-----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, PWHZRI1Vo59YCtdu0J/eeWBRZvknPcjpcbtDZDsIosQH7vjmtr2pmOpX1oyV9VKZ 8lysr6xw8Vl5wDmvuAUW2A== 0000912057-01-544982.txt : 20020413 0000912057-01-544982.hdr.sgml : 20020413 ACCESSION NUMBER: 0000912057-01-544982 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20010930 FILED AS OF DATE: 20011231 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VARI LITE INTERNATIONAL INC CENTRAL INDEX KEY: 0001033491 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC LIGHTING & WIRING EQUIPMENT [3640] IRS NUMBER: 752239444 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-23159 FILM NUMBER: 1826679 BUSINESS ADDRESS: STREET 1: 201 REGAL ROW CITY: DALLAS STATE: TX ZIP: 75247 BUSINESS PHONE: 2146301963 10-K 1 a2066739z10-k.txt 10-K - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 10-K /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2001 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 0-23159 ------------------------ VARI-LITE INTERNATIONAL, INC. (Exact name of registrant as specified in its charter) DELAWARE 75-2239444 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 201 REGAL ROW, DALLAS, TEXAS 75247 (Address of principal executive (Zip Code) offices)
Registrant's telephone number including area code: (214) 630-1963 Securities registered pursuant to Section 12(b) of the Act: NONE Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK, $0.10 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 / / Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. / / The aggregate market value of the voting stock held by non-affiliates of the registrant on December 21, was $6,492,307. As of that date, 7,800,003 shares of the registrant's Common Stock were outstanding. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- DOCUMENTS INCORPORATED BY REFERENCE: Certain information required by Part III of this Annual Report on Form 10-K is incorporated by reference from the registrant's definitive proxy statement for its annual meeting of stockholders to be held on March 1, 2002. INDEX TO ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2001
PAGE -------- PART I Item 1. Business.................................................... 3 Item 2. Properties.................................................. 7 Item 3. Legal Proceedings........................................... 7 Item 4. Submission of Matters to a Vote of Security Holders......... 7 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters....................................... 8 Item 6. Selected Consolidated Financial Data........................ 9 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations..................................... 10 Item 7A. Quantitative and Qualitative Disclosures About Market Risk...................................................... 18 Item 8. Financial Statements and Supplementary Data................. 18 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure...................................... 18 PART III Item 10. Directors and Executive Officers of the Registrant.......... 19 Item 11. Executive Compensation...................................... 19 Item 12. Security Ownership of Certain Beneficial Owners and Management................................................ 19 Item 13. Certain Relationships and Related Transactions.............. 19 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K....................................................... 20 SIGNATURES.......................................................................... 26 INDEX TO FINANCIAL STATEMENTS....................................................... F-1
2 PART I ITEM 1. BUSINESS GENERAL The Company is a leading worldwide designer and manufacturer of automated lighting systems and distributor of automated and conventional lighting and related equipment and services. The Company markets its products and services primarily to the entertainment industry, serving such markets as concert touring, theater, television and film and corporate events. The Company's manufacturing and sales division sells VARI*LITE automated lighting equipment through a dedicated sales staff and a worldwide network of independent dealers. Through its domestic and international offices, the Company's VLPS rental division offers complete automated and conventional lighting systems and lighting production services. The Company's predecessor was incorporated in 1988 in the State of Texas as a holding company for operations, which began in 1981 and was reincorporated in the State of Delaware in 1997. The Company's principal executive offices are located at 201 Regal Row, Dallas, Texas 75247 and its telephone number is (214) 630-1963. PRODUCTS AND SERVICES VARI-LITE MANUFACTURING AND SALES The Company designs, manufactures and distributes an extensive line of automated spot and wash lighting fixtures, or "luminaires." Spot luminaires create a hard-edged, crisp beam which can be used for precisely focused illumination and visual effects, as well as for projecting custom light images and designs through the use of "gobos", designs etched into a piece of glass or cut into a piece of metal through which a light beam is directed to create an image. Wash luminaires project a soft-edge light beam for even illumination of objects and areas. The Company has patented a number of features which the Company believes makes its luminaires superior to those of its competitors. The Company currently manufactures three series of luminaires. - SERIES 2200-TM- SPOT LUMINAIRES. The small, lightweight and virtually silent VL2202-TM- luminaire features an upper enclosure that houses the control electronics, as well as a power factor corrected arc power supply for a 700 watt lamp. The VL2202-TM- luminaire supports a wide variety of colors and gobos with two fixed 11-position wheels for interchangeable dichroic color and gobo selections, as well as one five-position rotating gobo wheel for gobos or effects. A 3:1 zoom optics system and a programmable iris combine to create a wide variety of beam sizes. The luminaire features full field dimming, strobe effects and smooth, repeatable motion. - SERIES 2400-TM- WASH LUMINAIRES. Like the VL2202-TM- spot luminaire, the Series 2400-TM- wash luminaires include an upper enclosure that houses the control electronics as well as a power factor corrected arc power supply for the lamp. The VL2416-TM- wash luminaire features a 1200 watt arc lamp and an innovative zoomable beam spreading optics system which can provide a field angle from 5 to 55 degrees. A rotatable, indexable front lens assembly that accepts standard PAR 64 lenses can be used for many unique beam effects. The DICHRO*TUNE-TM- radial color changer employs enhanced dichroic color filters to produce smooth, full spectrum color crossfades as well as very quick color changes. An internal douser allows intensity control as well as strobe effects. The VL2402-TM- wash luminaire is identical in configuration and size to the VL2202-TM- spot luminaire and features the same zoomable beam spreading optics offered in the VL2416-TM- wash luminaire for beam control. The VL2402-TM- luminaire includes three color wheels for smooth, full spectrum color crossfades as well as a fixed color wheel for rapid, "snap" color changes. Smooth dimming and strobe effects are also provided. - SERIES 1000-TM- ELLIPSOIDAL REFLECTOR SPOTLIGHT. The VL1000-TM- ERS is the only automated version of one of the most popular lighting tools in use today, the ellipsoidal reflector spotlight. There are currently 3 four versions of the VL1000-TM- ERS that combine either a tungsten or arc lamp source with the absence or presence of automated shutters. Features of the VL1000-TM- ERS include CYM color mixing, five rotating and indexing gobo positions, zoom optics with an imaging range from 19(o) to 36(o) and a non-imaging zoom range out to a 70(o) beam field, pan and tilt capability and an optional beam size iris. Another unique feature of the VL1000-TM- ERS is a variable diffusion mechanism to soften the edges of the beam or image all the way out to a total wash beam. This allows the same fixture to function as a spot or a wash luminaire. The VL1000-TM- ERS offers a unique optical system which enables these luminaires to be the only automated spotlight to utilize a tungsten source to produce professional level output at the popular 3200(o)K color temperature. As such, the VL1000-TM- ERS can be used for applications traditionally dominated by conventional lighting fixtures. The tungsten lamp versions of the VL1000-TM- ERS produce approximately 10,000 lumens of output while the 575 watt arc lamp versions of the VL1000-TM- ERS produce over 15,000 lumens of output at a 5600(o)K color temperature and include mechanical dimming and an external arc power supply. All of the Company's luminaires will operate from the various line voltages around the world. The Company has