FOOL CONFERENCE CALL SYNOPSIS*
By Debora Tidwell (MF Debit)

Cyrk, Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CYRK)") else Response.Write("(NASDAQ: CYRK)") end if %>
3 Pond Road
Gloucester, MA 01930
(508) 283-5800

UNION CITY, Ca., November 11, 1996/FOOLWIRE/ --- Cyrk Inc. reported their third quarter 1996 results on November 8th. Cyrk's net sales were $55.6 million compared to $26.4 million for the same period last year. This represents an increase of 110%. The company reported a net loss of $524,000 or -$0.05 per share versus a net loss of $1.5 million or -$0.14 per share last year.

For the nine month period, net sales total $164.8 million versus $104.8 million for the same period a year ago, a 57% increase. For the nine month period, net income was $126,000 or $0.01 earning per share compared to a net loss of $871,000 or -$0.08 loss per share last year.

SALES SPECIFICS. LARGE ACCOUNTS. Sales to Philip Morris in the third quarter amounted to $21.3 million, or approximately 38% of total sales. Sales to Pepsico totalled $18.3 million in the third quarter or approximately 33% of total sales. These amounts are significantly higher than their respective second quarter 1996 sales to these two prominent customers and are comparable to their first quarter 1996 purchases. Sales to these customers are in relation to the major marketing programs that are in effect during the quarter, namely the Marlboro Unlimited Program and the Pepsi Stuff continuity promotion. The quarterly fluctuation of sales relative to these programs is inherent and the timing of the promotion, the redemption rates, and the particular stage of the various marketing programs.

SALES TO OTHER ACCOUNTS. Promotional sales to their other customers in the quarter totalled just over $5.6 million and represents an increase of 24% over the third quarter last year. As they have said in prior conference calls, this growth can be attributed to the Citibank promotion and the success of their diversification effort to achieve a more diverse customer base.

PRIVATE LABEL. Their private label and Cyrk brand business is also showing an increase. Sales in this category were $10.3 million or 18% of total sales and that represents an increase over third quarter last year of 30% or $2.5 million. They are pleased with the growth in this category and they do expect this growth rate to be maintained for the remainder of the year.

MARGINS. The company sales in the third quarter does reflect lower gross margins. Gross margins for the quarter total 15.1% versus 17.2% a year ago. They obviously enjoyed the sales volumes from the large promotional programs, but they also have a company margin pressure as they evolve and mature. This factor remains the single largest reason for the margin decline versus last year. Further, the third quarter volume associated with their private label and retail group is up from last year, but is down from the first two quarters of this year. This fluctuation is seasonal and is not unexpected. It remains consistent in this business. But, as such, it is another factor in the decline of gross margins from prior calendar year quarters. And with a throughput decline in their manufacturign operations because of the low demand, they have incurred the associated increase in the cost of their production. But they do expect this factor will reverse in light of estimated higher fourth quarter production levels.

EXPENSES. The company's SG&A reflects a 6% increase over the second quarter. On a year-over-year comparison, SG&A reflects a $1.8 million increase and as a percentage of sales declined to 17% of sales versus 29% a year ago. They have briefly referenced the investment spending nature and the business development aspect of these costs in their press release.

New customers and sales growth remain their focus. These efforts have already produced additional accounts. Their ability is somewhat restricted by their customer agreements as it relates to disclosing the significant details of this new business, but nonetheless speaks to their diversification effort.

MARGIN PRESSURES FROM BIG ACCOUNTS. As they look forward, the cost side of their business does remain a challenge as they balance the seeding of new business and investment spending and dealing with the margin pressures exerted by the major continuity programs. They are very pleased to acknowledge the highest backlog in 8 quarters. At September 30th, their backlog totalled $81.1 million. They intend to build upon the new business relationships secured by their internal efforts as they integrate the acquisition of Marketing Incentives Inc., a transaction they announced early last week, they haven't released the terms of this deal but they can acknowledge that it is expected to be accretive, adding to earnings per share. They realize their company remains very difficult to model in light of the numerous factors affecting the purchases relative to the major promotional programs. In particular, consumer redemption rates remain a wildcard in projecting volume. Based on the data available to them today, they expect to enjoy substantial revenue growth in the fourth quarter. Given the current level of SG&A and gross margin pressures, volume is a greater determinant of profitability. Consequently their energies, including their acquisition efforts are squarely focused on this end.

There hasn't been any significant change in any litigation matters previously disclosed or any other material adverse change in their business. Their balance sheet remains debt free and extremely liquid.

GENERAL BACKGROUND AND STRATEGY. They had built, over the last few years one of the highest quality best executional machines in the promotional products business with an unparalleled design group, manufacturing group where they make their own products, their sourcing group in Asia, their fulfillment area, and even areas where they have added such as data for database marketing. Many have seen the decline in volume from their peak at $402 million and it was a matter of starting back on the road of filling that up with a more diversified customer base. On that note they are hitting on all cylinders and they think it is very exciting at this time to be able to talk about things that internally and externally are affecting the return to that volume. The first ones everyone looks to are the big programs and their relationships with Philip Morris and Pepsi couldn't be better. Those programs continue to be very robust and they believe prove the merit of these continuity programs in the consumer products world.

DIVERSIFYING THE BUSINESS. But they have also known that they have to diversify internal growth with a lot more smaller customers. And that is what they talked to in their press release. In the last quarter alone they are in 6 different industries. They have been awarded several new promotional accounts. They have secured the internal corporate premium catalogs for customers in the banking, food, credit card, and petroleum industries.

INTERNAL PROGRAMS. Almost every company out there in the Fortune 1000 has internal use for lots of hats, bags, jackets, etc. that are embroidered or screen printed with logos. Those have traditionally been low-quality giveaways and what Cyrk has brought to the industry is high quality hats, bags, jackets, and promotional items -- higher quality and better design. And now that they have turned their attention to broadening their customer base they are virtually undefeated in going into these corporations and securing their contract to provide items for these internal programs. These programs may be $1-2 million programs, some go as large as $20 million, but the difference is that they are internal and are generally relationships Cyrk can contract for over 3 years and they can plan to invest appropriately for the internal customers and that gives Cyrk a nice platform to do their consumer programs. They have turned their attention to this business and are making great strides and weekly adding new customers and new programs.

ACQUISITIONS. Also, they have done a lot of work and have been moving their pipeline of potential acquisition candidates forward. It has been a very interesting process. They wanted to be very careful that they in fact only acquired companies that they felt were of the highest caliber. What they do for their customers is somewhat different than the industry standard. They have a very high quality as far as fashion and execution. They wanted to make sure any acquisition candidates fit that profile. When they talk about adding acquisitions in this avenue, they are talking about companies that have strong relationships with their customers and for years have been delivering hats and bags and jackets and keychains and pens and pencils and things like that. Now, with the combination with Cyrk, they can offer their customers the resources of Cyrk's design, direct manufacturing, their substantial base in Asia, their fulfillment capabilities and their database marketing capacity. They have been working on a series of these acquisitions and Marketing Incentives is the first.

* A Fool conference call synopsis represents an effort to highlight the salient points of a conference call and should not be taken as an authoritative accounting or transcription of the entire event. Note: Statements made by a company other than historical information may constitute forward-looking statements for which the company can claim protection under the Safe Harbor Act. Please consult the company's filings with the SEC for information on risk factors which might cause actual results to differ materially from the information contained in these forward-looking statements.