-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Dp6pEiRk4JydHbQDh2i79LYqGCuc7djontYVII/8m99EtQQGj92NRQjf04MG1q+n E4VdhR+JouFu9/kecX9a6g== /in/edgar/work/20000814/0000912057-00-037512/0000912057-00-037512.txt : 20000921 0000912057-00-037512.hdr.sgml : 20000921 ACCESSION NUMBER: 0000912057-00-037512 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VDI MULTIMEDIA CENTRAL INDEX KEY: 0001014733 STANDARD INDUSTRIAL CLASSIFICATION: [7812 ] IRS NUMBER: 954272619 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-21917 FILM NUMBER: 700840 BUSINESS ADDRESS: STREET 1: 7083 HOLLYWOOD CITY: HOLLYWOOD STATE: CA ZIP: 90028 BUSINESS PHONE: 2139575500 MAIL ADDRESS: STREET 1: 6920 SUNSET BLVD CITY: HOLLYWOOD STATE: CA ZIP: 90028 FORMER COMPANY: FORMER CONFORMED NAME: VDI MEDIA DATE OF NAME CHANGE: 19960516 10-Q 1 a10-q.txt EXHIBIT 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000 Commission File Number 0-21917 -------------------- VDI MULTIMEDIA (Exact name of registrant as specified in its charter) California 95-4272619 (State of or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 7083 Hollywood Boulevard, Suite 200 90028 Hollywood, California (Zip Code) (Address of principal executive offices) Registrant's telephone number, including area code (323) 957-7990 Securities registered pursuant to Section 12(b) of the Act None. Securities registered pursuant to Section 12(g) of the Act Common Stock, no par value. -------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X] No [ ] As of August 11, 2000, there were 9,201,995 shares of Common Stock outstanding. PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS VDI MEDIA CONSOLIDATED BALANCE SHEET ASSETS
December 31, June 30, 1999 2000 ----------------- ----------------- (Unaudited) Current assets: Cash and cash equivalents $ 3,030,000 $ 233,000 Accounts receivable, net of allowances for doubtful accounts of $971,000 and $1,140,000, respectively 19,736,000 17,749,000 Inventories 1,122,000 1,022,000 Prepaid expenses and other current assets 1,413,000 2,591,000 Deferred income taxes 1,096,000 941,000 ----------------- ----------------- Total current assets 26,397,000 22,536,000 Property and equipment, net 21,860,000 25,709,000 Other assets, net 297,000 376,000 Goodwill and other intangibles, net 26,510,000 26,150,000 ----------------- ----------------- $ 75,064,000 $ 74,771,000 ================= ================= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 6,998,000 $ 7,375,000 Accrued expenses 2,581,000 2,896,000 Income taxes payable 418,000 - Borrowings under revolving credit agreement 5,888,000 8,388,000 Current portion of notes payable 8,309,000 5,800,000 Current portion of capital lease obligations 217,000 143,000 ----------------- ----------------- Total current liabilities 24,411,000 24,602,000 ----------------- ----------------- Deferred income taxes 1,408,000 1,459,000 Notes payable, less current portion 16,433,000 13,533,000 Capital lease obligations, less current portion 68,000 34,000 Shareholders' equity: Preferred stock; no par value; 5,000,000 authorized; none outstanding - - Common stock; no par value; 50,000,000 authorized; 9,210,697 and 9,245,062 shares, respectively, issued and outstanding 17,935,000 18,130,000 Retained earnings 14,809,000 17,013,000 ----------------- ----------------- Total shareholders' equity 32,744,000 35,143,000 ----------------- ----------------- $ 75,064,000 $ 74,771,000 ================= =================
See accompanying notes to consolidated financial statements 2 VDI MULTIMEDIA CONSOLIDATED STATEMENT OF INCOME (Unaudited)
Three Months Ended Six Months Ended June 30, June 30, ------------------------------ ------------------------------- 1999 2000 1999 2000 -------------- -------------- --------------- --------------- Revenues $18,657,000 18,431,000 $ 38,442,000 $ 37,612,000 Cost of goods sold 10,810,000 10,800,000 22,415,000 21,632,000 -------------- -------------- --------------- --------------- Gross profit 7,847,000 7,631,000 16,027,000 15,980,000 Selling, general and administrative expense 4,180,000 4,998,000 9,156,000 9,515,000 Expenses related to terminated merger - - - 1,214,000 -------------- -------------- --------------- --------------- Operating income 3,667,000 2,633,000 6,871,000 5,251,000 Interest expense 562,000 704,000 1,066,000 1,388,000 Interest income - - 3,000 - -------------- -------------- --------------- --------------- Income before income taxes 3,105,000 1,929,000 5,808,000 3,863,000 Provision for income taxes 1,273,000 866,000 2,381,000 1,659,000 ============== ============== =============== =============== Net income $ 1,832,000 $ 1,063,000 $ 3,427,000 $ 2,204,000 ============== ============== =============== =============== Earnings per share: Basic: Net income per share $ 0.20 $ 0.12 $ 0.36 $ 0.24 Weighted average number of shares 9,215,878 9,238,843 9,438,965 9,226,825 Diluted: Net income per share $ 0.20 $ 0.11 $ 0.36 $ 0.23 Weighted average number of shares including the dilutive effect of stock options (65,442 for 1999 and 234,056 for 2000) 9,363,586 9,472,899 9,545,540 9,660,947
3 VDI MEDIA CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