designed all of its luminaires, including models no longer manufactured, to be compatible with industry standard DMX-512 control consoles, as well as the Company's previously manufactured proprietary control consoles. The Company manufactures its products in Dallas, Texas. The manufacturing process principally consists of procuring, inspecting and assembling components custom-made by others to the Company's specifications. The Company generally provides its suppliers with specifications for its components and pays for all tooling used in their production. The Company emphasizes the quality and reliability of its products and, accordingly, submits all finished products to rigorous testing at the time they are manufactured. The Company has frequently worked in concert with certain of its key suppliers to design and develop new technologies which have been incorporated into the Company's products specifically to meet its requirements. As a result, although most components and raw materials used by the Company are available from more than one supplier, many important components for the Company's lighting systems are provided by one vendor and are custom-designed (often jointly by the Company and its vendors). The Company attempts to maintain adequate inventories of these components and, based on its experience, does not anticipate problems obtaining sufficient supplies in the foreseeable future. The loss of any supplier that is the sole vendor of a component would delay the Company's manufacturing schedules and possibly force the Company to purchase new tooling, but the Company believes substitute suppliers can be found for all components of all of its products. VLPS RENTAL OPERATIONS VLPS rental operations carries three major automated product lines previously manufactured by the Company, as well as all of the products currently manufactured and sold by the Company. - SERIES 200-TM- LUMINAIRES. The Company rents Series 200-TM- luminaires, including the VL2C-TM- spot luminaire and VL4-TM- wash luminaire. The VL2C-TM- spot luminaire can change light color in one-tenth of a second and can produce more than 120 separate light colors through the use of the Company's patented color changing system. The VL4-TM- luminaire's patented color changing system allows the user to select 30 preset and 160 programmable colors from thousands of available colors and to change these colors in less than three-tenths of a second, or program the system for timed color cross-fades. In addition, the VL4-TM- luminaire features precisely timed control of light intensity, including the ability to instantaneously turn the light fixture on and off. Continuous adjustment of diffusion and beam angle provides enhanced control of the beam shape. - SERIES 300-TM- LUMINAIRES. The Series 300-TM- luminaires are virtually silent, lightweight automated lighting instruments with sophisticated color changing features. The Series 300-TM- luminaires include the 4 VL5-TM-, VL5Arc-TM- and VL5B-TM- wash luminaires, and the VL6-TM-, VL6B-TM-, VL6C-TM-, VL7-TM- and VL7B-TM- spot luminaires. The VL5-TM- luminaire is lighter than the VL4-TM- luminaire, and its cold-mirror reflector both eliminates the need for noisy cooling fans and reduces the amount of heat the lights emit onto the stage. Color changes for the VL5-TM- are controlled by a system that allows color cross-fades in as little as seven-tenths of a second and interchangeable lenses work with an internal diffusing mechanism to provide a wide variety of beam sizes and shapes. The VL5Arc-TM- luminaire uses a 575 watt arc source rather than the 1000 watt tungsten source used in the VL5-TM- luminaire and the VL5B-TM- luminaire contains a different color palate than the VL5-TM- luminaire. The VL6-TM- spot luminaire is the companion to the VL5-TM- wash luminaire, and has two interchangeable 11-position wheels of dichroic color filters and gobos for split second color and image changes and multi-color beams. The VL6B-TM- spot luminaire adds a 3:1 zoom optics system and rotating gobos to the VL6-TM- luminaire. The VL6C-TM- luminaire has the same features as the VL6B-TM- luminaire except that it contains a 700 watt arc lamp. The VL7-TM- spot luminaire has a revolutionary collection optics system that produces a bright beam and provides an 8:1 zoom. Other features of the VL7-TM- include full color spectrum crossfades with unparalleled precision and repeatability via the unique CVF-TM- System, strobe, image morphing and fixed and rotating gobos. The VL7B-TM- spot luminaire adds a four frame shuttering system to the VL7-TM- fixture. - VIRTUOSO-TM- CONTROL CONSOLE. The Virtuoso-TM- control console was designed to control VARI*LITE-Registered Trademark- luminaires, DMX automated lights and conventional fixtures. The console is capable of controlling up to 2,000 luminaires with up to 10,000 cues per channel, depending on the types of luminaires being used, and includes an advanced, 3-D graphical interface that allows users to have a real-time view of system status and performance. The 3-D graphical interface can also be used to program cues while the luminaires are off-line to maximize programming efficiency for busy production environments or for pre-production work before the actual lighting system is available. Multiple Virtuoso-TM- consoles can be connected and programmed simultaneously, a major advantage in very large productions or when time is very limited. Advanced fiber optic connections are provided for maximum performance. The Virtuoso DX-TM- console offers all of the same performance and features as the Virtuoso-TM- console in a much smaller, less expensive platform. The Virtuoso DX-TM- console connects directly into the lighting system with either traditional network wiring or with the same advanced fiber optics used in the Virtuoso-TM- console. The Virtuoso DX-TM- console also offers the additional advantage of outputting eight universes of DMX-512 control directly from the console. This allows the console to be used with equal ease with VARI*LITE-Registered Trademark- luminaires, DMX automated lights or conventional fixtures. The Company's Visionary 3D-TM- software package allows users to create actual Virtuoso-TM- cues and showfiles, using the 3-D graphical interface, without the presence of a console or lighting system, using only a personal computer. These showfiles can then be transported to the Virtuoso-TM- or Virtuoso DX-TM- console for use with the lighting system. The Company also rents a wide variety of conventional lighting and rigging equipment, including numerous types of luminaires and control consoles, large search lights, automatic gel scrollers, trusses, motors, dimmers, smoke machines, power and control signal distribution equipment and cables. The Company developed a unique stackable, plastic injection-molded storage case for transporting its equipment. The case is custom-designed to protect VARI*LITE-Registered Trademark- equipment and last longer than the industry- standard carpet covered wood or laminate cases. The case is also significantly lighter than other cases, thereby reducing transportation costs. To complement the integrated product packages, customers can utilize the VLPS CAD/WYSIWYG studio facilities to assist with pre- and post-production design work. In addition, the Company provides trained personnel to operate its automated lighting systems and offers training courses, maintenance and other related production services to customers. The Company emphasizes the quality and reliability of its products and, accordingly, submits all products to vigorous testing at the time they are returned to the Company at the termination of each rental agreement. The Company uses an inventory control and management system to locate its rental equipment at all times anywhere in the world. Each piece of equipment is assigned a serial number for identification purposes. Equipment utilization is centrally monitored at the Company's headquarters to determine which 5 products are in highest demand in various geographic markets and whether certain equipment should be relocated to increase utilization and revenue, whether product shortages that require the production of additional units exist, whether current pricing is at the appropriate level, and whether excess quantities exist that may be sold. The maximum utilization rates of the Company's rental equipment are affected by production scheduling requirements of the customers' various markets. Utilization rates are also impacted by the quantity of inventory, maintenance requirements and shipping time. The Company's inventory control system helps the Company optimize its utilization rates in light of these factors in order to satisfy customer requirements, maximize revenue and optimize equipment levels. MARKETING, SALES AND DISTRIBUTION The Company markets its products and services to the entertainment industry, including