New Frontier Media Reports Fiscal 2011 Fourth Quarter Results

New Frontier Media Reports Fiscal 2011 Fourth Quarter Results

BOULDER, Colo., June 3, 2011 /PRNewswire/ -- New Frontier Media, Inc. (Nasdaq: NOOF), a leading provider of transactional television services and distributor of general motion picture entertainment, today reported its results for the fiscal fourth quarter and full fiscal year ended March 31, 2011.

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"New Frontier Media achieved many of its strategic objectives in fiscal year 2011 and ended the fiscal year with a solid balance sheet," said Michael Weiner, chief executive officer of New Frontier Media, Inc. "Within the Transactional TV segment, we grew our international revenue during the fiscal year to $5.9 million, or a 64% increase as compared to the prior year results. More importantly, we have increased our global distribution footprint, which we believe will fuel growth in years to come. We also believe our efforts to stabilize the domestic business have had a positive impact on improving the segment's revenue trends. The Film Production segment also had a solid performance during fiscal year 2011. The segment completed two producer-for-hire arrangements during the fiscal year and was successful in expanding its distribution of mainstream content to VOD platforms. The Film Production segment also benefited from the distribution of mainstream content to other retail customer markets through its agreements with large, independent film distributors."

Mr. Weiner continued, "Looking ahead to fiscal year 2012, we plan to focus our Transactional TV segment efforts on further growing international revenue through new launches on traditional and emerging platforms as well as through expanded content distribution and improved performance with existing customers. We will also continue to focus on improving the segment's domestic revenue trends by distributing new and unique content packages and by taking market share from our competitors. For the Film Production segment, our primary focus will be to maintain the owned content revenue trends and continue to improve the repped content revenue trends through the distribution of mainstream content to VOD and retail markets. We also expect that the Film Production segment will benefit in fiscal year 2012 from a lower cost structure."

"We invested in the growth of New Frontier Media during fiscal year 2011 and expect to realize the benefits from those investments in fiscal year 2012 and beyond. In addition to other investments, we invested in storage and distribution equipment as well as a new, state of the art facility, and these investments are included in the $5.0 million of property and equipment purchases reflected in our fiscal year 2011 cash flows. Despite these investments, we had approximately $18.8 million in cash at the end of the fiscal year. Overall, we believe the Company is well positioned to generate long-term value," concluded Mr. Weiner.

Fourth Fiscal Quarter Financial Highlights: March 31, 2011 Compared to March 31, 2010

-- Revenue was approximately $10.9 million as compared to $15.1 million in
the same prior year quarter and reflected the following results:
-- Transactional TV segment revenue was $9.0 million as compared to
$9.3 million in the same prior year quarter.
-- Video-on-demand ("VOD") revenue was flat as compared to the same
prior year quarter and was $5.5 million. Domestic VOD revenue
declined by approximately $0.2 million from a general decline in
buy rates from lower consumer discretionary spending. This
decline was offset by a $0.2 million increase in international
VOD revenue from the distribution of content to new customers
and from improved content performance with existing customers.
-- Pay-per-view ("PPV") revenue declined to $3.4 million as
compared to $3.6 million in the same prior year quarter
primarily due to lower revenue from the two largest U.S. digital
broadcast satellite providers in the U.S., and we believe the
declines are due to lower discretionary consumer spending. The
declines in domestic PPV revenue were partially offset by a $0.2
million increase in international PPV revenue primarily from the
distribution of channels in Latin America.
-- Film Production segment revenue decreased to $1.7 million from $5.6
million primarily because the prior year quarter results included
producer-for-hire revenue and no similar revenue was generated
during the fourth quarter of fiscal year 2011.
-- Direct-to-Consumer segment revenue was approximately $0.2 million
and was consistent with the same prior year quarter.
-- Cost of sales decreased to $3.9 million as compared to $7.4 million in
the same prior year quarter primarily because the prior year quarter
included production costs incurred in connection with the Film
Production segment's completion of producer-for-hire services.
Partially offsetting the decline in costs was an increase in
Transactional TV segment expenses from higher content and distribution
rights amortization and higher transponder costs incurred to support the
segment's international expansion efforts.
-- Operating expenses decreased to $9.1 million as compared to $12.6
million in the same prior year quarter and reflected the below
comparative results:
-- Transactional TV segment expenses increased $1.3 million due to (a)
a $0.3 million increase in depreciation and maintenance expenses
from storage equipment purchased primarily to support international
growth initiatives, (b) a $0.3 million increase in charges primarily
from fully impairing certain content and distribution rights assets
that no longer met our quality standards for distribution, (c) a
$0.2 million increase in employee costs incurred to support the
development of new content packages and to strengthen the
international sales efforts, (d) a $0.2 million increase in costs
from participating in a promotional event, and (e) a $0.1 million
increase in consulting expenses for international business
development services;
-- Film Production segment expenses a) increased $1.6 million from film
cost impairment charges, b) increased $0.3 million to record an
increase in the allowance for unrecoverable accounts to reserve for
certain recoupable costs and producer advances, and c) decreased
$0.3 million from the departure of the segment's Co-Presidents and
from lower amortization expense because certain intangible assets
became fully amortized during the quarter. The same prior year
quarter results included a) a $4.9 million goodwill impairment
charge, b) $1.2 million in film cost impairment charges, and c) a
$0.7 million increase in the allowance for unrecoverable accounts;
and
-- Corporate Administration segment costs increased $0.3 million
primarily from higher bonus accruals.
-- The loss from continuing operations attributable to New Frontier Media,
Inc. was $1.3 million, or $0.07 per share, as compared to a loss of $4.8
million, or $0.25 per share, in the same prior year quarter.

