-----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, N1pa0DUXV02jsOxvFjaaVYRENWOjRRELoq/OBU25mpQpUqdqcsFnBPp3TXWXvy+T K4qc/fesTya/74HHoY9U3A== 0001047469-99-002946.txt : 19990203 0001047469-99-002946.hdr.sgml : 19990203 ACCESSION NUMBER: 0001047469-99-002946 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19981117 ITEM INFORMATION: FILED AS OF DATE: 19990202 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: 8-K/A SEC ACT: SEC FILE NUMBER: 000-21917 FILM NUMBER: 99518760 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 8-K/A 1 8-K/A SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 8-K/A AMENDMENT NO. 1 CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) NOVEMBER 17, 1998 VDI MEDIA (Exact Name of Registrant as Specified in its Charter) CALIFORNIA 0-21917 95-4272619 (State or Other Jurisdiction (Commission (I.R.S. Employer of Incorporation) File Number) Identification No.) 6920 SUNSET BOULEVARD HOLLYWOOD, CALIFORNIA 90028 (Address of Principal Executive Offices) (Zip Code) (323) 957-5500 Registrant's telephone number, including area code The undersigned registrant (the "Registrant") hereby amends the following items of its Current Report on Form 8-K dated November 17, 1998 (the "Report") as follows: ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS The Registrant amends the information set forth in Items 7(a) and 7(b) of the Report and restates such items in their entirety as set forth below. Item 7(a) REPORT OF INDEPENDENT ACCOUNTANTS To the Shareholder of DUBS Incorporated In our opinion the accompanying balance sheet and the related statements of operations, shareholder's deficit and of cash flows present fairly, in all material respects, the financial position of DUBS Incorporated at September 30, 1998 and the results of its operations and its cash flows for the nine months then ended, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for the opinion expressed above. PricewaterhouseCoopers LLP Costa Mesa, California January 6, 1999 BALANCE SHEET - --------------------------------------------------------------------------------
SEPTEMBER 30, 1998 ASSETS Current assets: Cash $ 101,424 Accounts receivable, net of allowance for doubtful accounts of $423,249 2,603,215 Inventories 362,062 Prepaid expenses and other current assets 236,404 ------------- Total current assets 3,303,105 Property and equipment, net 2,262,933 Other assets 139,604 ------------- $ 5,705,642 ------------- ------------- LIABILITIES AND SHAREHOLDER'S DEFICIT Current liabilities Accounts payable 1,265,107 Accrued expenses 754,584 Due to shareholder 49,401 Line of credit (Note 6) 1,180,000 Current portion of note payable (Note 7) 1,040,000 Capital lease obligations (Note 8) 23,546 ------------- Total current liabilities 4,312,638 Note payable, less current portion (Note 7) 1,866,659 ------------- 6,179,297 Commitments and contingencies (Note 8) Shareholder's deficit: Common stock, $1 par value; 200 shares authorized, 200 shares issued and outstanding 200 Additional paid-in capital 750,000 Accumulated deficit (1,223,855) ------------- Total shareholder's deficit (473,655) ------------- $ 5,705,642 ------------- -------------
The accompanying notes are an integral part of these financial statements. STATEMENT OF OPERATIONS - --------------------------------------------------------------------------------
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 Revenues $ 12,070,331 Costs of goods sold 8,957,765 --------------- Gross profit 3,112,566 Selling, general and administrative expense 2,840,629 --------------- Operating income 271,937 Interest expense 336,155 --------------- Net loss before income taxes (64,218) Provision for income tax benefit 930 --------------- Net loss $ (65,148) --------------- ---------------
The accompanying notes are an integral part of these financial statements. STATEMENT OF SHAREHOLDER'S DEFICIT FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 - --------------------------------------------------------------------------------
COMMON STOCK ------------------------- ADDITIONAL TOTAL PAID-IN ACCUMULATED SHAREHOLDER'S SHARES AMOUNT CAPITAL DEFICIT DEFICIT -------- -------- ----------- -------------- --------------- Balance at December 31, 1997 200 $ 200 $ 250,000 $ (1,158,707) $ (908,507) Net loss (65,148) (65,148) Contribution from shareholder 500,000 500,000 -------- -------- ----------- -------------- --------------- Balance at September 30, 1998 200 $ 200 $ 750,000 $ (1,223,855) $ (473,655) -------- -------- ----------- -------------- --------------- -------- -------- ----------- -------------- ---------------
