EX-1 2 dex1.txt PRESS RELEASE EXHIBIT 1 EMUSIC.COM ANNOUNCES THIRD-QUARTER FINANCIAL RESULTS REDWOOD CITY, Calif. -- April 18, 2001 -- EMusic.com Inc. (Nasdaq: EMUS), the Internet's leading downloadable music subscription service, today reported its financial results for the fiscal third quarter ended March 31, 2001. EMusic's revenues for the quarter ended March 31, 2001, were $4.3 million, a 36- percent increase compared with combined EMusic.com and Tunes.com revenues of $3.2 million for the quarter ended March 31, 2000. Revenues for the quarter ended December 31, 2000 were $4.7 million. Music revenues increased to $2.2 million for the quarter ended March 31, 2001 compared with $450,000 and $1.7 million for the quarters ended March 31, 2000 and December 31, 2000, respectively. Advertising revenues were $2.0 million for the quarter, a 32- percent decrease compared with the preceding quarter -- reflecting the continued decline in online advertising rates and sell through. The pro forma net loss for the fiscal third quarter ended March 31, 2001, was $5.3 million or $0.13 per share compared with a pro forma net loss of $13.3 million or $0.37 per share in the same quarter of the prior year and $8.7 million or $0.21 per share for the quarter ended December 31, 2000. Pro forma net losses exclude non-cash charges related to stock compensation, the amortization of intangible assets, impairment and restructuring charges and gain on the sale of IUMA. Including these charges net losses for the quarters ended March 31, 2001 and 2000 and December 31, 2000 were $6.1 million or $0.15 per share, $22.5 million or $0.62 per share and $191.0 million or $4.65 per share. As of March 31, 2001, the company's cash and short-term investments totaled approximately $10.9 million. In January 2001, EMusic announced a corporate reorganization aimed at reducing expenses and focusing the company on its two core sources of revenue -- advertising and promotional revenue through RollingStone.com, and downloadable music sales through EMusic.com. As a result of these actions the Company recorded a restructuring charge in the quarter ended March 31, 2001 of approximately $1.3 million that primarily included charges related to severance, lease terminations and other contract cancellations. Proposed Acquisition by Universal Music Group On April 9, 2001, EMusic and Universal Music Group announced that they had entered into a definitive merger agreement. Under this agreement, Universal Music Group will commence a cash tender offer to acquire all of EMusic's outstanding shares at a price of $0.57 per share. Any shares not purchased in the tender offer will be converted into the same cash price in a subsequent merger. The tender offer will commence on or prior to April 20, 2001 and will be made only by an offer to purchase and other offering and solicitation documents, copies of which will be filed with the Securities and Exchange Commission (SEC) and mailed to EMusic stockholders. The obligation of Universal to complete the tender offer will be conditioned on a minimum tender of shares representing a majority of EMusic's fully diluted shares. In addition, the offer will be conditioned on EMusic having cash and marketable securities (after deduction for estimated transaction costs) of a minimum of $5 million on April 30, 2001, reducing by no more than approximately $48,000 for each day thereafter until the offer closes. Either party can terminate the agreement if the offer is not completed by June 25, 2001. The transaction is subject to other customary conditions. It is not subject to the waiting period requirements of the Hart-Scott-Rodino Antitrust Improvement Act of 1976. About EMusic.com Since it was founded in January 1998, EMusic has established itself at the forefront of how music will be discovered, delivered and enjoyed in the next decade. In addition to having the Internet's leading downloadable music subscription service, EMusic operates one of the most popular families of music- oriented Web sites -- including RollingStone.com, EMusic.com and DownBeat.com. The company is based in Redwood City, California, with regional offices in Chicago, Los Angeles and New York. Availability of SEC Tender Offer and Other Information EMusic security holders and any potential investors in EMusic securities are advised to carefully read the tender offer statement on Schedule TO to be filed by Universal with the SEC, the solicitation/recommendation statement on Schedule 14D-9 to be filed by EMusic with the SEC and all other documents filed by either company with the SEC in connection with the proposed tender offer and/or merger when they become available. Those documents will contain important information about the proposed transaction. Security holders and potential investors may obtain free copies of those documents (when available), as well as other documents filed by EMusic at the SEC's website at http://www.sec.gov. These documents will also be made available to all stockholders of EMusic at no expense to them by submitting a request to Investor Relations at EMusic. ### NOTE: EMUSIC is a registered trademark and EMUSIC.COM is a trademark of EMusic.com Inc. Any forward-looking statements contained in this release involve a number of uncertainties, risks and other factors which may cause the actual results, performance or achievements expressed or implied by such forward-looking statements to materially differ. Factors that could cause actual events or results to differ materially include, among others, whether the conditions to Universal's obligations under the merger agreement are satisfied and changes in the Nasdaq listing status of the Company, and those other factors set forth in the Company's SEC reports. EMUSIC.COM INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited)