concert touring, theatre, television and film and corporate events markets, through various media including, but not limited to, trade shows, trade advertising and direct marketing. The Company solicits business from lighting and set designers, other specifiers and consultants, artist managers, producers, production managers, end users and production companies, promoters, rental companies, corporations and business associations. The Company believes that its quality products, reputation for innovation, customer relationships, worldwide distribution and excellent service are the keys to its success. No customer has accounted for more than 10% of the Company's revenues for at least the last three fiscal years. The Company's Vari-Lite manufacturing and sales division sells its products through a dedicated sales staff and through independent dealers located in over 40 cities in North America, Europe and Asia. The Company's VLPS operations rents complete lighting systems and provides services through Company-owned offices located in New York, Los Angeles, Nashville, Orlando, Las Vegas, Chicago, London and Tokyo. The Company relies heavily on its reputation for quality and service, which is enhanced by its high visibility projects and customers. The Company reinforces this reputation by advertising in trade and specialty magazines. Although most of the VLPS rental operations contracts are procured through a bidding process, the Company believes that competition for both sales and rental of lighting equipment is based on expertise, quality, price, reputation and, in the case of VLPS, full service capabilities. RESEARCH AND DEVELOPMENT; INTELLECTUAL PROPERTY The Company's proprietary technology and development of innovative products that meet the needs of its customers have enabled it to expand the applications for its technology to new products and markets. From time to time, the Company collaborates with unaffiliated entities to supplement and complement its internal research and development activities. The Company's innovative research and development activities were recognized when Vari-Lite, Inc. was awarded Primetime Emmy-Registered Trademark- awards for its Series 200-TM- system, VL5-TM- wash luminaire and Virtuoso-TM- control console in 1991, 1994 and 2001, respectively. The Company's research and development group consists of over 25 engineers, technicians and related personnel. These internal capabilities enable the Company to continually improve existing products, design new products and develop new technology to meet the needs of its customers. In the fiscal years ended September 30, 1999, 2000 and 2001, the Company's research and development expenditures totaled $5.6 million, $5.2 million and $5.3 million, respectively. The Company's extensive research and development efforts have produced a number of leading-edge technological developments in the automated lighting industry. When appropriate, the Company seeks patent protection for its products. The Company had registered and received more than 45 domestic patents and more than 190 foreign patents in several different countries and territories. In addition, the Company consistently has patent applications pending in the United States and worldwide. The Company's patents cover the basic concepts, control software, control hardware and features unique to each of the Company's VARI*LITE-Registered Trademark- luminaire models. The Company believes that its patents provide it with a 6 substantial competitive advantage in the automated lighting industry, and the Company's ability to compete in the future will depend in part on maintaining its technological advantage over its competitors. The Company has obtained trademark protection in the United States and numerous foreign countries on various names, including, among others, VARI*LITE-Registered Trademark-, Virtuoso-TM-, Virtuoso DX-TM-, VL2C-TM-, VL4-TM-, VL5-TM-, VL5Arc-TM-, VL5B-TM-, VL6-TM-, VL6B-TM-, VL6C-TM-, VL7-TM-, VL7B-TM-, VL1000-TM-, VL2200-TM-, VL2202-TM-, VL2400-TM-, VL2402-TM-, VL2416-TM-, VARI*IMAGE-TM-, DICHRO*TUNE-TM- and DICHRO*WHEEL-TM-. COMPETITION The lighting industry is highly competitive. The Company's manufacturing and sales operation primarily competes with High End Systems, Inc., Martin Gruppen A/S, Coemar SPA and Clay Paky SPA. The Company's VLPS rental operation primarily competes with Production Resource Group, PLC and many other conventional lighting rental companies. Competitive factors primarily include product capabilities, quality, reliability, price, worldwide distribution, full service capabilities, brand name recognition, reputation, customer service and support. The VARI*LITE-Registered Trademark- brand name has been recognized for years as the preeminent brand name for automated lighting. EMPLOYEES The Company has 336 full-time employees. In addition, the Company has 115 part-time and temporary employees. None of the Company's employees is a party to any collective bargaining agreement and the Company has never experienced a work stoppage. The Company considers its relations with its employees to be good. ITEM 2. PROPERTIES The Company leases all of its facilities, including three facilities comprising approximately 114,400 square feet in Dallas, Texas under leases that expire in April 2002 and April 2003. The Dallas facilities contain the Company's executive offices, manufacturing, warehouse, maintenance, research and development facilities and training center. The executive offices and warehouse space of Vari-Lite Europe, Ltd. are located in London, England in one facility comprising approximately 57,000 square feet and the associated lease expires in April 2010. The executive offices of Vari-Lite Asia, Inc., as well as its technical center, are located in Tokyo in two leased facilities aggregating approximately 23,300 square feet, the terms of which expire in February 2003 and November 2004. The Company also leases office and warehouse space in New York and Los Angeles of 35,300 and 58,000 square feet, respectively, with lease term expirations of August 2010 and April 2004, respectively. In addition, the Company leases sales offices in Chicago, Las Vegas, Nashville and Orlando. The Company believes it maintains generally adequate insurance with respect to its properties. ITEM 3. LEGAL PROCEEDINGS In the ordinary course of its business, the Company is from time to time threatened with or named as a defendant in various lawsuits, including patent infringement claims. Additionally, the Company has filed lawsuits claiming infringements of its patents by third parties for which the Company has been subject to counterclaims. The Company is not currently involved in any material legal proceedings incidental to the conduct of its business. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not Applicable. 7 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's Common Stock trades on the Nasdaq National Market under the symbol "LITE." The Company consummated its initial public offering of Common Stock on October 16, 1997. The following table sets forth, on a per share basis for the periods indicated, the high and low sale prices for the Common Stock as reported by the Nasdaq National Market:
PRICE RANGE ------------------- HIGH LOW -------- -------- FISCAL YEAR 2000 First Quarter............................................. $1.688 $0.938 Second Quarter............................................ $4.000 $0.938 Third Quarter............................................. $2.750 $0.875 Fourth Quarter............................................ $1.500 $0.688 FISCAL YEAR 2001 First Quarter............................................. $2.500 $0.625 Second Quarter............................................ $2.250 $0.750 Third Quarter............................................. $2.000 $1.210 Fourth Quarter............................................ $1.540 $0.780 FISCAL YEAR 2002 First Quarter (through December 21, 2001)................. $1.350 $0.940
There were 77 stockholders of record of Common Stock on December 21, 2001. The Company has not paid, and does not anticipate paying in the foreseeable future, any cash dividends and expects that future earnings will be retained to finance operations and expansion. Currently, the payment of cash dividends is prohibited by the New Credit Facility (as hereinafter defined). See "Liquidity and Capital Resources". 8 ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA The following selected consolidated financial data for the Company as of and for each of the five fiscal years in the period ended September 30, 2001, have been derived from the audited consolidated financial statements of the Company. This data should be read in conjunction with the information set forth in "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Financial Statements and related notes thereto included elsewhere in this report.
