-----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, DPNkoTTyyBo52QIj2zxXb4p+MH2hbbBeH3ajL34A03zbfRBlegrbOM9BimEOnxWJ cjyoCQMnGMYnYPLEZeCt4Q== 0001047469-97-004735.txt : 19971117 0001047469-97-004735.hdr.sgml : 19971117 ACCESSION NUMBER: 0001047469-97-004735 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971114 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: VDI MEDIA CENTRAL INDEX KEY: 0001014733 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MOTION PICTURE & VIDEO TAPE PRODUCTION [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: 97718780 BUSINESS ADDRESS: STREET 1: 6920 SUNSET BOULEVARD CITY: HOLLYWOOD STATE: CA ZIP: 90028 BUSINESS PHONE: 2139575500 MAIL ADDRESS: STREET 1: 6920 SUNSET BLVD CITY: HOLLYWOOD STATE: CA ZIP: 90028 10-Q 1 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 SEPTEMBER 30, 1997 Commission File Number 0-21917 ____________________ VDI MEDIA (Exact name of registrant as specified in its charter) California 95-4272619 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 6920 Sunset Boulevard, 90028 Hollywood, California (Zip Code) (Address of principal executive offices) Registrant's telephone number, including area code (213) 957-5500 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 November 11, 1997, there were 9,580,000 shares of Common Stock outstanding. PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS VDI MEDIA CONSOLIDATED BALANCE SHEET ASSETS
December 31, September 30, 1996 1997 ---------------- ----------------- (Unaudited) Current assets: Cash $ 564,000 $ 3,614,000 Accounts receivable, net of allowances for doubtful accounts of $460,000 and $733,000, respectively 4,537,000 9,928,000 Amounts receivable from officer 1,214,000 - Amounts receivable from employees 224,000 6,000 Inventories 144,000 268,000 Prepaid expenses and other current assets 2,000 454,000 ---------------- ----------------- Total current assets 6,685,000 14,270,000 Property and equipment, net 3,520,000 7,325,000 Deferred offering costs 876,000 - Goodwill (Note 2) - 7,385,000 Other assets 97,000 105,000 ---------------- ----------------- Total Assets $ 11,178,000 $ 29,085,000 ---------------- ----------------- ---------------- ----------------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 2,394,000 $ 3,691,000 Accrued expenses 1,606,000 2,319,000 Borrowings under revolving credit agreement - 417,000 Current portion of notes payable 728,000 342,000 Current portion of capital lease obligations 32,000 712,000 Deferred tax liability (Note 1) - 185,000 ---------------- ----------------- Total current liabilities 4,760,000 7,666,000 ---------------- ----------------- Notes payable, less current portion 1,102,000 653,000 ---------------- ----------------- Capital lease obligations, less current portion 75,000 743,000 ---------------- ----------------- Shareholders' equity: Preferred stock; no par value; 5,000,000 authorized; none outstanding - - Common stock; no par value; 50,000,000 authorized; 6,660,000 and 9,580,000 shares, respectively, issued and outstanding 1,015,000 18,711,000 Retained earnings 4,226,000 1,312,000 ---------------- ----------------- Total shareholders' equity 5,241,000 20,023,000 ---------------- ----------------- $ 11,178,000 $ 29,085,000 ---------------- ----------------- ---------------- -----------------
See accompanying notes to consolidated financial statements 2 VDI MEDIA CONSOLIDATED INCOME STATEMENT
For the Three Months Ended For the Nine Months Ended September 30, September 30, -------------------------- -------------------------- (Unaudited) (Unaudited) 1996 1997 1996 1997 ----------- ----------- ----------- ----------- Revenues $ 6,874,000 $11,248,000 $18,182,000 $28,546,000 Cost of goods sold 3,988,000 7,096,000 11,080,000 17,513,000 ----------- ----------- ----------- ----------- Gross profit 2,886,000 4,152,000 7,102,000 11,033,000 Selling, general and adminisrative expense 1,479,000 2,518,000 4,205,000 6,752,000 ----------- ----------- ----------- ----------- Operating income 1,407,000 1,634,000 2,897,000 4,281,000 Interest expense 117,000 74,000 271,000 239,000 Interest income 39,000 57,000 48,000 205,000 ----------- ----------- ----------- ----------- Income before income taxes 1,329,000 1,617,000 2,674,000 4,247,000 Provision for income taxes 22,000 665,000 45,000 1,421,000 Establishment of deferred tax liability (Note 1) - - - 185,000 ----------- ----------- ----------- ----------- Net income $ 1,307,000 $ 952,000 $ 2,629,000 $ 2,641,000 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Net income per share $ 0.10 $ 0.30 ----------- ----------- ----------- ----------- Weighted average number of shares 9,580,000 8,894,222 ----------- ----------- ----------- -----------
