Fiscal 1999 Earnings Per Share Grew 57%, Sales Increased 52% And Internet Sales Rose 503% ---------------------------------------------------------------------- WOODLAND, Calif.--(BUSINESS WIRE)--May 20, 1999--Valley Media Inc. (Nasdaq:VMIX), the largest independent full-line distributor of music and video entertainment products in the United States, today announced its financial results for the fiscal year and quarter ending April 3, 1999. For fiscal 1999, net income increased 69.2% from $2.6 million to $4.4 million and earnings per share increased 57.1% from $0.49 to $0.77. Before an extraordinary item, net income for fiscal 1999 was $5.2 million and earnings per share were $0.89. Net sales for fiscal 1999 increased 52.4% from $583.5 million to $889.0 million. Sales for Full-line Distribution, which serves traditional music, video and other retailers, increased 28.4% from $520.5 million to $668.4 million. Sales for New Media, which supports Internet retailers, saw a 503.0% increase from $30.3 million to $182.7 million. Independent Distribution, which supports independent labels and studios, increased 20.4% from $45.7 million to $55.0 million. Valley Media reported that fourth quarter net income increased 79.4% from $669,000 to $1.2 million and fourth quarter earnings per share increased 61.5% from $0.13 to $0.21 over the same period one year ago. Net sales for the fourth quarter of fiscal 1999 increased by 65.1% from $156.2 million to $257.9 million compared to the same period in fiscal 1998. Full-line Distribution sales increased 32.4% from $135.0 million to $178.7 million, New Media sales increased 448.8% from $12.7 million to $69.7 million and Independent Distribution sales increased 13.8% from $12.3 million to $14.0 million over last year's fourth quarter. "We are very pleased with our record financial results for the quarter and the year," commented CEO Rob Cain. "Fiscal 1999 was a record growth year for our New Media group. In addition to benefiting from the spectacular growth of our established on-line customers, major new customers such as Amazon.com (Nasdaq:AMZN), contributed significantly to our growth. It is exciting to see traditional retailers starting to enjoy some success on the Internet as well. In fiscal 1999, DVD and deep catalog video began to emerge as meaningful growth drivers. Here, we have been able to leverage our deep catalog skills and to cross sell to our established audio and Internet retailers." Mr. Cain continued: "While our New Media success has been dramatic, it is built on the foundation of our core Full-line and Independent Distribution businesses. I am pleased that these groups continued to grow faster than our industry. We offer our customers the most reliable access to the deepest selection in the industry, buttressed by a growing array of data products and other value-added services." "We achieved our record profitability in spite of significant expenses associated with investing in our future. The startup of the Company's new state-of-the-art 330,000 square foot Louisville distribution center, the write-off of deferred offering costs, our continued investment in the development of new data products and our consolidation of a number of video facilities acquired with Star Video during fiscal 1998 added materially to selling, general and administrative expenses," said Mr. Cain. Valley Media is a distributor of music, video and DVD product offering full-line distribution, Internet fulfillment, independent distribution, publications, and proprietary database products. Valley Media operates facilities in seven states with primary distribution facilities in Louisville, KY and at its Woodland, CA corporate headquarters. Additional information is available at www.valley-media.com. This press release may contain forward-looking statements made pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These statements are identified by words such as "will", "expects", "anticipates", "plans", or "intends" and by other descriptions of future circumstances or conditions. Actual results may differ materially from those projected in these forward-looking statements. Factors that could affect Valley Media's actual results include, without limitation, risks and uncertainties related to the following factors: intense competition, customers' ability or preference to buy product direct, facilities and systems