The accompanying notes are an integral part of these financial statements. STATEMENT OF CASH FLOWS - --------------------------------------------------------------------------------
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 Cash flows from operating activities: Net loss $ (65,148) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 760,156 Provision for doubtful accounts 142,641 Changes in assets and liabilities: Decrease in accounts receivable 87,513 Decrease in inventory 123,682 Increase in prepaid expenses and other assets (22,689) Decrease in accounts payable (834,824) Decrease in accrued expenses (59,879) ------------ Net cash provided by operating activities 131,452 Cash flows used in investing activities: Capital expenditures (191,488) Loans to shareholders (28,060) Payments received on shareholder loans 119,497 ------------ Net cash used in investing activities (100,051) Cash flows from financing activities: Principal payments on capital lease obligations (61,772) Increase in line of credit 140,000 Proceeds from due to shareholder 49,401 Repayment of note payable (560,000) Contribution from shareholder 500,000 ------------ Net cash provided by financing activities 67,629 Net increase in cash 99,030 Cash, beginning of period 2,394 ------------ Cash, end of period $ 101,424 ------------ ------------ Supplemental disclosures of cash flow information: Cash paid for interest: $ 315,782 ------------ ------------
The accompanying notes are an integral part of these financial statements. NOTES TO FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 PAGE 6 - ------------------------------------------------------------------------------- 1. THE COMPANY DUBS Incorporated (the Company) is located in Hollywood, California and provides high quality video duplication, distribution and related value-added services. 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 companies and other end-users nationwide and (ii) a broad range of video services, including the duplication of video in all formats, electronic storage, standards conversions, closed captioning and transcription services, and video encoding for air play verification purposes. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. REVENUES AND RECEIVABLES The Company records revenues and receivables at the time products are delivered to customers. CASH AND CASH EQUIVALENTS The Company considers cash equivalents to be all highly liquid investments with an original maturity of three months or less. FAIR VALUE OF FINANCIAL INSTRUMENTS All current assets and liabilities are carried at cost, which approximates fair value because of the short maturity of those instruments. The recorded amounts of the Company's long-term obligations also approximate fair value as current interest rates offered to the Company for debts of similar maturities are substantially the same. CONCENTRATION OF CREDIT RISK Financial instruments which potentially subject the Company to concentration of credit risk consists primarily of accounts receivable. The Company performs ongoing credit evaluations of its customers and generally does not require collateral. An allowance for uncollectable accounts receivable is maintained based upon expected collectability of all accounts receivable. INVENTORIES Inventories comprise raw materials, principally tape stock, and are stated at the lower of cost or market. Cost is determined using the average cost method. NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 PAGE 7 - ------------------------------------------------------------------------------- PROPERTY AND EQUIPMENT Property and equipment are stated at cost. Expenditures for additions and major improvements are capitalized. Maintenance, repairs and minor improvements are expensed as incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets, generally five years. Amortization of leasehold improvements is computed using the straight-line method over the lesser of the estimated useful lives of the improvements or the remaining lease term. INCOME TAXES The company is an "S" corporation for both federal and state income tax purposes. Accordingly, the liability for income taxes is the responsibility of the Company's shareholder with the exception of a 1.5% surtax, based upon the Company's taxable income, imposed by the state. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided if it is more likely than not that some or all of the deferred tax asset will not be realized. Deferred tax assets and liabilities were not material at September 30, 1998. NEW ACCOUNTING PRONOUNCEMENTS Effective January 1, 1998, the Company adopted the provisions of SFAS No. 130, REPORTING COMPREHENSIVE INCOME ("SFAS 130"). SFAS No. 130 establishes standards for reporting comprehensive income, defined as all changes in equity from nonowner sources. The Company did not have any other comprehensive income for the nine months ended September 30, 1998. Effective January 1, 1998, the Company adopted the provisions of SFAS No. 131, DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION. SFAS No. 131 establishes standards for the way public enterprises report information about operating segments in annual financial statements and requires those enterprises to report selected information about operating segments in interim financial reports issued to stockholders. Adoption of SFAS No. 131 did not have a material effect on the Company's financial position or results of operations. 3. PREPAID EXPENSES AND OTHER CURRENT ASSETS Prepaid expenses and other current assets comprised the following:
SEPTEMBER 30 1998 ------------- Prepaid insurance $ 167,481 Other prepaid expenses and current assets $ 68,923 ------------- $ 236,404 ------------- -------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 PAGE 8 - ------------------------------------------------------------------------------- 4. PROPERTY AND EQUIPMENT Property and equipment comprised the following:
SEPTEMBER 30 1998 ------------ Machinery and equipment $ 6,267,301 Leasehold improvements 1,058,850 Vehicles 93,675 Computers 511,505 ------------ 7,931,331 Less accumulated depreciation and amortization (5,668,398) ------------ $ 2,262,933 ------------ ------------
Assets acquired under capitalized lease obligations are included in property and equipment and totaled $288,283, with related accumulated amortization of $207,075 at September 30, 1998. 5. ACCRUED EXPENSES Accrued expenses comprised the following:
SEPTEMBER 30 1998 ------------ Accrued payroll $ 376,047 Other accrued liabilities 378,537 ------------ ------------ $ 754,584 ------------ ------------
6. LINE OF CREDIT In March 1996, the Company established a line of credit with a bank. The line of credit provides for borrowings up to $1,200,000, as amended, and is due and payable December 1, 1998. Borrowings bear interest at prime rate (8.25% at September 30, 1998) plus 0.75%. The line of credit is secured by substantially all of the assets of the Company and is guaranteed by the Company's sole shareholder. The terms of the line of credit agreement include covenants regarding the maintenance of various financial ratios. As of September 30, 1998, the Company was not in compliance with certain of these covenants and obtained a waiver with respect to these covenants from the bank. In connection with the acquisition of DUBS Incorporated by VDI Media (Note 11), the outstanding principal plus accrued interest was repaid. NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 PAGE 9 - ------------------------------------------------------------------------------- 7. NOTE PAYABLE In March 1996, the Company issued a $5,200,000 promissory note payable to a bank. The note is due and payable March 15, 2001 and bears interest at prime rate (8.25% at September 30, 1998) plus 1.0% per annum. The Company is required to make monthly principal payments of $86,667. The terms of the note payable include covenants regarding the maintenance of various financial ratios. As of September 30, 1998, the Company was not in compliance with certain of these covenants and obtained a waiver with respect to these covenants from the bank. In connection with the acquisition of DUBS Incorporated by VDI Media (Note 11), the outstanding principal amount plus accrued interest was repaid. 8. LEASING AGREEMENTS AND COMMITMENTS The Company leases certain office and computer equipment under non-cancelable long-term lease agreements which are reported as capital leases. The terms of the leases range from three to five years, with purchase options at the end of the respective lease terms. The Company intends to exercise such purchase options, which will require minimal payments. The borrowings are secured by the equipment purchased. The Company leases its office space, which houses the Company's corporate, sales and duplicating operations, under a non-cancelable operating lease which expires on March 16, 1999. On October 6, 1998, the Company entered into an agreement to extend this lease through March 15, 2009. The new agreement does not include any option to renew. The Company also leases warehouse space under a non-cancelable operating lease which expires December 31, 1999. Total rent expense for operating leases amounted to $558,741 for the nine months ended September 30, 1998. Future minimum lease payments under all non-cancelable capital and operating leases as of September 30, 1998 are as follows:
CAPITAL OPERATING LEASES LEASES ------------------------ 1998 (three months ending December 31, 1998) $ 16,516 $ 188,223 1999 7,579 707,805 2000 552,328 2001 549,348 2002 549,348 2003 549,348 Thereafter 2,835,000 ----------- ------------ Total minimum payments 24,095 $5,931,400 ----------- ------------ ----------- ------------ Less imputed interest 549 ----------- Present value of payments under capital leases $ 23,546 ----------- -----------
NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 PAGE 10 - ------------------------------------------------------------------------------- 9. RELATED PARTY TRANSACTIONS The Company is obligated on a payable to its sole shareholder of which $49,401 was outstanding at September 30, 1998. 10. DEFINED CONTRIBUTION RETIREMENT PLANS The Company sponsors a 401 (K) Plan for the benefit of all eligible employees of the Company. Plan participants may contribute from 2% to 10% of their salary. Company contributions are discretionary and are limited to 7% of eligible wages. Total retirement expense under the 401 (K) Plan amounted to $50,000 for the nine months ended September 30, 1998 of which $50,000 is included in accrued expenses. 11. SUBSEQUENT EVENT On November 9, 1998, the Company entered into an Asset Purchase Agreement with VDI Media (VDI) whereby VDI acquired all of the assets of the Company and assumed substantially all of the liabilities of the Company. As part of this transaction, VDI Media paid the outstanding principal and interest on the line of credit and note payable. Item 7(b) Pro Forma Financial Information The following unaudited pro forma financial statements give effect to the acquisition of DUBS Incorporated (Dubs). The unaudited pro forma combined balance sheet presents the combined financial position of VDI Media and Dubs at September 30, 1998 as if VDI Media had acquired Dubs on that date. Such pro forma information is based upon the unaudited historical balance sheet data of VDI Media and the audited balance sheet data of Dubs on September 30, 1998. The unaudited pro forma combined statements of operations for the nine months ended September 30, 1998 and for the year ended December 31, 1997, reflect adjustments as if the transaction had occurred on January 1, 1997. The acquisition is being accounted for as a purchase. The unaudited pro forma combined financial statements reflect VDI Media's allocation of the purchase price of approximately $6.9 million (plus the assumption of trade payables and long-term debt) to the assets and remaining liabilities assumed. The final allocation of purchase price may vary as additional information is obtained, and differ from that used in the unaudited pro forma combined financial statements. The unaudited pro forma combined financial statements should be read in conjunction with the separate historical financial information and related notes of Dubs, appearing in Item 7 (a) of this current report on Form 8-K and the historical financial statements, related notes and "Management's Discussion and Analysis of Financial Condition and Results of Operations" of the Company for the year ended December 31, 1997, and the nine months ended September 30, 1998, previously filed with the Securities and Exchange Commission (SEC). The pro forma information is not necessarily indicative of the results that would have been reported had the acquisition actually occurred on the dates specified, nor is it necessarily indicative of the future results of the combined companies. PRO FORMA COMBINED BALANCE SHEET The following unaudited pro forma combined balance sheet presents the combined financial position of VDI Media and Dubs as of September 30, 1998. Such unaudited pro forma information is based on the combined historical balance sheets of VDI Media and Dubs as of September 30, 1998, giving effect to the pro forma adjustments described in the accompanying Notes to the Pro Forma Combined Financial Statements.