YEAR ENDED SEPTEMBER 30, ---------------------------------------------------- 1997 1998 1999 2000 2001 -------- -------- -------- -------- -------- (IN THOUSANDS EXCEPT PER SHARE DATA) INCOME STATEMENT DATA: Rental revenues............................................. $ 66,095 $ 73,235 $ 78,520 $ 76,366 $ 55,597 Product sales and service revenues.......................... 24,563 15,141 13,012 17,322 17,466 -------- -------- -------- -------- -------- Total revenues............................................ 90,658 88,376 91,532 93,688 73,063 Rental costs................................................ 26,746 33,172 39,557 35,990 25,534 Product sales and service costs............................. 13,301 10,472 7,393 10,881 11,518 -------- -------- -------- -------- -------- Gross profit................................................ 50,611 44,732 44,582 46,817 36,011 Selling, general and administrative expense................. 32,779 35,014 38,224 37,102 31,551 Research and development expense............................ 6,657 6,690 5,586 5,152 5,260 Impairment of assets........................................ -- 3,542 -- 3,850 -- Restructuring costs......................................... -- 1,080 600 -- -- Gains on lawsuit settlement and sale of lease............... -- -- -- (3,993) -- Gain on sale of concert sound reinforcement business........ -- -- -- -- (7,100) -------- -------- -------- -------- -------- Operating income (loss)..................................... 11,175 (1,594) 172 4,706 6,300 Interest expense (net)...................................... 3,930 2,881 4,540 5,180 2,294 -------- -------- -------- -------- -------- Income (loss) before taxes, extraordinary loss and cumulative effect of change in accounting principle....... 7,245 (4,475) (4,368) (474) 4,006 Income taxes (benefit)...................................... 2,916 (1,785) (1,725) (187) 1,556 -------- -------- -------- -------- -------- Income (loss) before extraordinary loss and cumulative effect of change in accounting principle.................. 4,329 (2,690) (2,643) (287) 2,450 Extraordinary loss from early extinguishment of debt........ -- (737) -- -- -- Cumulative effect of change in accounting principle......... -- (195) -- -- -- -------- -------- -------- -------- -------- Net income (loss)........................................... $ 4,329 $ (3,622) $ (2,643) $ (287) $ 2,450 ======== ======== ======== ======== ======== Net income (loss) per basic share........................... $ 0.75 $ (0.47) $ (0.34) $ (0.04) $ 0.31 Net income (loss) per diluted share......................... $ 0.74 $ (0.47) $ (0.34) $ (0.04) $ 0.31 Cash dividends per share(1)................................. $ 0.18 $ -- $ -- $ -- $ -- Weighted average basic shares outstanding................... 5,799 7,712 7,800 7,800 7,800 Weighted average diluted shares outstanding................. 5,819 7,712 7,800 7,800 7,865 OTHER DATA: EBITDA(2)................................................... $ 22,634 $ 11,921 $ 15,402 $ 18,547 $ 16,761 Net cash provided by operations............................. 15,237 6,474 8,494 9,653 3,347 Net cash provided (used) by investing activities............ (23,071) (27,576) (10,040) 4,314 9,054 Net cash provided (used) by financing activities............ 8,346 23,673 (2,181) (10,284) (12,334) Capital expenditures........................................ 23,212 25,841 12,914 3,980 8,267
AS OF SEPTEMBER 30, ---------------------------------------------------- 1997 1998 1999 2000 2001 -------- -------- -------- -------- -------- BALANCE SHEET DATA: Total assets................................................ $96,704 $114,627 $107,700 $94,703 $80,218 Total long-term obligations................................. 46,242 50,333 48,050 37,735 23,256 Stockholders' equity........................................ 27,541 44,704 43,235 41,748 45,327
- ------------------------------ (1) The Company does not anticipate paying any cash dividends on the Common Stock for the foreseeable future and anticipates that future earnings will be retained to finance future operations and expansion. See "Market for Registrant's Common Equity and Related Stockholder Matters." (2) EBITDA is calculated herein as income before income taxes, extraordinary loss and cumulative effect of change in accounting principle plus depreciation, amortization and net interest expense. The Company believes that EBITDA serves as an important financial analysis tool for measuring and comparing financial information such as liquidity, operating performance and leverage. EBITDA should not be considered an alternative to net income or other cash flow measures determined under accounting principals generally accepted in the United States of America as an indicator of the Company's performance or liquidity. EBITDA as disclosed herein may not be comparable to EBITDA as disclosed by other companies. 9 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL The Company is a leading worldwide designer and manufacturer of automated lighting systems and distributor of automated and conventional lighting and related equipment and services. The Company markets its products and services primarily to the entertainment industry, serving such markets as concert touring, theater, television and film and corporate events. The Company's manufacturing and sales division sells VARI*LITE automated lighting equipment through a dedicated sales staff and a worldwide network of independent dealers. Through its domestic and international offices, the Company's VLPS rental division offers complete automated and conventional lighting systems and lighting production services. Rental revenues were $78.5 million, $76.4 million and $55.6 million or 85.8%, 81.5% and 76.1% of total revenues during fiscal 1999, 2000 and 2001, respectively. The majority of the Company's rental revenues are generated from VLPS' rental of VARI*LITE-Registered Trademark- automated lighting systems, with the remainder from the rental of conventional lighting equipment, related equipment and from the provision of services and, through November 2000, from the rental of concert sound systems. The Company's rental revenues are recorded as earned over the term of each lease. Rental costs consist of direct costs of maintaining, supporting and delivering the rental equipment and the depreciation costs of the capital expenditures incurred to manufacture or purchase the rental equipment. The Company depreciates rental equipment over periods of five to ten years. The Company generates sales revenue from the sale of VARI*LITE-Registered Trademark- automated lighting equipment as well as, through April 2001, providing design and production management services to corporations and business associations for conventions, business meetings and special events. The following table reflects the percentages of total revenues by market:
YEARS ENDED SEPTEMBER 30, ------------------------------ 1999 2000 2001 -------- -------- -------- Concert Touring........................................ 31.1% 26.9% 22.1% Theatre................................................ 12.0 9.5 9.8 Television and Film.................................... 19.8 21.0 21.0 Corporate Events....................................... 26.4 25.5 21.0 Product Sales and Sales-Type Leases.................... 7.9 13.4 20.0 Other.................................................. 2.8 3.8 6.0 ----- ----- ----- Total Revenue........................................ 100.0% 100.0% 100.0% ===== ===== =====