integration upgrades, new electronic delivery technologies and copyright or royalty disputes. More information about these and other factors that could negatively affect Valley Media's financial performance and the value of its common stock is contained in Valley Media's registration statement on Form S-1, which is on file with the Securities and Exchange Commission. Persons reviewing Valley's Form S-1 should pay particular attention to the risks and uncertainties discussed in the sections titled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." VALLEY MEDIA, INC. Consolidated Balance Sheets Dollars in thousands, except share data. April 3, March 28, 1999 1998 --------- --------- Assets Current assets Cash $ 1,433 $ 394 Accounts receivable, less allowance for doubtful accounts of $8,892 at April 3, 1999 and $5,276 at March 28, 1998 167,925 108,429 Inventories, net of reserves of $2,823 at April 3, 1999 and $1,587 at March 28, 1998 216,807 95,365 Deferred income taxes 5,956 1,903 Prepaid expenses and other 1,551 2,626 --------- --------- Total current assets 393,672 208,717 Property and equipment, net 20,913 15,681 Goodwill and other intangibles, net 14,678 19,040 Deferred income taxes 399 525 Other assets 1,063 335 --------- --------- Total assets $ 430,725 $ 244,298 ========= ========= Liabilities and stockholders' equity Current liabilities Accounts payable $ 191,978 $ 140,380 Accrued expenses and deferred revenue 11,534 9,024 Revolving line of credit 148,730 73,381 Current portion of long-term debt 1,905 2,334 Deferred income taxes 3,918 908 --------- --------- Total current liabilities 358,065 226,027 Deferred income taxes 2,855 4,590 Long-term debt 3,918 3,166 Stockholders' equity Preferred stock, $.001 par value, 2,000,000 shares authorized, none issued Common stock, $.001 par value, 20,000,000 shares authorized, 8,449,009 and 4,810,553 shares issued and outstanding 8 5 Additional paid-in capital 52,145 845 Stockholder notes receivable (360) -- Retained earnings 14,094 9,665 --------- --------- Total stockholders' equity 65,887 10,515 --------- --------- Total liabilities and stockholders' equity $ 430,725 $ 244,298 ========= ========= VALLEY MEDIA, INC. Consolidated Statements of Operations Dollars in thousands, except share data Fiscal Quarters Ended Fiscal Years Ended April 3, March 28, April 3, March 28, 1999 1998 1999 1998 ---------- ---------- ---------- ---------- Net sales $257,864 $156,212 $888,966 $583,492 Cost of goods sold 230,042 136,214 791,154 516,627 ---------- ---------- ---------- ---------- Gross profit 27,822 19,998 97,812 66,865 Selling, general and administrative expenses 22,311 16,765 78,059 55,948 ---------- ---------- ---------- ---------- Operating income 5,511 3,233 19,753 10,917 Interest expense 3,410 2,115 10,928 6,627 ---------- ---------- ---------- ---------- Income before income taxes 2,101 1,118 8,825 4,290 Income taxes 861 449 3,673 1,731 ---------- ---------- ---------- ---------- Income before extraordinary loss 1,240 669 5,152 2,559 Extraordinary loss (net of income taxes of $477) -- -- (723) -- ---------- ---------- ---------- ---------- Net income $ 1,240 $ 669 $ 4,429 $ 2,559 ========== ========== ========== ========== Net income per share: Basic: Income before extraordinary loss $ 0.24 $ 0.14 $ 1.04 $ 0.53 Extraordinary loss -- -- (0.15) -- ---------- ---------- ---------- ---------- Net income per share $ 0.24 $ 0.14 $ 0.89 $ 0.53 ========== ========== ========== ========== Diluted: Income before extraordinary loss $ 0.21 $ 0.13 $ 0.89 $ 0.49 Extraordinary loss -- -- (0.12) -- ---------- ---------- ---------- ---------- Net income per share $ 0.21 $ 0.13 $ 0.77 $ 0.49 ========== ========== ========== ========== Weighted average shares used in the calculation Basic 5,263,701 4,820,116 4,950,753 4,791,864 Diluted 5,919,558 5,373,135 5,781,840 5,263,870 Supplemental Operating Data EBITDA $ 6,983 $ 4,416 $ 25,383 $ 15,030 Net sales information on reportable segments is as follows: Fiscal Years Ended Dollars in thousands April 3, March 28, March 29, 1999 1998 1997 -------- --------- --------- Full-line Distribution $668,385 $520,465 $184,721 New Media 182,734 30,316 8,319 Independent Distribution 55,048 45,685 6,626 Other 1,195 (144) 567 Intersegment Eliminations (18,396) (12,830) (1,002) -------- -------- -------- Total net sales $888,966 $583,492 $199,231 ======== ======== ========  