EMAK Restructures, Drops CFO
EMAK Worldwide is consolidating three marketing services divisions and has let go CFO Zohar Ziv in a restructuring designed to save $2.8 million a year.
The shakeup comes barely one month into the tenure of CEO Jim Holbrook, who left Zipatoni to take the helm at EMAK on Nov. 14 (Nov. 10 Xtra)
EMAK is consolidating three divisions: Pop Rocket, its consumer products business; and SCI Promotions and Logistix, its two U.S. premiums agencies that don’t serve EMAK’s flagship client Burger King. (Logistix’s U.K. operations remain separate. That division saw layoffs in September, after revenues fell.)
There are no changes at EMAK’s flagship promotions agency, Equity Marketing, which handles Burger King, or at Chicago shop Upshot. EMAK shuttered Minneapolis shop Johnson Grossfield in October after it lost sole client Subway.
The new, combined division will have operations in Chicago and Los Angeles and likely will adopt the Logistix name because it has strong recognition, Holbrook says.
“We’re trying to create scale, synergy and management depth so it’s a tighter group with a broader offering for clients,” Holbrook told PROMO. “If we can put custom premiums, open-source premiums and licensing all under one roof, it’s an interesting proposition for clients.”
Logistix does mostly custom premiums; SCI specializes in open-sourced premiums. Pop Rocket sells toys and kids’ products based on a broad slate of licensed properties.
The consolidation also aligns EMAK’s cost structure with its current level of business activity, and the combined shop becomes a marketing services resource for EMAK’s promotions agencies to serve current and potential clients globally.
EMAK will close SCI’s Ontario, CA, office and warehouse, and relocate some staffers to EMAK’s Los Angeles headquarters, which now houses about 40% of SCI’s staff and all of Pop Rocket’s staff. It’s unclear how many employees will be affected. EMAK is mulling its options for its long-term lease on the 41,000 square-foot Ontario warehouse.
The consolidation should be complete by second-quarter 2006, and will save EMAK about $2.8 million a year, mostly by cutting SCI’s operating expenses 40%, or $2.1 million. But the move will cost EMAK about $1.8 million in separation costs. (That one-time expense will be spread over the next three quarters.)
EMAK has been scaling back Pop Rocket all year, dropping licenses and cutting staff as it revamps the consumer products business. “Pop Rocket will now [operate] on a strategic basis rather than an opportunistic basis,” Holbrook says, adding that Pop Rocket’s retail and licensing expertise complements SCI and Logistix.
EMAK also eliminated the post of CFO, shifting those duties to VP-Controller and Principal Accounting Officer Roy Dar and VP-Finance Michael Sanders. Ziv leaves EMAK immediately in an “amicable” departure, per Holbrook. Dar has been controller since 1999; Sanders has been VP-finance since 2004. “It made sense to create an ‘office of the CFO’ and separate the duties according to Dar’s and Sanders’ different expertise,” Holbrook says.
EMAK still expects fourth-quarter 2005 revenues will be down from fourth-quarter 2004, but projects an increase over third-quarter 2005. The Los Angeles-based company reported third-quarter revenues of $49.8 million, down 14% from third-quarter 2004. Revenues for the first nine months of 2005 were $165 million, up 2% from the first nine months of 2004.
EMAK ranked No. 25 in the 2005 PROMO 100 with 2004 net revenues of $40.2 million, up 9% from 2002.