Six Months Ended June 30, ------------------------------------- 1999 2000 ---------------- ----------------- Cash flows from operating activities: Net income $ 3,427,000 $ 2,204,000 Adjustment to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,409,000 2,827,000 Deferred taxes 315,000 206,000 Provision for doubtful accounts 152,000 169,000 Changes in assets and liabilities: Decrease in accounts receivable 875,000 1,818,000 (Increase) decrease in inventories (344,000) 100,000 Increase in prepaid expenses and other current assets (1,188,000) (1,178,000) Increase in other assets (18,000) (79,000) (Decrease) increase in accounts payable (92,000) 377,000 Increase in accrued expenses 350,000 315,000 Decrease in income taxes payable (548,000) (418,000) ---------------- ----------------- Net cash provided by operating activities 5,338,000 6,341,000 ---------------- ----------------- Cash used in investing activities: Capital expenditures (4,122,000) (5,847,000) Proceeds from sale of assets - 12,000 Net cash paid for acquisitions (968,000) (481,000) ---------------- ----------------- Net cash used in investing activities (5,090,000) (6,316,000) Cash flows from financing activities: Change in revolving credit agreement 5,655,000 2,500,000 Repurchase of common stock (3,064,000) - Proceeds from exercise of stock options - 195,000 Proceeds from notes payable 1,000,000 - Repayment of notes payable (2,919,000) (5,409,000) Repayment of capital lease obligations (335,000) (108,000) ---------------- ----------------- Net cash provided by (used in) financing activities 337,000 (2,822,000) Net increase (decrease) in cash 585,000 (2,797,000) Cash at beginning of period 2,048,000 3,030,000 ---------------- ----------------- Cash at end of period $ 2,633,000 $ 233,000 ================ ================= Supplemental disclosure of cash flow information: Cash paid for: Interest $ 1,066,000 $ 1,388,000 ================ ================= Income tax $ 3,854,000 $ 2,337,000 ================ =================
See accompanying notes to consolidated financial statements 4 VDI MULTIMEDIA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2000 NOTE 1 -- THE COMPANY VDI MultiMedia ("VDI" or the "Company") is a leading provider of video and film asset management services to owners, producers and distributors of entertainment and advertising content. The Company provides the services necessary to edit, master, reformat, archive and ultimately distribute its clients' video content. The Company provides physical and electronic delivery of commercials, movie trailers, electronic press kits, infomercials and syndicated programming to thousands of broadcast outlets worldwide. The Company provides worldwide electronic distribution, using fiber optics and satellites, through its Broadcast One(R) network. Additionally, the Company provides a broad range of video services, including the duplication of video in all formats, element storage, standards conversions, closed captioning and transcription services and video encoding for air play verification purposes. The Company also provides its customers value-added post production, editing and digital media services. The Company seeks to capitalize on growth in demand for the services related to the distribution of entertainment content, without assuming the production or ownership risk of any specific television program, feature film or other form of content. The primary users of the Company's services are entertainment studios and advertising agencies that generally choose to outsource such services due to the sporadic demand of any single customer for such services and the fixed costs of maintaining a high-volume physical plant. Since January 1, 1997, the Company has successfully completed seven acquisitions of companies providing similar services. The latest of these acquisitions occurred in November 1998 when the Company acquired the assets of Dubs, Inc. ("Dubs"), one of the Company's largest direct competitors in Hollywood. The Company will continue to evaluate acquisition opportunities to enhance its operations and profitability. As a result of these acquisitions, VDI believes it is one of the largest and most diversified providers of technical and distribution services to the entertainment and advertising industries, and is therefore able to offer its customers a single source for such services at prices that reflect the Company's scale economies. The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles and the Securities and Exchange Commission's rules and regulations for reporting interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the six months ended June 30, 2000 are not necessarily indicative of the results that may be expected for the year ending December 31, 2000. These financial statements should be read in conjunction with the financial statements and related notes contained in the Company's Form 10-K for the year ended December 31, 1999, as amended. NOTE 2 - STOCK REPURCHASE In February 1999, the Company commenced a stock repurchase program. The board of directors authorized the Company to allocate up to $4,000,000 to purchase its common stock at suitable market prices. As of August 11, 2000, the Company has