Fiscal Year Financial Highlights: March 31, 2011 Compared to March 31, 2010

Revenue was $48.7 million for fiscal year 2011 as compared to $50.4 million in fiscal year 2010. The Company reported a loss from continuing operations attributable to New Frontier Media, Inc. of $0.7 million, or $0.04 per share, as compared to a loss of $1.1 million, or $0.06 per share, in the prior fiscal year. Cash flows from operating activities of continuing operations during fiscal year 2011 were $7.6 million as compared to $6.5 million in fiscal year 2010.

Conference Call Information

New Frontier Media, Inc. will be conducting its conference call and web cast to discuss earnings today at 11 a.m. Eastern Time. The participant phone number for the conference call is (877) 941-9205. To participate in the web cast please log onto www.noof.com and click on "Investor Relations" and then "Calendar of Events". A replay of the conference call will be available for seven days beginning after 1 p.m. Eastern Time on June 3, 2011 at (800) 406-7325, access code 4444131. The replay will also be archived for twelve months on the corporate web site at www.noof.com. This press release can be found on the Company's corporate web site, www.noof.com, under "Investor Relations/News Releases".

Cautionary Statements

This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "1933 Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "1934 Act"). The forward-looking statements are based on current expectations, estimates and projections made by management. These forward-looking statements are covered by the safe harbor provisions for forward-looking statements under Section 27A of the 1933 Act and Section 21E of the 1934 Act. Words such as "anticipates", "expects", "intends", "plans", "believes'', "seeks", "estimates", or variations of such words are intended to identify such forward-looking statements. For example, our stated expectation that (i) our investments will benefit the Company in fiscal year 2012 and beyond, and (ii) the Company is well positioned to generate long-term value, are forward looking statements. The forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those set forth or implied by any forward-looking statements. All forward-looking statements made in this press release are made as of the date hereof, and the Company assumes no obligation to update the forward-looking statements included in this news release whether as a result of new information, future events, or otherwise. Please refer to the Company's most recent annual report on Form 10-K, as amended, and other periodic filings with the Securities and Exchange Commission ("SEC") for additional information regarding risks and uncertainties, including, but not limited to, the risk factors listed from time to time in such SEC reports. Copies of these filings are available through the SEC's electronic data gathering analysis and retrieval (EDGAR) system at www.sec.gov.

ABOUT NEW FRONTIER MEDIA, INC.

New Frontier Media, Inc. is a leading producer and distributor of branded television networks and on-demand programming. The Company delivers transactional, adult-themed pay-per-view networks as well as video-on-demand services to cable and satellite operators worldwide. The Company's programming originates at New Frontier Media's state of the art digital broadcast center in Boulder, Colorado. The Company owns thousands of hours of digital content and partners with movie studios to bring together a variety of transactional adult entertainment available today.

New Frontier Media's Film Production segment produces original motion pictures that are distributed in the U.S. on premium movie channels, such as Cinemax® and Showtime®, and internationally on similar services. The Film Production segment also develops and produces original programming that is widely distributed on satellite and cable pay-per-view and video-on-demand platforms. This segment also represents the work of a full range of independent film producers in markets around the globe.