SEPTEMBER 30, 1998 ------------------------------------------------------------------------ DUBS COMBINED VDI MEDIA INCORPORATED ADJUSTMENTS PRO FORMA ----------------- ----------------- -------------- ------------- ASSETS Current assets: Cash and cash equivalents $ 2,261,000 $ 101,000 $ - $ 2,362,000 Accounts receivable, net 14,871,000 2,603,000 17,474,000 Inventories 558,000 362,000 920,000 Deferred income taxes 508,000 508,000 Prepaid expenses and other current assets 429,000 237,000 666,000 ---------------- --------------- ------------- ------------- Total current assets 18,627,000 3,303,000 - 21,930,000 Property and equipment, net 14,211,000 2,263,000 16,474,000 Other assets 339,000 339,000 Goodwill and other intangibles, net 18,480,000 140,000 6,824,000 (A) 25,444,000 ---------------- --------------- ------------- ------------- $51,657,000 $ 5,706,000 $ 6,824,000 $64,187,000 ---------------- --------------- ------------- ------------- ---------------- --------------- ------------- ------------- LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) Current liabilities: Accounts payable $ 3,629,000 $ 1,265,000 $ - $ 4,894,000 Accrued expenses 1,461,000 804,000 2,265,000 Borrowings under revolving credit agreement 17,964,000 1,180,000 (1,180,000) (B) 17,964,000 Current portion of notes payable 25,000 1,040,000 (1,040,000) (B) 25,000 Current portion of capitalized lease obligations 678,000 24,000 702,000 ---------------- --------------- ------------- ------------- Total current liabilities 23,757,000 4,313,000 (2,220,000) 25,850,000 ---------------- --------------- ------------- ------------- Deferred income taxes 103,000 - 103,000 Notes payable, less current portion - 1,867,000 8,570,000 (A),(B) 10,437,000 Capital lease obligations, less current portion 279,000 - 279,000 Shareholders' equity (deficit): Preferred stock - Common stock 20,608,000 - - 20,608,000 Additional paid-in capital - 750,000 (750,000) (A) - Retained earnings (deficit) 6,910,000 (1,224,000) 1,224,000 (A) 6,910,000 ---------------- --------------- ------------- ------------- Total shareholders' equity (deficit) 27,518,000 (474,000) 474,000 27,518,000 ---------------- --------------- ------------- ------------- $51,657,000 $ 5,706,000 $ 6,824,000 $64,187,000 ---------------- --------------- ------------- ------------- ---------------- --------------- ------------- -------------
See accompanying Notes to Pro Forma Combined Financial Statements PRO FORMA COMBINED STATEMENT OF OPERATIONS The following unaudited pro forma combined statement of operations presents the combined results of operations of VDI Media and Dubs for the year ended December 31, 1997 by combining the historical statements of operations for VDI Media and Dubs for the period, giving effect to the pro forma adjustments described in the accompanying Notes to the Pro Forma Combined Financial Statements.
YEAR ENDED DECEMBER 31, 1997 -------------------------------------------------------------------- DUBS COMBINED VDI MEDIA INCORPORATED ADJUSTMENT PRO FORMA ------------ -------------- ------------ ------------- Revenues $40,772,000 $ 17,094,000 $ - $57,866,000 Cost of goods sold 24,898,000 13,535,000 - 38,433,000 ----------- ------------ --------- ----------- Gross Profit 15,874,000 3,559,000 - 19,433,000 Selling, general, and administrative expense 9,253,000 4,198,000 296,000 (C) 13,747,000 ----------- ------------ --------- ----------- Operating income (loss) 6,621,000 (639,000) (296,000) 5,686,000 Interest expense 294,000 497,000 280,000 (D) 1,071,000 Interest income 226,000 30,000 256,000 ----------- ------------ --------- ----------- Income (loss) before income taxes 6,553,000 (1,106,000) (576,000) 4,871,000 Provision (benefit) for income taxes 2,572,000 3,000 (624,000) (E) 1,951,000 ----------- ------------ --------- ----------- Net income (loss) $ 3,981,000 $ (1,109,000) $ 48,000 $ 2,920,000 ----------- ------------ --------- ----------- ----------- ------------ --------- ----------- Earnings per share: Basic: Net income per share $ 0.44 $ 0.32 Weighted average number of shares 9,122,575 9,122,575 Diluted: Net income per share $ 0.43 $ 0.32 Weighted average number of shares including the dilutive effect of stock options 9,207,940 9,207,940
See accompanying Notes to Pro Forma Combined Financial Statements PRO FORMA COMBINED STATEMENT OF OPERATIONS The following unaudited pro forma combined statement of operations presents the combined results of operations of VDI Media and Dubs for the nine months ended September 30, 1998 by combining the historical statements of operations for VDI Media and Dubs for the period, giving effect to the pro forma adjustments described in the accompanying Notes to the Pro Forma Combined Financial Statements.