repurchased 629,000 shares, totaling $3.4 million, of the Company's common stock in connection with this program. VDI MULTIMEDIA MANAGEMENT'S DISCUSSION AND ANALYSIS ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS In connection with the "safe-harbor" provisions of the Private Securities Litigation Reform Act of 1995, the Company, in its Annual Report on Form 10-K for the year ended December 31, 1999, outlined cautionary statements identifying important factors that could cause the Company's actual results to differ materially from those projected in forward-looking statements made by, or on behalf of, the Company. Such forward-looking statements, as made within this Quarterly Report on Form 10-Q, should be considered in conjunction with the information included in the Company's Annual Report on Form 10-K for the year ended December 31, 1999, as amended, and the risk factors set forth in the Company's Registration Statement on Form S-1 filed with the Securities and Exchange Commission on February 19, 1997 and Registration Statement on Form S-3 filed with the Securities and Exchange Commission on June 29, 1998. Factors that could cause future results to differ from the Company's expectations include, but are not limited to, the following: competition, customer and industry concentration, dependence on technological developments, risks related to expansion and acquisition of new businesses, dependence on key personnel, fluctuating results and seasonality and control by management. THREE MONTHS ENDED JUNE 30, 2000 COMPARED TO THREE MONTHS ENDED JUNE 30, 1999. REVENUES. Revenues decreased by $0.3 million or 1.2% to $18.4 million for the three month period ended June 30, 2000 compared to $18.7 million for the three month period ended June 30, 1999. This decrease in revenue was due to a decrease in the use of the Company's services by certain customers resulting from the integration of its two largest facilities. GROSS PROFIT. Gross profit decreased $0.2 million or 2.7% to $7.6 million for the three month period ended June 30, 2000 compared to $7.8 million for the three month period ended June 30, 1999. As a percent of revenues, gross profit decreased from 42.1% to 41.4%. The decrease in gross profit as a percentage of revenues was due primarily to costs related to building the digital television services department, which generated an insignificant amount of revenues in the quarter. SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and administrative expense increased $0.8 million, or 19.6%, to $5.0 million for the three month period ended June 30, 2000 compared to $4.2 million for the three month period ended June 30, 1999. As a percentage of revenues, selling, general and administrative expense increased to 27.1% for the three month period ended June 30, 2000 compared to 22.4% for the three month period ended June 30, 1999. This increase was due to accrued severance costs related to the recent departure of certain executives, administrative salaries related to the build-out of the digital television services department and increased legal fees. OPERATING INCOME. Operating income decreased $1.1 million or 28.2% to $2.6 million for the three month period ended June 30, 2000 compared to $3.7 million for the three month period ended June 30, 1999 due to the lower gross profit and higher selling, general and administrative expense. INTEREST EXPENSE. Interest expense increased $0.1 million, or 25.3%, to $0.7 million for the three month period ended June 30, 2000 compared to $0.6 million for the three month period ended June 30, 1999. This increase was due to increased borrowings under the Company's debt agreements and an increase in the cost of funds due to higher interest rates. INCOME TAXES. The Company's effective tax rate was 43% for the second quarter of 2000 and 41% for the second quarter of 1999. VDI MULTIMEDIA MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED) NET INCOME. Net Income for the three month period ended June 30, 2000 decreased $0.7 million or 42.0% to $1.1 million compared to $1.8 million for the three month period ended June 30, 1999. SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO SIX MONTHS ENDED JUNE 30, 1999. REVENUES. Revenues decreased by $0.8 million or 2.2% to $37.6 million for the six month period ended June 30, 2000 compared to $38.4 million for the six month period ended June 30, 1999. This decrease in revenue was due to a decrease in the use of the Company's services by certain customers resulting from the integration of its two largest facilities. GROSS PROFIT. Gross profit remained flat at $16.0 million for the six month period ended June 30, 2000 compared to the six month period ended June 30, 1999. As a percent of revenues, gross profit increased from 41.7% to 42.5%. The increase in gross profit as a percentage of revenues was due primarily to the lower cost of direct materials resulting from volume purchasing discounts. SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and administrative expense increased $0.3 million, or 3.9%, to $9.5 million for the six month period ended June 30, 2000 compared to $9.2 million for the six month period ended June 30, 1999. As a