The Company is headquartered in Boulder, Colorado, and its common stock is listed on the Nasdaq Global Select Market under the symbol "NOOF." For more information about New Frontier Media, Inc., contact Grant Williams, Chief Financial Officer, at (303) 444-0900, extension 2185, and please visit our web site at www.noof.com.

Consolidated Operating Results
(in thousands, except per share amounts)

(Unaudited)
Three Months Ended March
31,
-------------------------
2011 2010
---- ----

Net revenue $10,920 $15,087

Cost of sales 3,914 7,400
----- -----

Gross margin 7,006 7,687

Operating expenses excluding impairment
charges 7,081 6,264
Charge for goodwill impairment - 4,856
Charge for asset impairments other than
goodwill 1,975 1,497
----- -----
Total operating expenses 9,056 12,617
----- ------

Operating loss (2,050) (4,930)

Other income (expense) 44 (13)
--- ---

Loss from continuing operations before
income tax benefit (expense) (2,006) (4,943)

Income tax benefit (expense) 659 134
--- ---

Loss from continuing operations (1,347) (4,809)

Income (loss) from discontinued
operations, net of income tax
benefit (expense) of $(3), $149, $5 and
$391, respectively 4 (267)
--- ----

Net loss (1,343) (5,076)

Add: Net loss attributable to
noncontrolling interests 23 -
--- ---

Net loss attributable to New Frontier
Media, Inc. shareholders $(1,320) $(5,076)
======= =======

Amounts attributable to New Frontier
Media, Inc. shareholders:
Loss from continuing operations $(1,324) $(4,809)
Income (loss) from discontinued
operations, net of income tax
benefit (expense) of $(3), $149, $5 and
$391, respectively 4 (267)
--- ----
Net loss $(1,320) $(5,076)
======= =======

Per share information attributable to New
Frontier Media, Inc. shareholders:
Basic income (loss) per share:
Continuing operations $(0.07) $(0.25)
Discontinued operations 0.00 (0.01)
---- -----
Net basic loss per share $(0.07) $(0.26)
====== ======

Diluted income (loss) per share:
Continuing operations $(0.07) $(0.25)
Discontinued operations 0.00 (0.01)
---- -----
Net diluted loss per share $(0.07) $(0.26)
====== ======

Weighted average shares outstanding 19,201 19,454
====== ======
Weighted average diluted shares 19,201 19,454
====== ======

(Unaudited)
Year Ended March 31,
--------------------
2011 2010
---- ----

Net revenue $48,709 $50,428

Cost of sales 20,486 19,858
------ ------

Gross margin 28,223 30,570

Operating expenses excluding impairment charges 26,788 24,310
Charge for goodwill impairment - 4,856
Charge for asset impairments other than goodwill 2,599 1,497
----- -----
Total operating expenses 29,387 30,663
------ ------

Operating loss (1,164) (93)

Other income (expense) 55 (182)
--- ----

Loss from continuing operations before income
tax benefit (expense) (1,109) (275)

Income tax benefit (expense) 349 (838)
--- ----

Loss from continuing operations (760) (1,113)

Income (loss) from discontinued operations, net
of income tax
benefit (expense) of $(3), $149, $5 and $391,
respectively (9) (625)
--- ----

Net loss (769) (1,738)

Add: Net loss attributable to noncontrolling
interests 44 -
--- ---

Net loss attributable to New Frontier Media,
Inc. shareholders $(725) $(1,738)
===== =======

Amounts attributable to New Frontier Media, Inc.
shareholders:
Loss from continuing operations $(716) $(1,113)
Income (loss) from discontinued operations, net
of income tax
benefit (expense) of $(3), $149, $5 and $391,
respectively (9) (625)
--- ----
Net loss $(725) $(1,738)
===== =======

Per share information attributable to New
Frontier Media, Inc. shareholders:
Basic income (loss) per share:
Continuing operations $(0.04) $(0.06)
Discontinued operations (0.00) (0.03)
----- -----
Net basic loss per share $(0.04) $(0.09)
====== ======

Diluted income (loss) per share:
Continuing operations $(0.04) $(0.06)
Discontinued operations (0.00) (0.03)
----- -----
Net diluted loss per share $(0.04) $(0.09)
====== ======

Weighted average shares outstanding 19,291 19,481
====== ======
Weighted average diluted shares 19,291 19,481
====== ======

Consolidated Balance Sheets
(in thousands)