NINE MONTHS ENDED SEPTEMBER 30, 1998 --------------------------------------------------------------------------- DUBS COMBINED VDI MEDIA INCORPORATED ADJUSTMENT PRO FORMA -------------- --------------- ---------------- --------------- Revenues $ 16,419,000 $ 12,070,000 $ - $ 28,489,000 Cost of goods sold 9,886,000 8,957,000 - 18,843,000 -------------- --------------- ------------ --------------- Gross Profit 6,533,000 3,113,000 - 9,646,000 Selling, general, and administrative expense 3,457,000 2,841,000 222,000 (C) 6,520,000 -------------- --------------- ------------ --------------- Operating income 3,076,000 272,000 (222,000) 3,126,000 Interest expense 342,000 336,000 210,000 (D) 888,000 Interest income 3,000 - 3,000 -------------- --------------- ------------ --------------- Income (loss) before income taxes 2,737,000 (64,000) (432,000) 2,241,000 Provision (benefit) for income taxes 1,122,000 1,000 (226,000) (E) 897,000 -------------- --------------- ------------ --------------- Net income (loss) $ 1,615,000 $ (65,000) $(206,000) $ 1,344,000 -------------- --------------- ------------ --------------- -------------- --------------- ------------ --------------- Earnings per share: Basic: Net income per share $ 0.17 $ 0.14 Weighted average number of shares 9,769,904 9,769,904 Diluted: Net income per share $ 0.16 $ 0.14 Weighted average number of shares including the dilutive effect of stock options 9,817,243 9,817,243
See accompanying Notes to Pro Forma Combined Financial Statements NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS The following significant adjustments were made to the historical balance sheets of VDI Media and Dubs at September 30, 1998 or historical statements of operations of VDI Media and Dubs, as applicable, to arrive at the pro forma combined balance sheets and pro forma combined statements of operations: (A) Pro forma adjustments have been made to (i) record estimated goodwill of $6,824,000 equal to the excess of the initial consideration over the fair market value assigned to specific assets and liabilities assumed, (ii) eliminate the shareholder deficit of Dubs and (iii) reflect the use of borrowings under the Company's term loan agreement to purchase Dubs. (B) A pro forma adjustment has been made to reflect the repayment of Dubs's long-term debt and line of credit at closing in accordance with the purchase agreement. (C) A pro forma adjustment has been made to selling, general and administrative expense to reflect the amortization over 20 years of the goodwill related to the acquisition of Dubs. (D) A pro forma adjustment has been made to interest expense to reflect the increase in debt related to the use of borrowings under VDI Media's term loan agreement to finance the purchase net of the decrease in interest expense due to the repayment of Dubs's long-term debt and line of credit. (E) A pro forma adjustment has been made to reflect the effective tax rate of the combined company. VDI Media estimates that it will save approximately $804,000 per year in rent, utilities and other facilities costs by combining its Hollywood facilities with the Dubs facility. VDI Media also estimates an annual savings of approximately $1,418,000 related to the salaries of DUBS employees terminated immediately prior to the acquisition. The related severance costs were paid by the sole shareholder of DUBS. In accordance with SEC rules, these estimated cost savings have not been reflected in the pro forma combined statements of operations presented above. 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: February 1, 1999 /s/ Donald R. Stine ------------------------------- Donald R. Stine Chief Financial Officer and Treasurer EX-23 2 EXHIBIT 23 Exhibit 23 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Prospectus constituting part of the Registration Statement on Form S-3 (No. 333-57549) of VDI Media of our report dated January 6, 1999 relating to the financial statements of DUBS, Incorporated, which appears in the Current Report on Form 8-K/A of VDI Media dated February 1, 1999. PricewaterhouseCoopers LLP Costa Mesa, California February 1, 1999 EX-23.1 3 EXHIBIT 23.1 Exhibit 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 333-46923) of VDI Media of our report dated January 6, 1999 relating to the financial statements of DUBS, Incorporated, which appears in the Current Report on Form 8-K/A of VDI Media dated February 1, 1999. PricewaterhouseCoopers LLP Costa Mesa, California February 1, 1999 -----END PRIVACY-ENHANCED MESSAGE-----