percentage of revenues, selling, general and administrative expense increased to 25.3% for the six month period ended June 30, 2000 compared to 23.8% for the six month period ended June 30, 1999. This increase was due to accrued severance costs related to the recent departure of certain executives, administrative salaries related to the build-out of the digital television services department and increased legal fees; these additional costs were offset by lower administrative wages in other areas of the Company. EXPENSES RELATED TO TERMINATED MERGER. In the quarter ended March 31, 2000, the Company accrued $1.2 million in expenses related to the termination of their proposed merger with an affiliate of Bain Capital. OPERATING INCOME. Operating income decreased $1.7 million or 23.6% to $5.2 million for the six month period ended June 30, 2000 compared to $6.9 million for the six month period ended June 30, 1999 due to the higher selling, general and administrative expense and expenses related to the terminated merger. INTEREST EXPENSE. Interest expense increased $0.3 million, or 30.2%, to $1.4 million for the six month period ended June 30, 2000 compared to $1.1 million for the six month period ended June 30, 1999. This increase was due to increased borrowings under the Company's debt agreements and an increase in the cost of funds due to higher interest rates. INCOME TAXES. The Company's effective tax rate was 43% for the first six months of 2000 and 41% for the first six months of 1999. NET INCOME. Net income for the six month period ended June 30, 2000 decreased $1.2 million or 35.7% to $2.2 million compared to $3.4 million for the six month period ended June 30, 1999. VDI MULTIMEDIA MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED) LIQUIDITY AND CAPITAL RESOURCES This discussion should be read in conjunction with the notes to the financial statements and the corresponding information more fully described in the Company's Form 10-K, as amended, for the year ended December 31, 1999. At June 30, 2000 the Company's cash and cash equivalents aggregated $0.2 million. The Company's operating activities provided cash of $6.3 million for the six months ended June 30, 2000. The Company's investing activities used cash of $6.3 million for the six months ended June 30, 2000. The Company spent approximately $5.8 million for the addition and replacement of capital equipment necessary to consolidate newly acquired companies, accommodate increased customer demands for the Company's services, and for investments in digital television services equipment and management information systems. The Company's business is equipment intensive, requiring periodic expenditures of cash or the incurrence of additional debt to acquire additional fixed assets in order to increase capacity or replace existing equipment. The Company expects to spend approximately $5.5 million on capital expenditures during the last six months of 2000 to upgrade and replace equipment, upgrade the Company's management information system and invest in high definition and other digital equipment. The Company's financing activities provided cash of $2.8 million in the six months ended June 30, 2000. Cash flows from financing activities include $5.5 million in debt repayments, offset by an increase in the Company's revolving credit facility of $2.5 million. The Company has a $10.0 million revolving credit agreement with the Bank, which expires on November 1, 2000. There was $8.4 million outstanding under the credit agreement at June 30, 2000. The Company also had $19.3 million outstanding on a term loan with the Bank at June 30, 2000. The Company is currently in the process of negotiating a larger credit facility, which it expects to complete by the end of the third quarter of 2000. Management believes that cash generated from its ongoing operations and a larger credit facility, which the Company expects to complete by the end of the third quarter of 2000, will fund necessary capital expenditures and provide adequate working capital for at least the next twelve months. The Company, from time to time, considers the acquisition of businesses complementary to its current operations. Consummation of any such acquisition or other expansion of the business conducted by the Company may be subject to the Company securing additional financing. VDI MULTIMEDIA MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED) PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBIT NO. DESCRIPTION 27 Financial Data Schedule (b) REPORTS ON FORM 8-K None. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. VDI MEDIA DATE: AUGUST 14, 2000 BY: /s/ CLARKE W. BREWER -------------------- ------------------------------ Clarke W. Brewer Chief Financial Officer and Treasurer (duly authorized officer and principal financial officer) EX-27 2 ex-27.txt EXHIBIT 27
5 6-MOS DEC-31-2000 JUN-30-2000 233,000 0 18,889,000 1,140,000 1,022,000 22,536,000 44,793,000 19,084,000 74,771,000 24,602,000 0 0 0 18,130,000 0 74,771,000 37,612,000 37,612,000 21,632,000 21,632,000 10,729,000 0 1,388,000 3,863,000 1,659,000 2,204,000 0 0 0 2,204,000 0.24 0.23
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