See accompanying notes to consolidated financial statements 3 VDI MEDIA CONSOLIDATED STATEMENT OF CASH FLOWS
For the Nine Months Ended September 30, ------------------------- 1996 1997 ----------- ---------- (Unaudited) Cash flows from operating activites: Net income $2,630,000 $2,641,000 Adjustment to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,222,000 2,573,000 Increase in deferred taxes - 185,000 Provision for doubtful accounts 57,000 110,000 Gain on sale of assets - (11,000) Changes in assets and liabilities net of effects from purchase of Woodholly Productions: Increase in accounts receivable (859,000) (2,112,000) (Increase) decrease in other receivables (39,000) 210,000 Decrease in inventories 54,000 14,000 Decrease (increase) in prepaid expenses and other current assets 25,000 (385,000) Increase in other assets (6,000) (18,000) (Increase) decrease in deferred offering costs (584,000) 876,000 Increase in accounts payable 433,000 279,000 Increase in accrued expenses 384,000 375,000 Decrease in accrued settlement obligation (41,000) - ----------- ---------- Net cash provided by operatring activities 3,276,000 4,737,000 ----------- ---------- Cash used in investing activities: Capital expenditures (1,043,000) (1,009,000) Proceeds from sale of assets - 16,000 Payment for purchase of Woodholly, net of cash acquired - (4,703,000) Payment for purchase of MultiMedia, net of cash acquired - (6,838,000) ----------- ---------- Net cash used in investing activities (1,043,000) (12,534,000) Cash flows from financing activities: S Corporation distributions to shareholders (1,264,000) (5,555,000) Change in revolving credit agreement 1,014,000 17,000 Proceeds from sale of common stock - 17,696,000 Repayment of notes payable (577,000) (1,854,000) Repayment of amounts receivable from officer (1,175,000) 1,227,000 Repayment of subordinated notes payable to related parties (255,000) - Repayment of capital lease obligations (118,000) (684,000) ----------- ---------- Net cash (used in) provided by financing activities (2,375,000) 10,847,000 Net (decrease) increase in cash (142,000) 3,050,000 Cash at beginning of period 415,000 564,000 ----------- ---------- Cash at end of period $ 273,000 $3,614,000 ----------- ---------- ----------- ---------- Supplemental disclosure of cash flows information: Cash paid for: Interest 236,000 219,000 ----------- ---------- ----------- ---------- Income tax 48,000 1,792,000 ----------- ---------- ----------- ----------
See accompanying notes to consolidated financial statements 4 VDI MEDIA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS September 30, 1997 NOTE 1 -- THE COMPANY VDI MEDIA (the "Company") is a provider of high quality, value-added video distribution and duplication services including distribution of national television spot advertising, motion picture trailers and electronic press kits. The Company's services consist of (i) the physical and electronic delivery of broadcast quality advertising, including spots, trailers, electronic press kits and infomercials, and syndicated television programming to television stations, cable television and other end-users nationwide and (ii) 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 and editing services. The Company is headquartered in Hollywood, California and has additional facilities in Los Angeles, California; Tulsa, Oklahoma; Chicago, Illinois; New York, New York and San Francisco, California. In the first quarter of 1997, the Company completed the sale of 3,120,000 common shares, no par value ("Common Stock"), in an initial public offering (the "Offering"). Prior to the Offering, the Company had elected S Corporation status for federal and state income tax purposes. As a result of the Offering, the S Corporation status terminated. Thereafter, the Company has paid federal and state income taxes as a C Corporation. The termination of the Company's S Corporation status resulted in the establishment of a net deferred tax liability calculated at normal federal and state income rates, causing a one-time non-cash charge of $185,000 against earnings for additional income tax expense in the quarter ended March 31, 1997. In May 1996, the Company effected a 333-for-1 common stock split and increased the number of authorized shares to 50,000,000 shares of common stock. All share amounts in the accompanying financial statements have been retroactively restated to reflect this split. 