March 31, 2001 June 30, 2000 -------------- ------------- Assets Current Assets: Cash and short-term investments.............................. $ 10,888 $ 34,260 Accounts receivable, net..................................... 1,813 2,488 Prepaid expenses and other assets............................ 3,064 9,715 --------- --------- Total current assets......................................... 15,765 46,463 Property and equipment, net.................................... 2,794 4,706 Music rights, intangibles, and other assets, net............... 18,142 202,091 --------- --------- Total assets............................................ $ 36,701 $ 253,260 ========= ========= Liabilities and Stockholders' Equity Current Liabilities: Accounts payable............................................. $ 1,154 $ 4,130 Accrued liabilities.......................................... 4,106 3,540 Accrued compensation and related benefits.................... 1,546 2,352 Deferred revenue............................................. 759 1,151 --------- --------- Total current liabilities.................................. 7,565 11,173 Capital lease 107 245 Stockholders' Equity: Common stock and additional paid-in capital.................. 369,072 367,406 Accumulated deficit.......................................... (340,043) (125,564) --------- --------- Total stockholders' equity................................. 29,029 241,842 --------- --------- Total liabilities and stockholders' equity.............. $ 36,701 $ 253,260 ========= =========
EMUSIC.COM INC. CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (In thousands, except per share data) (Unaudited) Three months Three months ended ended March 31, March 31, 2001 2000 ---- ---- Revenues: Music revenues......................................... $ 2,246 $ 450 Advertising revenues................................... 2,036 1,650 ------- -------- Total revenues......................................... 4,282 2,100 Cost of revenues......................................... 1,989 579 ------- -------- Gross profit............................................. 2,293 1,521 ------- -------- Operating expenses: Product development.................................... 3,195 4,922 Stock compensation..................................... 22 2,072 ------- -------- Total product development............................ 3,217 6,994 Selling and marketing.................................. 3,059 8,810 General and administrative............................. 1,407 2,141 Amortization of intangible assets...................... 225 7,132 Restructuring and other charges........................ 1,349 - ------- -------- Total operating expenses............................ 9,257 25,077 ------- -------- Operating loss........................................... (6,964) (23,556) Gain on sale of IUMA..................................... 751 - Interest and other income, net........................... 85 1,027 ------- -------- Net loss................................................. $(6,128) $(22,529) ======= ======== Net loss per common share-basic and diluted.............. $(0.15) $ (0.62) ======= ======== Weighted average common shares outstanding- basic and diluted....................................... 41,588 36,201 ======= ========
EMUSIC.COM INC. CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (In thousands, except per share data) (Unaudited) Nine months Nine months ended ended March 31, March 31, 2001 2000 ---- ---- Revenues: Music revenues......................................... $ 5,419 $ 733 Advertising revenues................................... 8,176 1,970 --------- -------- Total revenues......................................... 13,595 2,703 Cost of revenues......................................... 5,672 751 --------- -------- Gross profit............................................. 7,923 1,952 --------- -------- Operating expenses: Product development.................................... 11,403 9,908 Stock compensation..................................... 369 8,987 --------- -------- Total product development............................ 11,772 18,895 Selling and marketing.................................. 13,606 19,218 General and administrative............................. 5,703 4,031 Amortization of intangible assets...................... 18,469 12,292 Impairment, restructuring and other charges............ 174,410 - --------- -------- Total operating expenses............................ 223,960 54,436 --------- -------- Operating loss........................................... (216,037) (52,484) Gain on sale of IUMA..................................... 751 - Interest and other income, net........................... 807 2,181 --------- -------- Net loss................................................. $(214,479) $(50,303) --------- -------- Accretion of preferred stock to redemption value......... - (224) Dividend on preferred stock.............................. - (493) --------- -------- Net loss applicable to common shares..................... $(214,479) $(51,020) ========= ======== Net loss per common share-basic and diluted.............. $(5.22) $(1.92) ========= ======== Weighted average common shares outstanding- basic and diluted....................................... 41,096 26,615 ========= ========
EMUSIC.COM INC. CONDENSED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS (In thousands, except per share data) (Unaudited) Three months Three months Three months ended ended ended March 31, December 30, March 31, 2001 2000 2000 ---- ---- ---- Revenues: Music.................................................. $ 2,246 $ 1,667 $ 450 Advertising............................................ 2,036 3,010 1,650 ------- ------- -------- Total revenues......................................... 4,282 4,677 2,100 Cost of revenues......................................... 1,989 1,838 579 ------- ------- -------- Gross profit............................................. 2,293 2,839 1,521 ------- ------- -------- Operating expenses: Product development.................................... 3,195 3,977 4,922 Selling and marketing.................................. 3,059 5,550 8,810 General and administrative............................. 1,407 2,310 2,141 ------- ------- -------- Total operating expenses............................ 7,661 11,837 15,873 ------- ------- -------- Operating loss........................................... (5,368) (8,998) (14,352) Interest and other income, net........................... 85 307 1,027 ------- ------- -------- Net loss................................................. $(5,283) $(8,691) $(13,325) ------- ------- -------- Net loss per common share-basic and diluted.............. $ (0.13) $ (0.21) $ (0.37) ======= ======= ======== Weighted average common shares outstanding- basic and diluted....................................... 41,588 41,099 36,201 ======= ======= ========
Note: Pro forma amounts for all periods presented exclude impairment, restructuring and other charges and non-cash charges related to stock compensation and the amortization of intangible assets and the gain on sale of IUMA. ###