusted EBITDA |
7,510 | 6,909 | 10,226 | 8,344 | ||||||||||||
|
|
|
|
|
|
|
|
About Dreams, Inc.
Dreams, Inc. (NYSE Amex: DRJ) is a technology driven, multi-channel retailer focused on the sports licensed products industry. For more information, please visit www.DreamsCorp.com.
6
Important Cautions Regarding Forward Looking Statements
Statements contained in this press release, which are not historical facts, are forward-looking statements. The forward-looking statements in this press release are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such statements are indicated by words or phrases such as anticipates, projects, management believes, Dreams believes, intends, expects, and similar words or phrases. Forward looking statements made in the press release include, but are not limited to, statements made by Mr. Tannenbaum regarding the future activities and growth of the company, including that the company expects fiscal year 2012 revenues to be approximately $175 million, with the e-commerce channel expected to grow 30% to $147 million, and that the company also expects EBITDA for fiscal year 2012 to range between $12-$13 million, which represents an increase between 116%-134% over 2011. Such factors include, among others, the following: competition; seasonality; success of operating initiatives; new product development and introduction schedules; acceptance of new product offerings; franchise sales; advertising and promotional efforts; adverse publicity; expansion of the franchise chain; availability, locations and terms of sites for franchise development; changes in business strategy or development plans; availability and terms of capital including the continuing availability of our credit facility with PNC Bank or a similar facility with another financial institution; labor and employee benefit costs; changes in government regulations; and other factors particular to the company.
Company Contact:
David M. Greene
Senior Vice President
Tel 954-377-0002
dgreene@dreamscorp.com
Investor Relations:
Liolios Group, Inc.
Scott Liolios or Cody Slach
Tel 949-574-3860
DRJ@liolios.com
7
DREAMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
December 31, 2011 |
December 31, 2010 |
|||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash |
$ | 1,860 | $ | 440 | ||||
Accounts receivable, net |
11,590 | 9,898 | ||||||
Notes receivable, current |
131 | | ||||||
Inventories |
44,695 | 32,609 | ||||||
Prepaid expenses and other current assets |
3,060 | 2,166 | ||||||
Deferred tax asset |
1,396 | 1,340 | ||||||
|
|
|
|
|||||
Total current assets |
62,732 | 46,453 | ||||||
Property and equipment, net |
6,795 | 5,538 | ||||||
Deferred loan costs |
185 | 234 | ||||||
Notes Receivable |
121 | | ||||||
Goodwill, net |
8,650 | 8,650 | ||||||
Other intangible assets, net |
5,738 | 5,821 | ||||||
Other assets |
9 | 9 | ||||||
|
|
|
|
|||||
Total Assets |
$ | 84,230 | $ | 66,705 | ||||
|
|
|
|
|||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | 18,886 | $ | 14,477 | ||||
Accrued liabilities |
9,818 | 9,264 | ||||||
Current portion of long-term debt |
275 | 323 | ||||||
Borrowings against line of credit |
10,500 | 1,128 | ||||||
Capital lease obligation, current |
445 | | ||||||
Deferred credits |
1,897 | 1,622 | ||||||
|
|
|
|
|||||
Total current liabilities |
41,821 | 26,814 | ||||||
Long-term debt, less current portion |
1,418 | 1,694 | ||||||
Capital lease obligation |
698 | 168 | ||||||
Long-term deferred tax liability |
3,581 | 2,887 | ||||||
|
|
|
|
|||||
Total Liabilities |
$ | 47,518 | $ | 31,563 | ||||
|
|
|
|
|||||
Stockholders equity: |
||||||||
Preferred stock authorized 10,000,000 shares; issued and 0 outstanding shares as of December 31, 2011 and December 31, 2010 |
| |
8
December 31, 2011 |
December 31, 2010 |
|||||||
Common stock and additional paid-in capital, no par value; authorized 100,000,000, and 100,000,000 shares; issued and outstanding 44,662,579 and 44,107,464 shares as of December 31, 2011, and December 31, 2010, respectively |
44,179 | 43,814 | ||||||
Treasury stock 38,400 issued as of December 31, 2011 and December 31, 2010 |
(46 | ) | (46 | ) | ||||
Accumulated deficit |
(7,354 | ) | (8,588 | ) | ||||
Non-controlling interest in subsidiaries |
(67 | ) | (38 | ) | ||||
|
|
|
|
|||||
Total stockholders equity |
36,712 | 35,142 | ||||||
|
|
|
|
|||||
Total liabilities and stockholders equity |
$ | 84,230 | $ | 66,705 | ||||
|
|
|
|
9
DREAMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and earnings per share amounts)
Year ended December 31, 2011 |
Year ended December 31, 2010 |
|||||||
Revenues: |
||||||||
Manufacturing/Distribution |
$ | 10,807 | $ | 11,107 | ||||
Retail |
130,697 | 99,798 | ||||||
OtherFees |
216 | 458 | ||||||
|
|
|
|
|||||
Total Revenues |
$ | 141,720 | $ | 111,363 | ||||
|
|
|
|
|||||
Expenses: |
||||||||
Cost of salesmanufacturing/distribution |
$ | 6,232 | $ | 6,543 | ||||
Cost of salesretail |
69,803 | 53,172 | ||||||
Operating expenses |
60,136 | 45,939 | ||||||
Depreciation and amortization |
2,709 | 1,820 | ||||||
|
|
|
|
|||||
Total Expenses |
$ | 138,880 | $ | 107,474 | ||||
|
|
|
|
|||||
Income from operations |
$ | 2,840 | $ | 3,889 | ||||
Interest (expense), net |
(978 | ) | (1,185 | ) | ||||
Other (expense) / income |
72 | | ||||||
|
|
|
|
|||||
Income before income taxes |
$ | 1,934 | $ | 2,704 | ||||
Provision for Income tax (expense)/benefit: |
||||||||
Current |
(376 | ) | (295 | ) | ||||
Deferred |
(353 | ) | (1,068 | ) | ||||
|
|
|
|
|||||
Net income |
$ | 1,205 | $ | 1,341 | ||||
Net loss attributable to non-controlling interest |
29 | 2 | ||||||
Net income attributable to Dreams, Inc. |
$ | 1,234 | $ | 1,343 | ||||
|
|
|
|
|||||
Basic income per share |
$ | 0.03 | $ | 0.03 | ||||
|
|
|
|
|||||
Basic weighted average common shares outstanding |
44,610,838 | 40,715,535 | ||||||
|
|
|
|
|||||
Dilutive income per share |
$ | 0.03 | $ | 0.03 | ||||
Potentially dilutive weighted average shares outstanding |
45,087,436 | 41,636,411 | ||||||
|
|
|
|
10