Global Sports, Inc, Reports Third Quarter Fiscal 2000 Results
GLOBAL SPORTS, INC. (NASDAQ: GSPT), a leading developer and operator of e-commerce businesses, announced today operating results from continuing operations for the third quarter ended September 30, 2000. The Company achieved sequential revenue growth of 16% over the second quarter of fiscal 2000, from $7.75 million to $9.0 million, while cash operating expenses decreased 7% and gross margins were 30%. The Company noted that incremental sales volume from new relationships launched during the third quarter of fiscal 2000 contributed to the Company’s solid sequential improvement. Global Sports pointed to the recent addition of multiple alliances established since the end of the second quarter of fiscal 2000 as continued evidence of its ability to grow revenues by establishing new relationships. The quarter was also highlighted by enhanced working capital management and an improved financial position, as inventory increased only 3% compared to 16% sales growth and Global Sports strengthened its cash position. On October 24, 2000, the Company announced that it had entered into a definitive agreement to acquire all of the outstanding shares of Fogdog, Inc. in a stock-for-stock merger valued at approximately $38.9 million based on the closing price of Global Sports common stock on October 23, 2000. The completion of the merger is subject to certain customary closing conditions. Assuming completion of the Companys pending acquisition of Fogdog, Inc. and closing of the $40.8 million investment by Interactive Technology Holdings, LLC (a joint venture between Comcast Corporation and QVC, Inc.) in Global Sports, which closed on October 5, 2000, Global Sports had approximately $100 million in cash and marketable securities, on a pro forma basis, as of September 30, 2000.
Third Quarter Financial Results
Revenues from continuing operations were $9.0 million for the third quarter of fiscal 2000 compared to $7.75 million for the second quarter of fiscal 2000. The Company had no revenues from continuing operations for the third quarter of fiscal 1999 as the Company did not launch its e-commerce sporting goods business until the fourth quarter of fiscal 1999. The Company’s financial statements for the third quarter of fiscal 1999 reflect the Company’s historical businesses, which have been accounted for as discontinued operations. Pro forma net loss from continuing operations was $9.7 million for the third quarter of fiscal 2000 which represents a 13% decrease compared to pro forma net loss from continuing operations of $11.2 million for the second quarter of fiscal 2000. Pro forma net loss per share was $0.45 for the third quarter of fiscal 2000 compared with a pro forma net loss per share of $0.54 for the second quarter of fiscal 2000. Pro-forma net loss and pro-forma net loss per share exclude all non-cash charges, including stock-based compensation and depreciation and amortization expenses.
Gross profit was $2.7 million and gross margin was 30% for the third quarter of fiscal 2000 compared to gross profit of $2.2 million and gross margin of 29% for the second quarter of fiscal 2000. Operating expenses excluding non-cash charges were $12.8 million for the third quarter of fiscal 2000 compared to $13.7 million for the second quarter of fiscal 2000, a decrease of 7%. Operating expenses excluding non-cash charges for the third quarter of fiscal 2000 primarily consisted of sales and marketing costs of $8.6 million, product development costs of $1.9 million, and general and administrative expenses of $2.2 million. This compares to sales and marketing costs of $9.5 million, product development costs of $1.9 million, and general and administrative costs of $2.3 million for the second quarter of fiscal 2000. The Companys overall decrease in cash operating expenses was the result of a 9% decrease in sales and marketing expenses, offset by the costs of operating redundant fulfillment operations during the quarter and transitioning from a third party fulfillment solution to the Companys own fulfillment center. This transition was substantially completed by the end of October 2000. Sales and marketing expenses also include general distribution facility costs, promotional shipping, payroll and related expenses for personnel engaged in merchandising, buying, marketing, client services, fulfillment and customer service, credit card fees, partner revenue share, as well as advertising and media spending. Non-cash charges for the third quarter of fiscal 2000 totaled $2.6 million and included primarily stock-based compensation and depreciation and amortization expenses.
Michael G. Rubin, Chairman and CEO of Global Sports, commented on the Company’s financial results, stating, Our financial results this quarter clearly demonstrate the power and success of our business model. The true opportunity in e-commerce lies in creating the infrastructure to enable leading brands to succeed online. We believe Global Sports technology, fulfillment, customer service, and overall e-commerce management expertise position us to provide an effective end-to-end solution for these brands.