March 31, March 31,
2011 2010
---------- ----------
Assets (Unaudited)
Current assets:
Cash and cash equivalents $18,787 $17,187
Restricted cash 109 112
Accounts receivable, net 8,695 10,112
Deferred producer-for-hire costs - 625
Taxes receivable 877 944
Prepaid and other assets 2,569 1,749
----- -----
Total current assets 31,037 30,729
------ ------
Property and equipment, net 7,218 4,557
Content and distribution rights, net 11,543 11,316
Recoupable costs and producer advances, net 2,771 3,421
Film costs, net 2,579 5,705
Goodwill 3,743 3,743
Other identifiable intangible assets, net 45 673
Deferred tax assets 1,658 349
Other assets 879 1,320
Total assets $61,473 $61,813
======= =======

Liabilities and equity
Current liabilities:
Accounts payable $1,571 $1,103
Producers payable 1,089 951
Deferred revenue 863 685
Accrued compensation 1,607 1,802
Deferred producer liabilities 1,654 1,377
Short-term debt 500 1,000
Deferred tax liabilities 46 107
Accrued and other liabilities 1,910 1,823
----- -----
Total current liabilities 9,240 8,848
----- -----
Taxes payable 116 309
Other long-term liabilities 519 528
--- ---
Total liabilities 9,875 9,685
----- -----

Commitments and contingencies

Equity:
Common stock 2 2
Additional paid-in capital 55,169 54,929
Accumulated deficit (3,460) (2,735)
Accumulated other comprehensive loss (69) (68)
--- ---
Total New Frontier Media, Inc.
shareholders' equity 51,642 52,128
Noncontrolling interests (44) -
--- ---
Total equity 51,598 52,128
------ ------
Total liabilities and equity $61,473 $61,813
======= =======

Consolidated Statements of Cash Flows

(in thousands) (Unaudited)
Year Ended March 31,
--------------------
2011 2010
---- ----
Cash flows from operating activities:
Net loss $(769) $(1,738)
Add: Loss from discontinued operations 9 625
--- ---
Loss from continuing operations (760) (1,113)
Adjustments to reconcile loss from
continuing operations to net cash
provided by operating activities of
continuing operations:
Depreciation and amortization 9,118 8,835
Share-based compensation 608 555
Deferred taxes (1,374) (925)
Charge for asset impairments 2,599 6,353
Reversal of uncertain tax positions (193) -
Reversal of interest expense for
uncertain tax positions (35) -
Changes in operating assets and
liabilities:
Accounts receivable 1,715 (172)
Accounts payable 475 (705)
Content and distribution rights (4,736) (4,060)
Film costs (1,024) (2,919)
Deferred producer-for-hire costs 625 (566)
Deferred revenue 198 (60)
Deferred producer liabilities 277 (593)
Producers payable 138 1
Taxes receivable and payable 73 172
Accrued compensation (195) 649
Recoupable costs and producer advances 649 1,578
Other assets and liabilities (555) (557)

Net cash provided by operating
activities of continuing operations 7,603 6,473
Net cash used in operating activities
of discontinued operations (34) (1,061)
--- ------
Net cash provided by operating
activities 7,569 5,412
----- -----
Cash flows from investing activities:
Purchases of investments - (1,000)
Redemptions of investments - 1,090
Purchases of property and equipment (5,014) (1,064)
Purchases of intangible assets (2) (108)

Net cash used in investing activities
of continuing operations (5,016) (1,082)
Net cash provided by investing
activities of discontinued operations - 9
--- ---
Net cash used in investing activities (5,016) (1,073)
------ ------
Cash flows from financing activities:
Payments on short-term debt (500) (6,000)
Proceeds from short-term debt - 3,000
Purchases of common stock (363) (123)
Payments on long-term seller financing (95) (75)

Net cash used in financing activities
of continuing operations (958) (3,198)
Net cash provided by (used in)
financing activities of discontinued
operations - -
--- ---
Net cash used in financing activities (958) (3,198)
---- ------

Net increase in cash and cash
equivalents 1,595 1,141
Effect of exchange rate changes on cash
and cash equivalents 5 (3)
Cash and cash equivalents, beginning of
period 17,187 16,049

Cash and cash equivalents, end of
period $18,787 $17,187
======= =======

Segment Summary Data (1)
(dollars in millions)

(Unaudited)
Three Months Ended March
31,
-------------------------
2011 2010 % change
---- ---- --------

Net revenue from continuing
operations
Transactional TV $9.0 $9.3 -3%
Film Production 1.7 5.6 -70%
Direct-to-Consumer 0.2 0.2 0%
--- ---
Total net revenue 10.9 15.1 -28%
---- ----