Although the Company expects revenues earned from concert touring (primarily rental revenues) to continue to represent a significant percentage of the Company's total revenues, from fiscal 1999 to fiscal 2001 concert touring revenues have decreased as a percentage of the Company's total revenues due to an increase in rental revenues generated from the Company's other customer markets, an increase in revenues from product sales and the sale in November 2000, of the Company's concert sound reinforcement business. The Company has experienced fluctuations in its concert touring revenues because of the unpredictable nature of the timing and duration of such tours and expects such fluctuations to continue in the future. The Company anticipates revenue from the theater market will continue to fluctuate with the development of new theatrical productions. Revenues earned from the television and film market have increased from fiscal 1999 to fiscal 2001 as a result of the expanding worldwide television market and the need to meet additional programming requirements. In addition, the Company has experienced an increase in revenues from the corporate events market as a result of an increasing number of companies that desire to create entertainment-like productions at company meetings and trade shows. The increase in 10 product sales and sales-type leases from fiscal 1999 to fiscal 2001 is the result of the Company's strategic decision to begin selling VARI*LITE-Registered Trademark- products in fiscal 2000. The following table reflects the Company's revenues as a percentage of total revenues (see Note M of the "Notes to Consolidated Financial Statements") by geographic region:
1999 2000 2001 -------- -------- -------- North America.......................................... 52.0% 60.9% 59.4% Europe................................................. 35.3 28.0 25.7 Asia................................................... 12.7 11.1 14.9 ----- ----- ----- Total Revenue........................................ 100.0% 100.0% 100.0% ===== ===== =====
The majority of European and Asian revenues are denominated in British pounds sterling and Japanese yen, respectively. The Company has offices in London and Tokyo. Prior to their sale in July and October 2000, the Company also had offices in Brussels, Paris, Madrid, Stockholm and Amsterdam. Fluctuations in foreign currencies have impacted, and will continue to impact, the Company's consolidated results of operations due to the translation of foreign currencies into U.S. dollars. The Company has typically maintained foreign currency borrowings to act as an economic hedge against fluctuations in British pounds sterling and Japanese yen. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources." 11 RESULTS OF OPERATIONS The following table sets forth the percentages of total revenues (or as percentages of a component of total revenues as shown) represented by certain consolidated income statement data and other data for the indicated periods:
YEARS ENDED SEPTEMBER 30, ------------------------------ 1999 2000 2001 -------- -------- -------- Income Statement Data: Rental revenues........................................... 85.8% 81.5% 76.1% Product sales and service revenues........................ 14.2 18.5 23.9 ----- ----- ----- Total revenues.......................................... 100.0 100.0 100.0 Rental costs.............................................. 43.2 38.4 34.9 Product sales and service costs........................... 8.1 11.6 15.8 ----- ----- ----- Gross margin.............................................. 48.7 50.0 49.3 Selling, general and administrative expense............... 41.7 39.6 43.2 Research and development expense.......................... 6.1 5.5 7.2 Impairment of assets...................................... -- 4.1 -- Restructuring costs....................................... 0.7 -- -- Gains on lawsuit settlement and sale of lease............. -- (4.2) -- Gain on sale of concert sound reinforcement business...... -- -- (9.7) ----- ----- ----- Operating income.......................................... 0.2 5.0 8.6 Interest expense (net).................................... 5.0 5.5 3.1 ----- ----- ----- Income (loss) before income taxes......................... (4.8) (0.5) 5.5 Income tax expense (benefit).............................. (1.9) (0.2) 2.1 ----- ----- ----- Net income (loss)......................................... (2.9)% (0.3)% 3.4% ===== ===== ===== Other Data: Rental revenues........................................... 100.0% 100.0% 100.0% Rental costs.............................................. 50.4 47.1 45.9 ----- ----- ----- Rental gross margin....................................... 49.6% 52.9% 54.1% ===== ===== ===== Product sales and service revenues........................ 100.0% 100.0% 100.0% Product sales and service costs........................... 56.8 62.8 65.9 ----- ----- ----- Product sales and service gross margin.................... 43.2% 37.2% 34.1% ===== ===== ===== EBITDA(1)................................................. 17.0% 19.8% 22.9%
- ------------------------------ (1) EBITDA is calculated herein as income before income taxes, extraordinary loss and cumulative effect of change in accounting principle plus depreciation, amortization and net interest expense. The Company believes that EBITDA serves as an important financial analysis tool for measuring and comparing financial information such as liquidity, operating performance and leverage. EBITDA should not be considered an alternative to net income or other cash flow measures determined under accounting principals generally accepted in the United States of America as an indicator of the Company's performance or liquidity. EBITDA as disclosed herein may not be comparable to EBITDA as disclosed by other companies. 12 FISCAL YEAR ENDED SEPTEMBER 30, 2001 COMPARED TO FISCAL YEAR ENDED SEPTEMBER 30, 2000 REVENUES. Total revenues decreased 22.0%, or $20.6 million, to $73.1 million in fiscal 2001, compared to $93.7 million in fiscal 2000. The revenue decrease was attributable primarily to the factors set forth below. RENTAL REVENUES. Rental revenues decreased 27.2%, or $20.8 million, to $55.6 million in fiscal 2001, compared to $76.4 million in fiscal 2000. This decrease was entirely due to the sale of the Company's continental European rental operations in October 2000 and concert sound reinforcement business in November 2000 which collectively accounted for $1.6 million of rental revenues in fiscal 2001 compared to $22.4 million in fiscal 2000. PRODUCT SALES AND SERVICES REVENUES. Although revenues generated from product sales and services increased in 2001 due, in part, to the sales of new and used VARI*LITE-Registered Trademark- automated lighting equipment, the increase was partially offset by the closing of the Company's corporate meeting and special events management business in April 2001 which had revenues of $6.7 million in fiscal 2000 and $3.7 million in fiscal 2001. This resulted in products sales and services revenues in fiscal 2001 being virtually unchanged from fiscal 2000. RENTAL COSTS. Rental costs decreased 29.1%, or $10.5 million, to $25.5 million in fiscal 2001, compared to $36.0 million in fiscal 