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 accruals) considered necessary for a fair presentation have been included. Operating results for the nine months ended September 30, 1997 are not necessarily indicative of the results that may be expected for the year ending December 31, 1997. 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, 1996. NOTE 2 -- WOODHOLLY PRODUCTIONS AND MULTI-MEDIA ACQUISITIONS On January 1, 1997, the Company acquired all of the assets of Woodholly Productions. Woodholly Productions provides full service duplication, distribution, video content storage and ancillary services to major motion picture studios, advertising agencies and independent production companies for both domestic and international use. As consideration, the Company will pay the partners of Woodholly Productions a maximum of $9.0 million, net of adjustments, of which $4.0 million was paid in the first quarter of 1997. The remaining balance is subject to earn-out provisions which are predicated upon Woodholly Productions attaining certain operating income goals, as set forth in the purchase agreement, in each quarter through December 31, 2001. To date, the Company has made earn-out payments totaling $0.6 million for the first three quarters of 1997. On July 31, 1997, the Company acquired all of the outstanding shares of Multi-Media Services, Inc. ("Multi-Media Services"), a duplication and distribution company specializing in commercial advertisers and major ad agencies. As consideration, the Company paid a purchase price of $6.8 million, net of adjustments. In addition, the 5 purchase agreement calls for earn-out payments of up to $2.0 million (exclusive of interest) in the event Multi-Media Services meets specified financial goals. The Company has accounted for both of these acquisitions as purchases. Goodwill arising from these transactions is being amortized over twenty years. The contingent purchase price for each of these transactions, to the extent earned, will be recorded as an increase to goodwill. The accompanying consolidated financial statements include the accounts of Woodholly Productions, Multi-Media Services and the Company. All material intercompany transactions and balances have been eliminated. The consolidated statement of income includes both Woodholly Productions and Multi-Media Services' results of operations from the effective date of their acquisitions. The following table reflects unaudited pro forma combined results of operations of the Company, Woodholly Productions and Multi-Media Services as if the acquisitions had occurred on January 1, 1996:
Nine Months Ended September 30, 1997 1996 ---- ---- Net Sales $ 32,756 $ 28,727 Net Income $ 2,340 $ 1,793 Earnings per share $ 0.26 $ 0.25
NOTE 3 -- S CORPORATION DISTRIBUTION In connection with the termination of its S Corporation status (see Note 1), the Company distributed $5.6 million of the net proceeds of the Offering ("S Corp Distribution") to its three shareholders in respect of previously taxed and undistributed earnings of the Company. A final distribution of approximately $0.3 million is expected to be paid on or before November 30, 1997 to the Company's pre-offering Shareholders. 6 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, 1996, outlined cautionary statements identifying important factors that could cause the Company's actual results to differ materially from those projected in forward-looking statement 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, 1996 and the risk factors set forth in the Company's prospectus filed with the Securities and Exchange Commission dated February 18, 1997. NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 1996 REVENUES. Revenues increased by $10.4 million or 57.0% to $28.5 million for the nine month period ended September 30, 1997 compared to $18.2 million for the nine month period ended September 30, 1996. This increase in revenue was due to increased volume resulting from (i) new clients and the availability of new services and capacity resulting from the acquisition of Woodholly Productions and Multi-Media Services and (ii) substantially increased marketing of the Company's national distribution capabilities through the Broadcast One/Multi-Media Services division. GROSS PROFIT. Gross profit increased $3.9 million or 55.3% to $11.0 million for the nine month period ended September 30, 1997 compared to $7.1 million for the nine month period ended September 30, 1996. As a percentage of revenues, gross profit decreased from 39.1% to 38.6%. The decrease in gross profit as a percentage of revenues was attributable to an increase in direct labor costs and depreciation charges resulting