Global Sports achieved many important milestones since July 1, 2000. Highlights of these achievements include:
Partnerships and Alliances
- On October 24, 2000, Global Sports announced that it entered into a definitive agreement to acquire all of the outstanding shares of Fogdog, Inc., an online sporting goods store. Under the terms of the agreement, upon close of the transaction, Fogdog stockholders will receive 0.135 of a share of Global Sports common stock for each share of Fogdog common stock. Global Sports expects to issue approximately 5.0 million shares of common stock, which, based on the closing price of Global Sports common stock on the date the agreement was announced, October 23, 2000, is valued at approximately $38.9 million (excluding assumed options). Fogdog had approximately $42.5 million in cash and marketable securities on September 30, 2000. The Fogdog Web site (www.fogdog.com) and brand will be integrated into Global Sports existing infrastructure and will represent Global Sports 14th e-commerce sporting goods business.
- On September 13, 2000, the Company announced an agreement with iQVC, the e-commerce division of QVC, to develop and operate the sporting goods store for iQVC. This represents Global Sports seventh new alliance in 2000 and 13th alliance since inception.
- On July 31, 2000, Global Sports announced an agreement with Toysrus.com, a leading retailer of children’s products on the Internet, to develop a new youth sporting goods e-commerce site, Sportsrus.com.
- On July 31, 2000, the Company announced that it formed a long-term strategic alliance with buy.com, a leading multi-category Internet superstore. Under the agreement, Global Sports powers the new sporting goods store on the flagship buy.com Web site.
- On July 26, 2000, Global Sports announced an exclusive long-term alliance with FOXSPORTS.com, the online sports division of News Corporations News Digital Media unit, whereby Global Sports will develop and operate the flagship store on FOXSPORTS.com and the 19 FOX Sports Net regional Web sites.
Strategic Investment
- On September 13, 2000, Global Sports announced that Comcast Corporation and QVC, Inc., through a joint venture company, agreed to acquire from Global Sports 5.0 million common shares of Global Sports stock at $8.15 per share in cash. This $40.8 million investment gives the companies a combined ownership interest in Global Sports of approximately 19% of the currently outstanding common shares. In addition, the Comcast and QVC venture agreed to purchase, for $562,000 in cash, warrants to purchase up to an additional 4.5 million shares of Global Sports common stock, at prices ranging from $8.15 to $10.00 per share. The transaction closed in two tranches on September 13, 2000 and October 5, 2000.
Marketing Agreements
- On October 31, 2000, the Company announced that it signed a marketing agreement with Excite@Home. As part of the agreement, sporting goods retailers for which Global Sports develops and operates e-commerce businesses, including The Sports Authority, Oshmans Sporting Goods, Sport Chalet, MC Sports, and Dunhams Sports, will become featured tenants within the Sports & Fitness area of Excite.com.
- On October 20, 2000, Global Sports announced that it signed an agreement with America Online, Inc., the worlds leading interactive services company, for seven placements within the Sports & Outdoors area of the Shop@AOL online shopping destinations as well as integration into the Shop@AOL shopping search engine. The Web sites for The Sports Authority, Oshmans Sporting Goods, Sport Chalet, MC Sports, Dunhams Sports, The Athletes Foot, FOXSPORTS.com, and WebMD will be included in the program.
- On October 19, 2000, the Company announced that it signed a marketing agreement with the MSN. network of Internet services to add two of the retailers for which Global Sports develops and operates e-commerce sporting goods Web sites to the MSN eShop. Under the agreement, www.thesportsauthority.com and www.oshmans.com, both developed and operated by Global Sports, will be featured prominently throughout the Sports & Outdoors section of the MSN eShop.
Global Sports, Inc. (NASDAQ: GSPT) (www.globalsports.com) is a leading developer and operator of e-commerce businesses. Global Sports develops and operates the e-commerce sporting goods businesses of specialty retailers, general merchandisers, Internet companies, and media companies under exclusive long-term agreements. The Company operates the e-commerce sporting goods businesses of www.bluelight.com—the exclusive e-commerce partner for Kmart, www.broadbandsports.com and www.athletesdirect.com, www.buy.com, www.dunhamssports.com, store.foxsports.com, www.mcsports.com, www.oshmans.com, www.qvc.com, www.sportchalet.com, www.sportsrus.com, www.theathletesfoot.com, www.thesportsauthority.com, and store.webmd.com.
Statements about the Company’s outlook and all other statements in this release other than historical facts are forward-looking statements. Since these statements involve risks and uncertainties, they are subject to change at any time and the Company’s actual results may differ materially from expected results. Many of the Company’s forward-looking statements are based upon certain assumptions, and there are inherent difficulties in predicting certain important factors that could impact these assumptions. These factors, as and when applicable, are discussed in the Company’s filings with the SEC.
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Contact:
Investor Contact:
Jordan M. Copland
Executive Vice President and Chief Financial Officer
Global Sports, Inc.
(610) 491-7000
coplandj@globalsports.com
Media Contact:
Dana Stein Grosser
Director of Corporate Communications
Global Sports, Inc.
(610) 491-7000
grosserd@globalsports.com