2000. Rental costs as a percentage of rental revenues decreased to 45.9% in fiscal 2001, from 47.1% in fiscal 2000. The decrease in rental costs as a percentage of total rental revenues was primarily due to the sale of the Company's continental European operations in October 2000 which had higher costs as a percent of respective revenues than the remainder of the Company's rental business. PRODUCT SALES AND SERVICES COSTS. Product sales and services costs increased 5.9%, or $0.6 million, to $11.5 million in fiscal 2001, compared to $10.9 million in fiscal 2000. Product sales and services costs as a percentage of product sales and services revenues increased to 65.9% in fiscal 2001, from 62.8% in fiscal 2000. The increase in product sales and services costs as a percentage of the related revenues was primarily due to the higher costs associated with the manufacture and sale of new automated lighting equipment sold in fiscal 2001 as compared to the lower costs associated with the sale of used automated equipment in fiscal 2000. SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and administrative expense decreased 15.0%, or $5.5 million, to $31.6 million in fiscal 2001, compared to $37.1 million in fiscal 2000. This decrease was primarily due to the sale of the Company's continental European rental operations in October 2000 and concert sound reinforcement business in November 2000 and the closing of the Company's Hong Kong rental operations in January 2001 and corporate meeting and special events management business in April 2001. This expense as a percentage of total revenues increased to 43.2% in fiscal 2001 from 39.6% in fiscal 2000. RESEARCH AND DEVELOPMENT EXPENSE. Research and development expense increased 2.1%, or $0.1 million, to $5.3 million in fiscal 2001, compared to $5.2 million in fiscal 2000. This expense as a percentage of total revenues increased to 7.2% in fiscal 2001, from 5.5% in fiscal 2000. IMPAIRMENT OF ASSETS. In June and October 2000, the Company implemented a strategic decision to sell a portion of its European operations. As a result, these European assets were written down to their net realizable value, resulting in a pre-tax charge of $3.9 million for fiscal 2000. GAINS ON LAWSUIT SETTLEMENT AND SALE OF LEASE. In August 2000, the Company settled a patent infringement lawsuit for $5.0 million which resulted in a net gain of $1.7 million and also negotiated the sale of a building lease in New York which resulted in a net gain of $2.3 million. 13 INTEREST EXPENSE. Interest expense decreased 55.7%, or $2.9 million, to $2.3 million in fiscal 2001, compared to $5.2 million in fiscal 2000. This decrease was due to a lower debt balance and a lower interest rate in fiscal 2001. INCOME TAXES. The effective tax rate in fiscal 2001 and 2000 were 38.8% and 39.5%, respectively. FISCAL YEAR ENDED SEPTEMBER 30, 2000 COMPARED TO FISCAL YEAR ENDED SEPTEMBER 30, 1999 REVENUES. Total revenues increased 2.4%, or $2.2 million, to $93.7 million in fiscal 2000, compared to $91.5 million in fiscal 1999. The revenue increase was attributable primarily to the factors set forth below. RENTAL REVENUES. Rental revenues decreased 2.7%, or $2.1 million, to $76.4 million in fiscal 2000, compared to $78.5 million in fiscal 1999. This decrease was primarily due to a decrease in the revenues earned by the Company's European and Asian rental operations, partially offset by increased revenues from the Company's North American rental operations. PRODUCT SALES AND SERVICES REVENUES. Product sales and services revenues increased 33.1%, or $4.3 million, to $17.3 million in fiscal 2000, compared to $13.0 million in fiscal 1999. This increase was primarily due to sales of new and used VARI*LITE-Registered Trademark- automated lighting equipment which increased $3.6 million from $10.4 million for fiscal 2000 compared to $6.8 million for fiscal 1999. RENTAL COSTS. Rental costs decreased 9.0%, or $3.6 million, to $36.0 million in fiscal 2000, compared to $39.6 million in fiscal 1999. Rental costs as a percentage of rental revenues decreased to 47.1% in fiscal 2000, from 50.4% in fiscal 1999. The decrease in rental costs as a percentage of total rental revenues was primarily due to improvement in rental prices and general reductions in variable operating costs. PRODUCT SALES AND SERVICES COSTS. Product sales and services costs increased 47.2%, or $3.5 million, to $10.9 million in fiscal 2000, compared to $7.4 million in fiscal 1999. Product sales and services costs as a percentage of product sales and services revenues increased to 62.8% in fiscal 2000, from 56.8% in fiscal 1999. The increase in product sales and services costs as a percentage of the related revenues was primarily the result of a decrease in revenues from sales-type leases which have historically had a lower cost compared to product sales. SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and administrative expense decreased 2.9%, or $1.1 million, to $37.1 million in fiscal 2000, compared to $38.2 million in fiscal 1999. This expense as a percentage of total revenues decreased to 39.6% in fiscal 2000 from 41.7% in fiscal 1999. This decrease was primarily due to lower overhead costs as a result of the Company's restructuring efforts. RESEARCH AND DEVELOPMENT EXPENSE. Research and development expense decreased 7.8%, or $0.4 million, to $5.2 million in fiscal 2000, compared to $5.6 million in fiscal 1999. This expense as a percentage of total revenues decreased to 5.5% in fiscal 2000, from 6.1% in fiscal 1999. This decrease was primarily the result of a decrease in employee related costs as a result of employee terminations from the restructuring of the Company in fiscal 1999. IMPAIRMENT OF ASSETS. In June and October 2000, the Company implemented a strategic decision to sell a portion of its European operations. As a result, these European assets were written down to their net realizable value, resulting in a pre-tax charge of $3.9 million for fiscal 2000. GAINS ON LAWSUIT SETTLEMENT AND SALE OF LEASE. In August 2000, the Company settled a patent infringement lawsuit for $5.0 million which resulted in a net gain of $1.7 million and also negotiated the sale of a building lease in New York which resulted in a net gain of $2.3 million. 14 RESTRUCTURING COSTS. In 1999, the Company recorded a $0.6 million pretax charge for the estimated costs of restructuring the Company's operations. The charge includes severance payments and other costs associated with the termination of approximately 15 employees. The charge also includes costs associated with terminating leases and the write off of the net book value of leasehold improvements associated with the closing of two offices. INTEREST EXPENSE. Interest expense increased 14.1%, or $0.7 million, to $5.2 million in fiscal 2000, compared to $4.5 million in fiscal 1999. This increase was due to higher interest rates in fiscal 2000. INCOME TAXES. The effective tax rate in fiscal 2000 and 1999 was 39.5%. QUARTERLY FLUCTUATIONS AND SEASONALITY The following table sets forth certain quarterly income statement data and EBITDA for each of the Company's last three fiscal years, which were derived from unaudited financial statements of the Company. In the opinion of the Company's management, this income statement data contains all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation thereof.
