TORRANCE, Calif.--(BUSINESS WIRE)--May 19, 1999--Video City, Inc. (OTCBB:VDCT) announced today its annual earnings for the fiscal year ended Jan. 31, 1999. Revenues for the year were up 139 percent from $10,212,000 in fiscal 1998 to $24,436,000 in fiscal 1999. Earnings per share went from a loss of $.30 on 9,770,594 average shares in fiscal 1998 to a breakeven after adjustments, on 13,498,715 average shares in fiscal 1999. Management was pleased with the increase in revenue in fiscal 1999. "We are starting to see the effects of our acquisitions," said CEO and founder, Robert Y. Lee. He added, "Fiscal year 2000 should continue with revenue increases of more than 100% over the prior year." Video City started fiscal 1999 with 18 stores and, primarily through acquisition, increased to 128 stores by the end of the fiscal year. Subsequently, the company has both added stores and announced the agreement for the sale of 50 stores to Blockbuster Entertainment. Proceeds of the sale will be used to pay down debt and continue with the expansion plans. Video City, Inc. owns and operates several chains of retail video specialty stores and, measured in growth rates, was the fastest growing publicly-held video specialty store in the United States in 1998. As of May 17, 1999 the company owned and operated 137 video specialty stores in 11 states. This release contains forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, such as statements of the company's plans, objectives, expectations and intentions, that involve risks and uncertainties that could cause actual results to differ materially from those discussed in such forward looking statements. Factors that could cause or contribute to such differences include, but are not limited to: the ability to make future acquisitions on favorable terms; the availability of funding for future acquisitions; the integration of acquired stores into the company's operations; the expenses and cost savings associated with acquisitions; the demand for video tapes, both rental and sales, which may be affected by seasonal factors, weather, the level of home video viewing; competition from other retailers; the company's ability to manage and staff its growth; and other factors discussed under the caption "Special Considerations" in the company's Annual Report on Form 10-K for the fiscal year ended Jan. 31, 1999. Video City, Inc. (Formerly Lee Video City, Inc.) Consolidated Statements of Operations Year Ended Year Ended Year Ended January 31, January 31, December 31 1999 1998 1996 --------- --------- --------- Revenue Rental revenues and product sales $ 23,828,501 $ 10,007,358 $ 11,271,229 Management fee income 607,733 205,000 170,000 --------- --------- --------- Total Revenue 24,436,234 10,212,358 11,441,229 Operating costs and expenses Store operating expenses 13,675,372 4,460,200 6,390,574 Amortization of videocassette rental inventory 2,541,934 1,928,343 1,987,407 Cost of product sales 3,301,185 762,153 1,557,062 Cost of leased product 1,394,409 419,361 556,248 General and administrative 4,785,890 2,035,428 1,367,650 Non-recurring write-down of Film Library (Note 14) 3,029,829 ---------- --------- ---------- Total operating costs and expenses 25,698,790 12,635,314 11,858,941 Loss from operations (1,262,556) (2,422,956) (417,712) Other (income) expense Gain on disposition of assets net (Note 12) - - (1,049,295) Interest Expense, net 1,563,348 552,359 691,782 Other (221,081) - (17,275) --------- --------- --------- Loss before income taxes (2,604,823) (2,975,315) (42,924) Income tax benefit 2,615,957 - - --------- --------- --------- Net income (loss) $ 11,134 $ (2,975,315) $(42,924) Earnings (loss) per share (Note 11): Basic earnings (loss) per share $ 0.00 $ (0.30) $ (0.01) Diluted earnings (loss) per share $ 0.00 $ (0.30) $ (0.01) See accompanying notes to consolidated financial statements in company's Form 10-K Video City, Inc. (Formerly Lee Video City, Inc.) Consolidated Balance Sheets January 31, January 31, 1999 1998 ASSETS (Notes 1, 6, and 7) Current Assets: Cash $ 172,043 $ 28,127 Customer receivables (Note 1) 2,932,807 758,101 Notes receivable (Note 4) 86,703 355,430 Merchandise inventories (Note 1) 2,026,628 339,759 Other 52,870 411,536 --------- --------- Total current assets 5,271,051 1,892,953 Videocassette rental inventory, net (Note 1) 21,119,897 2,795,258 Property and equipment, net (Note 5) 4,525,986 859,708 Goodwill, net (Note 1) 5,176,850 -- Deferred taxes, net (Note 8) 883,249 -- Film library (Note 14) -- 818,171 Other assets (Note 6) 1,275,847 233,226 --------- --------- Total Assets $38,252,880 $ 6,599,316 Liabilities and Stockholders' Equity(Deficit) Current liabilities Accounts payable $ 9,328,556 $ 2,166,027 Accrued expenses 3,422,724 702,293 Current portion of long-term debt (Note 7) 2,125,187 1,674,457 ---------- ---------- Total current liabilities 15,876,467 4,542,777 Senior secured revolving line of credit (Note 6) 16,044,502 -- Long-Term debt, less current portion (Note 7) 1,636,646 2,043,431 Other liabilities 427,791 711,931 ---------- ---------- Total Liabilities 32,985,406 7,298,139 Commitments and contingencies (Note 9) Stockholders' equity (deficit) (Note 10) Preferred Stock 3,763,963 -- Common stock, $.01 par value per share, authorized 20,000,000 shares; issued and outstanding 13,498,715 shares at 1999 and 9,773,927 shares at 1998 134,987 97,739 Additional paid-in capital 9,229,687 7,075,735 Accumulated deficit (7,861,163) (7,872,297) --------- --------- Total Stockholders' Equity (deficit) 5,267,474 (698,823) --------- --------- Total Liabilities and Stockholders' Equity (deficit) $38,252,880 $ 6,599,316 ========= ========= See accompanying notes to consolidated financial statements in company's Form 10-K  