Cost of sales from continuing
operations
Transactional TV 3.3 3.1 6%
Film Production 0.4 4.0 -90%
Direct-to-Consumer 0.3 0.3 0%
--- ---
Total cost of sales 3.9 7.4 -47%
--- ---

Operating expenses from
continuing operations
Transactional TV 4.1 2.8 46%
Film Production(2) 2.6 7.8 -67%
Direct-to-Consumer 0.4 0.4 0%
Corporate Administration 2.0 1.7 18%
--- ---
Total operating expenses 9.1 12.6 -28%
--- ----

Operating income (loss) from
continuing operations
Transactional TV 1.7 3.5 -51%
Film Production (1.3) (6.3) 79%
Direct-to-Consumer (0.4) (0.5) 20%
Corporate Administration (2.0) (1.7) -18%
---- ----
Total operating loss $(2.1) $(4.9) 57%
===== =====

(Unaudited)
Year Ended March 31,
--------------------
2011 2010 % change
---- ---- --------

Net revenue from continuing
operations
Transactional TV $35.9 $37.4 -4%
Film Production 12.0 12.0 0%
Direct-to-Consumer 0.8 1.0 -20%
--- ---
Total net revenue 48.7 50.4 -3%
---- ----

Cost of sales from continuing
operations
Transactional TV 12.8 11.9 8%
Film Production 6.4 6.6 -3%
Direct-to-Consumer 1.2 1.4 -14%
--- ---
Total cost of sales 20.5 19.9 3%
---- ----

Operating expenses from
continuing operations
Transactional TV 12.1 10.3 17%
Film Production(2) 7.1 10.9 -35%
Direct-to-Consumer 0.7 0.6 17%
Corporate Administration 9.5 8.8 8%
--- ---
Total operating expenses 29.4 30.7 -4%
---- ----

Operating income (loss) from
continuing operations
Transactional TV 10.9 15.1 -28%
Film Production (1.5) (5.4) 72%
Direct-to-Consumer (1.1) (0.9) -22%
Corporate Administration (9.5) (8.8) -8%
---- ----
Total operating loss $(1.2) $(0.1) #
===== =====

(1) Amounts in this schedule may not sum due to rounding.

(2) Operating expenses from continuing operations during the quarter
and fiscal year ended March 31, 2011 included film cost impairment
charges of
approximately $1.6 million and $2.2 million, respectively. Operating
expenses during the quarter and fiscal year ended March 31, 2010
included a $4.9
million goodwill impairment charge and $1.2 million in film cost
impairment charges.

# Represents an increase or decrease in excess of 100%.

Supplemental Revenue Data (1)
(dollars in millions)

(Unaudited)
Three Months Ended March
31,
-------------------------
2011 2010 % change
---- ---- --------

Transactional TV
VOD $5.5 $5.5 0%
PPV 3.4 3.6 -6%
Other 0.2 0.3 -33%
--- ---
Total $9.0 $9.3 -3%
==== ====

Film Production
Owned content $0.8 $1.0 -20%
Repped content 0.8 0.5 60%
Producer-for-
hire and other 0.1 4.0 -98%
--- ---
Total $1.7 $5.6 -70%
==== ====

Direct-to-Consumer
Net membership $0.2 $0.2 0%
Other - - 0%
--- ---
Total $0.2 $0.2 0%
==== ====

(Unaudited)
Year Ended March 31,
--------------------
2011 2010 % change
---- ---- --------

Transactional TV
VOD $21.7 $20.4 6%
PPV 13.6 16.1 -16%
Other 0.5 0.8 -38%
--- ---
Total $35.9 $37.4 -4%
===== =====

Film Production
Owned content $4.9 $5.5 -11%
Repped content 2.8 2.2 27%
Producer-for-
hire and other 4.2 4.3 -2%
--- ---
Total $12.0 $12.0 0%
===== =====

Direct-to-Consumer
Net membership $0.8 $0.9 -11%
Other - 0.1 #
--- ---
Total $0.8 $1.0 -20%
==== ====

(1) Amounts in this schedule may not sum due to rounding.

# Represents an increase or decrease in excess of 100%.

Company Contact:Grant WilliamsChief Financial Officer(303) 444-0900 x 2185gwilliams@noof.com

SOURCE New Frontier Media, Inc.

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New Frontier Media, Inc.

Web Site: http://www.noof.com

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