QUARTERS ENDED --------------------------------------------------- DECEMBER 31 MARCH 31 JUNE 30 SEPTEMBER 30 FISCAL YEAR ------------ --------- -------- ------------- ----------- (IN THOUSANDS) FISCAL 1999 Total Revenues.......................... $25,248 $23,170 $20,066 $23,048 $91,532 EBITDA.................................. 5,326 4,370 3,035 2,671 15,402 Operating income (loss)................. 1,466 347 (661) (980) 172 FISCAL 2000 Total Revenues.......................... $27,679 $20,719 $21,509 $23,781 $93,688 EBITDA.................................. 6,938 2,714 4,004 4,891 18,547 Operating income (loss)................. 3,362 (791) 549 1,586 4,706 FISCAL 2001 Total Revenues.......................... $20,378 $18,337 $15,584 $18,764 $73,063 EBITDA.................................. 10,900 2,664 803 2,394 16,761 Operating income (loss)................. 8,229 115 (1,800) (244) 6,300
EBITDA is calculated herein as income before income taxes, extraordinary loss and cumulative effect of change in accounting principle plus depreciation, amortization and net interest expense. The Company believes that EBITDA serves as an important financial analysis tool for measuring and comparing financial information such as liquidity, operating performance and leverage. EBITDA should not be considered an alternative to net income or other cash flow measures determined under accounting principals generally accepted in the United States of America as an indicator of the Company's performance or liquidity. EBITDA as disclosed herein may not be comparable to EBITDA as disclosed by other companies. 15 The Company has experienced and is expected to continue to experience fluctuations in quarterly operating results, both between different quarters within the same fiscal year and with respect to the same quarter between different fiscal years. These fluctuations arise from several factors, including the timing and dollar value of product sales with customers, the dependence of the Company on concert tours, which are unpredictable in timing and duration, the introduction of new products and general economic conditions both domestically and internationally. Because of the possibilities of significant fluctuations, results for any quarter may not be indicative of results that may be achieved in a full year. EBITDA and operating loss for the quarter ended September 30, 1999, include charges totaling $0.6 million for employee termination costs associated with restructuring the Company's operations. EBITDA and operating loss for the quarter ended June 30, 2000, includes charges totaling $0.7 million for the impairment of assets used in the Company's Madrid, Spain operations which were sold. EBITDA and operating loss for the quarter ended September 30, 2000, includes total gains on the settlement of the patent infringement lawsuit and the sale of a building lease in New York of $4.0 million partially offset by charges totaling $3.2 million for the impairment of assets used in the Company's continental European operations which were sold. EBITDA and operating income for the quarter ended December 31, 2000, includes a $7.1 million gain on the sale of the Company's sound reinforcement business. LIQUIDITY AND CAPITAL RESOURCES Historically, the Company has financed its operations and capital expenditures with cash flow from operations, bank borrowings and advances from customers. The Company's operating activities generated cash flow of approximately $8.5 million, $9.7 million and $3.3 million during fiscal 1999, 2000 and 2001, respectively. On December 19, 1997, the Company entered into a $50.0 million multicurrency revolving credit facility (the "Old Credit Facility"). Borrowings under the Old Credit Facility were $32.2 million at September 30, 2000. Subsequent to September 30, 2000, the Company used proceeds of $22.2 million from the sale of the Company's concert sound reinforcement business and continental European rental operations and the funding of the London Bank Loans to reduce borrowings under the Old Credit Facility to $10.0 million. On December 29, 2000, Vari-Lite, Inc. entered into the New Credit Facility which includes the $12.0 million Term Loan, the $5.0 million Revolver and the $3.0 million Capital Expenditure Loan. The Term Loan and Capital Expenditure Loan amortize over 84 months (subject to a balloon payment on termination of the "New Credit Facility" as discussed below). Borrowings under the Revolver are subject to availability under a borrowing base of eligible inventory and accounts receivable (as defined in the New Credit Facility). As of September 30, 2001, there was $2.9 million outstanding under the Revolver. Prior to January 15, 2002, all outstanding borrowings under the New Credit Facility bear interest at the lender's base rate or LIBOR, plus a rate margin of .75% and 2.50%, respectively. Beginning on January 15, 2002, all outstanding balances under the New Credit Facility will bear interest at the lender's base rate or LIBOR, plus a rate margin ranging from 0.25% to 0.75% or 2.00% to 2.50%, respectively, based upon the Company's ratio of Adjusted Funded Debt to EBITDA (as defined in the New Credit Facility). The New Credit Facility is guaranteed by the Company and is secured by all of the stock and substantially all of the assets of Vari-Lite, and a pledge of 65% of the outstanding capital stock of the Company's foreign subsidiaries. A commitment fee of 0.25% is charged on the average daily unused portion of the New Credit Facility. The New Credit Facility contains compliance covenants, including requirements that the Company achieve certain financial ratios, as amended on December 31, 2001. In addition, the New Credit Facility places limitations on annual capital expenditures and on the ability to incur additional indebtedness, make certain loans or investments, sell assets, pay dividends or reacquire the Company's stock. The New Credit Facility terminates on December 31, 2003. Upon termination of the New Credit Facility, the entire outstanding indebtedness thereunder becomes due and payable in full. 16 On November 23, 2000, the Company entered into a British pounds sterling 4.0 million (USD 5.8 million) loan with a U.K. bank. On September 27, 2001, the Company entered into an additional British pounds sterling 0.5 million (USD 0.7 million) loan collectively, the "London Bank Loans". These loans accrue interest at the rate of 9.1% and 7.78% per annum and amortize over 48 months and 60 months, respectively. The London Bank Loans are secured by all of the assets of the Company's London operations and include certain financial covenants, limitations on capital expenditures and intercompany payments and the guarantee of the Company. The Company has typically hedged a portion of its currency fluctuation risk by borrowing foreign currencies. Cash generated from the Company's European and Asian operations is typically denominated in the local currencies of these foreign offices and is used to pay expenses incurred in those currencies and service the foreign currency borrowings. The London Bank Loans are serviced by cash generated from the Company's London operations and serves as an economic hedge for net cash generated from these operations. This would not qualify for hedge accounting under Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities." In the future, the Company may use other financial instruments to hedge its foreign currency fluctuation risk. The Company has borrowed money to purchase computer equipment, office furniture and fixtures and conventional equipment. These loans typically amortize over three years and bear interest at various rates ranging from 1.6% to 9.3%. Proceeds received under this type of financing were approximately $1.4 million, $2.9 million and $0.2 million for fiscal 1999, 2000 and 2001, respectively, and borrowings outstanding at September 30, 1999, 2000 and 2001 were