Genius: No Profit Assurances18 Apr, 2006 By: Erik Gruenwedel
Genius Products revealed April 17 in an annual report that it “cannot provide assurances” it will be profitable following the projected May closing of its acquisition by The Weinstein Co. (TWC).
The Solana Beach, Calif.-based home video distributor, which is 70% owned by Miramax co-founders Bob and Harvey Weinstein, reported a net loss of $17.2 million for fiscal year 2005 (ended Dec. 31).
Genius, which has released TWC films Derailed and Wolf Creek on DVD, is scheduled to street this year Hoodwinked, Mrs. Henderson Presents, Transamerica (with Golden Globe winner Felicity Huffman), The Matador and Scary Movie 4.
The company, which has accrued operating losses in every quarter since its inception, posted a net loss of $6 million during the same period last year. Net revenue for the fiscal year was $22.3 million, compared to $16.6 million last year. Audio revenue was $6 million, compared to $2.9 million in 2004.
Genius reported it generated 40% of net revenues (12.5% of accounts receivable) in 2005 from Wal-Mart — the latter announcing separately it intends to eliminate $6.5 billion this year in inventory from its shelves and warehouses.
Sales of videos and DVD accounted for 76.8% of gross revenue in 2005, compared to 82.6% in 2004. The cost of sales for videos and DVD for the year increased $2.2 million, to $13.7 million, which Genius attributed in part to its acquisition of Wellspring Media. The company also saw cost of product returns, discounts and allowances increase to $9.9 million, from $2.7 million last year.
Genius stated it expects to incur about $490,000 in expenses associated with the corporate realignment of Wellspring, including shuttering the theatrical distribution unit and relocating operations from New York to Santa Monica, Calif.
General and administrative expenses increased 116.1%, to $11 million (about 49.4% of revenues), from $5.9 million in 2004.
The company, which employs 91 people, paid CEO Trevor Drinkwater a base salary (excluding stock options and bonuses) of $228,125 in 2005.
Upon closing of the The Weinstein Co. acquisition, Drinkwater is slated to begin a three-year employment contract calling for a first-year base salary of $425,000; $475,000 in the second and $525,000 in the third year. Separate one-year extensions would have the CEO receive base salary of $675,000 in five years.