DVDPlanet Sold to Infinity Resources23 Sep, 2003 By: Holly J. Wagner
Image Entertainment Inc. is selling its wholly-owned retail subsidiary DVDPlanet Inc. to Planet Entertainment Inc., a company formed by Infinity Resources Inc. for the transaction.
“I am very pleased that we are able to acquire what is one of the best-known brands in the entertainment sector,” said Dennis Abboud, president and CEO of Infinity Resources. “The DVDPlanet Web site will profitably complement our existing brand portfolio and leverage our strong operational infrastructure. In addition, the DVDPlanet retail store will give us a foundation on which to build a profitable brick-and-mortar presence.”
Infinity Resources is the parent of I-Serve, the company with which DVDPlanet contracted in June for the fulfillment of its Internet sales. The sale includes the Web site dvdplanet.com, all associated operations and the DVDPlanet retail store in Huntington Beach, Calif.
Ten part-time and 23 full-time DVDPlanet employees, primarily in back-office positions, have been laid off in connection with the sale, with the remaining 18 full-time and 18 part-time employees being offered positions with Planet Entertainment.
“Online retailing of home entertainment programming is becoming increasingly competitive, with many online retailers offering free shipping and steep discounts,” Image COO David Borshell said. “Although its customers give DVDPlanet high marks for selection and service, profitability continued to be elusive in this very competitive direct-to-consumer space. Closing this sale continues to help streamline Image Entertainment and allow us to focus on growing our profitable core business of wholesale licensing and distribution of exclusive programming.”
Planet Entertainment is paying about $2.5 million in cash in connection with the sale, about $1 million of which is in the form of accelerated payments under a June fulfillment agreement with I-Serve. Planet Entertainment is also assuming DVDPlanet's leases for its corporate headquarters and the store and various other liabilities related to the assets being acquired. Additionally, Infinity Resources is releasing Image from its inventory repurchase guarantee under the fulfillment agreement.
Because Infinity will integrate DVDPlanet into its infrastructure, Image will take a $500,000 loss on proprietary computer software developed for DVDPlanet along with another $200,000 loss on assets associated with the sale.
Image will also expense about $400,000 in severance-related compensation liability between now and the end of the year. All of the financial estimates concerning the sale are subject to post-closing adjustments and reconciliation.
The sale will eliminate Image's ongoing losses from the long-unprofitable division. In its Form 10-K for the fiscal year ended March 31, 2003, Image reported that DVDPlanet incurred losses before income taxes of $1,618,000 ($0.10 per diluted share), $1,575,000 ($0.10 per diluted share) and $2,700,000 ($0.15 per diluted share) for fiscal years ended March 31, 2003, 2002 and 2001, respectively. In its Form 10-Q for the quarterly period ended June 30, Image reported that DVDPlanet incurred unaudited losses before income taxes of $448,000 ($0.02 per diluted share) and $373,000 ($0.02 per diluted share) for the three months ended June 30, 2003 and 2002, respectively.