from the acquisition of Woodholly Productions and Multi-Media Services. These amounts were partially offset by lower shipping expenses for the services provided by Woodholly Productions which are generally distributed to fewer locations. SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and administrative expense increased $2.5 million or 60.6% to $6.8 million for the nine month period ended September 30, 1997 compared to $4.2 million for the nine month period ended September 30, 1996. As a percentage of revenues, selling, general and administrative expense increased to 23.7% for the nine month period ended September 30, 1997 compared to 23.1% for the nine month period ended September 30, 1996. This increase is due to increased headcount in the Company's sales and marketing departments and an increase in depreciation and amortization charges resulting from the acquisition of Woodholly Productions and Multi-Media Services. In addition, selling, general and administrative expense for the nine months ended September 30, 1997 includes salaries paid to the four former owners of Woodholly Productions. OPERATING INCOME. Operating income increased $1.4 million or 47.7% to $4.3 million for the nine month period ended September 30, 1997 compared to $2.9 million for the nine month period ended September 30, 1996. INCOME TAXES. Prior to the Offering, the Company operated as an S Corporation. As such, the Company was not responsible for federal income taxes and provided for state income taxes at reduced rates. As a result of the Offering, the Company's S Corporation status terminated. Accordingly, the Company will, in future periods, provide for all income taxes at higher statutory rates. These factors are estimated to result in an effective tax rate for periods subsequent to the Offering of approximately 40%. For the nine month period ended September 30, 1997, the Company recorded a one-time non-cash charge of $0.2 million for deferred taxes based upon an increase in the effective tax rate for the Company's S Corporation status (1.5%) to C Corporation status (40%) applied to the temporary differences between the financial reporting and tax bases of the Company's assets and liabilities. NET INCOME. Net income for the nine month period ended September 30, 1997 remained constant at $2.6 million compared to the nine month period ended September 30, 1996. Net income did not rise proportionately to the increase in operating income as the Company currently provides for taxes at a higher effective rate of approximately 7 VDI MEDIA MANAGEMENT'S DISCUSSION AND ANALYSIS - (CONTINUED) 40%. In the prior comparable period the Company was taxed as an S Corporation and provided for income taxes at an effective rate of 1.5%. THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 1996 REVENUES. Revenues increased by $4.4 million or 63.6% to $11.2 million for the three month period ended September 30, 1997 compared to $6.9 million for the three month period ended September 30, 1996. This increase in revenue was due to increased volume resulting from (i) new clients and the availability of new services and capacity resulting from the acquisition of Woodholly Productions and Multi-Media Services and (ii) substantially increased marketing of the Company's national distribution capabilities through the Broadcast One/Multi-Media Services division. GROSS PROFIT. Gross profit increased $1.3 million or 43.8% to $4.2 million for the three month period ended September 30, 1997 compared to $2.9 million for the three month period ended September 30, 1996. As a percentage of revenues, gross profit decreased from 42.0% to 36.9%. The decrease in gross profit as a percentage of revenues was attributable to an increase in direct labor costs, depreciation charges and outsourcing costs resulting from the acquisition of Multi-Media Services. These amounts were partially offset by lower shipping expenses for the services provided by Woodholly Productions which are generally distributed to fewer locations. SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and administrative expense increased $1.0 million or 70.2% to $2.5 million for the three month period ended September 30, 1997 compared to $1.5 million for the three month period ended September 30, 1996. As a percentage of revenues, selling, general and administrative expense increased to 22.4% for the three month period ended September 30, 1997 compared to 21.5% for the three month period ended September 30, 1996. This increase in selling, general and administrative expense as a percentage of revenues was primarily due to the increased