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 Home -> Full Texts -> Press Releases -> Interplay -> INTERPLAY RETURNS TO OPERATING PROFITS IN THIRD QUARTER

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INTERPLAY RETURNS TO OPERATING PROFITS IN THIRD QUARTER

Irvine, California, October 31, 2000  Interplay Entertainment Corp. (NASDAQ: IPLY) today reported results for the third quarter and first nine months of fiscal 2000.

For the quarter ended September 30, 2000, the company reported net revenues of $31.6 million a 34 percent increase over net revenues of $23.6 million for the same period a year ago. Operating income for the quarter was $1.1 million versus an operating loss of $16.1 million in the same quarter a year ago. Gross margins for the quarter improved to 49 percent as compared with 35 percent in the same quarter a year ago resulting from a decrease in returns and allowances and a higher margin product mix. The company reported net income of $113,000, or break even per share, compared with a net loss of $17 million, or $(0.75) per share, in the third quarter of 1999.

For the first nine months of 2000, Interplay reported net revenues of $73.8 million compared with net revenues of $74.6 million in the first nine months of 1999. Interplay reported a net loss of $7.3 million, or $(0.25) per share, for the nine-month period, versus a net loss of $32.2 million, or $(1.55) per share, in the first nine months of 1999.

We are extremely pleased that we have returned Interplay to operating profitability for this quarter. Our revenue growth of approximately 34 percent over the same quarter last year was due to new title releases in the quarter as well as re-orders of previously released titles. Baldurs Gate II on PC, Star Trek New Worlds on PC, and Caesars Palace 2000 on Dreamcast were all released this quarter. Icewind Dale on PC as well as Caesars Palace 2000 on PlayStation, both of which were released last quarter, continue to be strong sellers for us, said Brian Fargo, Interplays chairman and chief executive officer.

As we enter the fourth quarter with Baldurs Gate II a #1 hit in the U.K. and #1 in dollar volume sales in the U.S., we expect to continue to achieve revenues from re-orders of the English version and the release of foreign language versions in various European territories. In October 2000, we released Wild Wild Racing, Interplays first title for the PlayStation 2, which was in retail stores for the launch of this new console. In the fourth quarter, we also plan to release Sacrifice on PC and Giants on PC, two of the shows top ten at E3, as well as the sequel Star Trek: Starfleet Command II on PC, and a new PC title in our popular Virtual Pool series featuring Jeanette Lee, known as the Black Widow and currently one of the most popular pool players. This is the strongest title line-up that we have had all year. Fargo added.

It has been our main task to return to profit since I begun my involvement at Interplay over a year ago. After five quarters of hard work, we are there. Our performance should be even more rewarding given the current state of the video game industry. Interplay will continue to leverage its strengths in the PC market with a very focused development and product release schedule. The PC business and strength of its back catalogue sales and OEM business should provide a continued revenue base. In addition, we believe that Interplay is well positioned to capitalize on the ongoing console transition occurring within the industry, said Herve Caen, the companys president.

At this time last year we were completing the reorganization of Interplay and had taken substantial non-recurring charges to accomplish our transition. Our comparative operating expenses are 42 percent less this quarter than the same quarter last year primarily due to the non-recurrence of charges in connection with the restructuring of international distribution activities charged to other operating expenses and provision for bad debts charged to general and administrative expenses. We have now reported four consecutive quarters with stable operating expenses, improved gross margins, and improved operating results, culminating in operating profits and positive cash flow for this quarter. noted Manuel Marrero, Interplays chief operating and chief financial officer. We have not sacrificed our product development efforts as evidenced by the comparable product development expenses between the two years, and we expect to maintain a similar level of operating expenses as we enter 2001, Marrero continued.

We continue to manage our assets well as reflected by the fact that we improved our accounts receivable days sales outstanding to 75 days from 85 days, and doubled our inventory turns to 14 times from 7 times annually, in the third quarter of this year compared to the third quarter of last year. Our working capital position has also improved to a positive $5 million from a negative $8 million, and we have reduced bank debt and total liabilities by $3.5 million and $12.5 million, respectively, at September 30, 2000 as compared to the end of 1999. Marrero added.

Fargo concluded. We have approximately the same number of major PC titles planned for development in the upcoming months as we have released in the recent months. However, we also have approximately 15 major console titles in various stages of development as compared to a historical equivalent of 2 titles. We are excited about the future of Interplay. We have a solid PC business, and we believe that our penetration into the console market, which IDG projects will grow to almost four times the size of the PC software market by the end of 2002, will present substantial upside opportunities for us. It has been a long journey to get Interplay back on track and I want to thank all of our employees who have stuck with us through the hard times. Id like to specially thank Manny Marrero who joined us eighteen months ago and helped to turn things around, and Skip Paul, our former Director, with his unwavering support during our most difficult times.

Net revenues by platform for the quarter were 75.3 percent PC, 13.3 percent console and 11.4 percent OEM, royalties and licensing. On a geographic basis, North America accounted for 61.3 percent of total net revenues, international represented 27.3 percent and OEM, royalty and licensing accounted for 11.4 percent.

Interplay Entertainment Corp. is a leading developer, publisher and distributor of interactive entertainment software for both core gamers and the mass market. Interplay currently balances its development efforts by publishing for personal computers and current generation video game consoles. Interplay releases products through Interplay, Shiny Entertainment, Digital Mayhem, Black Isle Studios, 14 Degrees East, its distribution partner and its wholly owned subsidiary, Interplay OEM, Inc. More comprehensive information on Interplay and its products is available through its worldwide web site at www.interplay.com

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995:

The operating results for the quarter are preliminary and subject to change. Statements contained in this release except for historical information are forward-looking statements that are based on current expectations and involve risks and uncertainties. Without limiting the generality of the foregoing, words such as "may," "will," "expect," "believe," "anticipate," "intend," "could," "estimate," or "continue" or the negative or other variations thereof or comparable terminology are intended to identify forward-looking statements. The risks and uncertainties inherent in such statements may cause actual future events or results to differ materially and adversely from those described in the forward-looking statements. For example, there can be no assurance that the Companys current scheduled titles will ship in the projected time frame or that they will be as popular as the Company presently anticipates, that the Company will be able to achieve its projected continued revenues from its existing titles, or that the Company will be able to increase the number of console titles it releases. Additional important factors that may cause a difference between projected and actual results for Interplay include, but are not limited to, future capital requirements, that equity or bank financing will be available on terms satisfactory to the company or at all, risks of loss of the Companys listing on the Nasdaq National Market, risk of delays in development and introduction of new products, dependence on new product introduction which achieve significant market acceptance and the uncertainties of consumer preferences, risks of product returns and markdown allowances, dependence on third party software developers for a significant portion of new products, risks of rapid technological change and platform change, intense competition, seasonality, risks of product defects and resulting returns, dependence upon licenses from third parties, risks associated with, dependence upon third party distribution, dependence upon key personnel and risks associated with international business, intellectual property disputes and other factors discussed in the Companys filings from time to time with the Securities and Exchange Commission, including but not limited to the Companys annual reports on Form 10-K and the Companys subsequent quarterly filings on Form 10-Q. Interplay disclaims any obligation to revise or update any forward-looking statements that may be made from time to time by it or on its behalf.


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