headcount resulting from the acquisition of Multi-Media Services and an increase in depreciation and amortization charges resulting from the acquisition of Woodholly Productions and Multi-Media Services, and was offset by the spreading of fixed overhead expenses over a higher revenue base in the three month period ended September 30, 1997 than to the comparable period in 1996. OPERATING INCOME. Operating income increased $0.2 million or 16.1% to $1.6 million for the three month period ended September 30, 1997 compared to $1.4 million for the three month period ended September 30, 1996. INCOME TAXES. Prior to the Offering, the Company operated as an S Corporation. As such, the Company was not responsible for federal income taxes and provided for state income taxes at reduced rates. As a result of the Offering, the Company's S Corporation status terminated. Accordingly, the Company will, in future periods, provide for all income taxes at higher statutory rates. These factors are estimated to result in an effective tax rate for periods subsequent to the Offering of approximately 40%. NET INCOME. Net income for the three month period ended September 30, 1997 decreased $0.4 million or -27.2% to $1.0 million compared to $1.3 million for the three month period ended September 30, 1996. Such decrease is not proportionate to the increase in operating income as the Company currently provides for taxes at a higher effective rate of approximately 40%. In the prior comparable period the Company was taxed as an S Corporation and provided for income taxes at an effective rate of 1.5%. 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 for the year ended December 31, 1996. Since its inception, the Company has financed its operations through internally generated cash flow, borrowings under lending agreements with financial institutions and, to a lesser degree, borrowings from related parties. In the first quarter of 1997, the Company completed the Offering of 3,120,000 shares of Common Stock, 200,000 of which were sold on behalf of a selling shareholder. The net proceeds of the Offering to the Company 8 VDI MEDIA MANAGEMENT'S DISCUSSION AND ANALYSIS - (CONTINUED) were approximately $18.0 million. At September 30, 1997, the Company's cash and cash equivalents aggregated $3.6 million. The Company's operating activities provided cash of $4.7 million for the nine months ended September 30, 1997 and $3.3 million for the nine months ended September 30, 1996. The Company's investing activities used cash of $12.5 million for the nine months ended September 30, 1997 including $4.7 million for the acquisition of Woodholly Productions and $6.8 million for the acquisition of Multi-Media Services. The Company also spent approximately $1.0 million for the addition and replacement of capital equipment necessary to accommodate increased customer demands for the Company's services, and for investments in management information systems. The Company's business is equipment intensive, requiring periodic expenditures of cash or the incurrence of additional debt to acquire additional videotape duplication equipment in order to increase capacity or replace existing equipment. The Company expects to spend approximately $1.0 million on capital expenditures during the fourth quarter of 1997 to acquire additional equipment and management information systems. The Company's financing activities provided cash of $10.8 million in the nine months ended September 30, 1997. Cash flows from financing activities during such nine month period include the effect of the Offering which raised net proceeds of approximately $18.0 million. Using the proceeds of the Offering, the Company repaid $1.8 million outstanding under its term loan with a bank. In addition the Company paid the first two installments of the final S Corporation distribution to its shareholders. Such distribution represents previously taxed and undistributed earnings of the Company while an S Corporation. The final installment, which is currently estimated to be approximately $0.3 million, is expected to be paid on or before November 30, 1997 to the Company's pre-offering Shareholders. In January 1997 the Company acquired substantially all of the assets and assumed certain liabilities of Woodholly Productions (the "Woodholly Acquisition"). The purchase price consisted of an initial payment of $4.0 million, net of adjustments, plus an undetermined contingent purchase price. The contingent purchase price is to be earned and paid based on the total operating income (as defined) resulting from the financial results of Woodholly Productions as a separate division of the Company. The contingent purchase price, in total, is limited to $5.0 million. To date, the Company has made earn-out payments totaling $0.6 million for the first three quarters of 1997. The excess of the initial consideration over the fair value of the assets acquired and liabilities assumed of approximately $1.8 million has been allocated to goodwill. In August 1997 the Company acquired substantially all of the outstanding capital stock of Multi-Media Services (the "Multi-Media Acquisition"). The purchase price consisted of an initial payment of $6.8 million, net of adjustments, plus an undetermined contingent purchase price. The contingent purchase price is to be earned and paid based on the total operating income (as defined) resulting from the financial results of Multi-Media Services as a separate division of the Company. The contingent purchase price, in total, is limited to $2.0 million. The excess of the initial consideration over the fair value of the assets acquired and liabilities assumed of approximately $5.0 million has been allocated to goodwill. Goodwill arising from the Woodholly Acquisition and Multi-Media Acquisition (the "acquisitions") will be amortized over 20 years. The contingent purchase price for the acquisitions, to the extent earned, will be treated as an increase in goodwill. The acquisitions were accounted for by the Company under the purchase method of accounting. The Company had a $2.0 million revolving credit agreement with Union Bank which expired on June 30, 1997. Management is in the process of negotiating a new credit facility. Additionally, in connection with the purchase of Multi-Media, the Company assumed responsibility for a $0.5 million revolving credit agreement with Wells Fargo Bank (the "Wells Fargo Credit Agreement") which expires on January 10, 1998. The amount currently outstanding under the Wells Fargo Credit Agreement is $0.4 million. 9 VDI MEDIA MANAGEMENT'S DISCUSSION AND ANALYSIS - (CONTINUED) Management believes that cash generated from the Offering, ongoing operations, and its existing working capital will fund necessary capital expenditures and provide adequate working capital for at least the next twelve months. 10 VDI MEDIA MANAGEMENT'S DISCUSSION AND ANALYSIS - (CONTINUED) 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. NEW ACCOUNTING STANDARDS In March 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("FAS 128") which will become effective in the fourth quarter of 1997, FAS 128 replaces the presentation of earnings per share reflected on the Statement of Income with a dual presentation of Basic Earnings per Share ("Basic EPS") and Diluted Earnings per Share ("Diluted EPS"). FAS 128 does not permit early application; however, it requires, when implemented in the fourth quarter of 1997, restatement of previously reported earnings per share for each income statement presented. The Company does not expect the adoption of FAS 128 to have a material impact on its financial condition or results of operations. In June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("FAS 130") which will become effective in fiscal 1998. The Company does not expect the adoption of FAS 130 to have a material impact on its financial condition or results of operations. In June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information" ("FAS 131") which will become effective in fiscal 1998. FAS 131 establishes standards for the way publicly-held companies report information about operating segments as well as disclosures about products and services, geographic areas and major customers. However, the Company does not expect the adoption of FAS 131 to have a material impact on its consolidated financial condition or results of operations. 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 Current Report on Form 8-K filed on August 14, 1997 relating to the acquisition of Multi-Media Services Current Report on Form 8-K/A filed on October 14, 1997 relating to the acquisition of Multi-Media Services 11 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: Nov. 14, 1997 BY: /s/ DONALD R. STINE ------------------- Donald R. Stine Chief Financial Officer and Treasurer (duly authorized officer and principal financial officer) 12 EX-27 2 EXHIBIT 27
5 9-MOS DEC-31-1997 SEP-30-1997 374,000 3,240,000 10,667,000 (733,000) 268,000 14,270,000 24,081,000 (16,756,000) 29,085,000 7,666,000 0 0 0 18,711,000 0 29,085,000 28,546,000 28,546,000 17,513,000 17,513,000 6,752,000 0 239,000 4,247,000 1,606,000 2,641,000 0 0 0 2,641,000 .30 .30
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