approximately $2.6 million, $3.8 million and $1.2 million, respectively. In addition, in fiscal 2000, the Company borrowed an aggregate of $1.9 million through various capitalized leases which bear interest at rates of 2.3% to 10.35%. At September 30, 2000 and 2001, respectively, the Company's equipment borrowings outstanding (including capitalized leases) were $1.7 million and $0.8 million, respectively. The Company uses customer advances to fund short-term working capital and immediate capital expenditure needs for specific contracts. As of September 30, 1999, 2000 and 2001, the Company had unearned revenue related to customer advances of approximately $2.6 million, $3.3 million and $1.2 million, respectively. The Company's business requires on-going capital expenditures. Capital expenditures for fiscal 1999, 2000 and 2001 were approximately $12.9 million, $4.0 million and $8.3 million, respectively, of which approximately $11.2 million, $2.6 million and $7.3 million were for rental equipment inventories. The majority of the Company's revenues are generated through equipment rentals and, as such, the Company must maintain a significant amount of rental equipment to meet customer demands. Inventory included in current assets consists primarily of raw materials, finished goods and spare parts inventory for the Company's automated lighting equipment. Raw materials represented 90%, 90% and 85% of total inventory at September 30, 1999, 2000 and 2001, respectively. The Company had a working capital deficit of approximately $0.2 million at September 30, 1999 and $2.1 million at September 30, 2000 and a working capital surplus of $15.2 million at September 30, 2001. The Company has historically maintained working capital deficits since the bulk of its revenue generating assets are classified as long-term assets rather than current assets. The working capital surplus in 2001 was primarily the result of the refinancing of the Company's senior bank debt which resulted in more of the Company's debt being classified as long term. The Company did not pay dividends in fiscal 1999, 2000 and 2001 and does not anticipate paying any cash dividends for the foreseeable future. Management believes that cash flow generated from operations and borrowing capacity under the New Credit Facility will be sufficient to meet the anticipated operating cash needs and capital expenditures for the next twelve months. Because the Company's future operating results will depend on a number of 17 factors, including the demand for the Company's products and services, the Company's ability to market, sell and support products, competition, the success of the Company's research and development programs, the ability to achieve competitive and technological advances, general and economic conditions and other factors beyond the Company's control, there can be no assurance that sufficient capital resources will be available to fund the expected expansion of its business beyond such period. INFLATION The Company has generally been able to offset cost increases with increases in the rental rates and sales prices charged for its products and services. Accordingly, the Company does not believe that inflation has had a material effect on its results of operations to date. However, there can be no assurance that the Company's business will not be adversely affected by inflation in the future. DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS This report includes "forward-looking statements" as that phrase is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. When used in this report, the words "anticipate," "believe," "estimate," "expect," "will," "could," "may" and similar expressions, as they relate to management or the Company, are intended to identify forward-looking statements. Such statements reflect the current views of management with respect to future events and are subject to certain risks, uncertainties and assumptions, including without limitation the following as they relate to the Company: fluctuations in operating results and seasonality; the Company's ability to market, sell and support products sold; technological changes; reliance on intellectual property; dependence on entertainment industry; competition; dependence on management; foreign exchange risk; international trade risk; and dependence on key suppliers and dependence on manufacturing facility. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described herein. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is exposed to market risk primarily due to fluctuations in interest rates and foreign currency. As of September 30, 2001, with all other variables held constant, a hypothetical one percentage point increase in interest rates would result in an increase in interest expense of approximately $0.2 million. The Company has typically hedged a portion of its currency fluctuation risk by borrowing foreign currencies. Cash generated from the Company's European and Asian operations is typically denominated in the local currencies of these foreign offices and is used to pay expenses incurred in those currencies and service the foreign currency borrowings. The London Bank Loans are serviced by cash generated from the Company's London operations and serves as an economic hedge for net cash generated from these operations. These activities do not qualify as hedge accounting under Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities." In the future, the Company may use other financial instruments to hedge its foreign currency fluctuation risk. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The consolidated financial statements of the Company and its subsidiaries which are required by this Item 8 are listed in Part IV, Item 14(a) of this report. Such consolidated financial statements are included herein beginning on page F-1. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not Applicable. 18 PART III Certain information required by Part III is omitted from this Report on the basis that the registrant will file a definitive proxy statement pursuant to Regulation 14A for its annual meeting of shareholders to be held on March 1, 2002 (the "Proxy Statement") not later than 120 days after the end of the fiscal year covered by this Report, and certain information included therein is incorporated herein by reference. Only those sections of the Proxy Statement which specifically address the items set forth herein are incorporated by reference. Such incorporation does not include the Report of the Compensation Committee and Omnibus Committee on Executive Compensation, the Report of the Audit Committee or the Stock Performance Graph included in the Proxy Statement. ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information concerning the Company's directors and executive officers required by this item is incorporated by reference to the sections entitled "Election of Directors" and "Management--Executive Officers" in the Proxy Statement. ITEM 11. EXECUTIVE COMPENSATION The information required by this Item is incorporated by reference to the section entitled "Executive Compensation" in the Proxy Statement. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this Item is incorporated by reference to the section entitled "Outstanding Capital Stock" and "Section 16(a) Beneficial Ownership Reporting Compliance" in the Proxy Statement. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this Item is incorporated by reference to the section entitled "Transactions with Directors, Officers and Affiliates" in the Proxy Statement. 19 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) Financial Statements The Financial Statements listed below are filed as part of this Annual Report on Form 10-K. (b) Financial Statement Schedule
SCHEDULE DESCRIPTION PAGE - -------- ----------- -------- II Valuation and Qualifying Accounts........................... S-1
The auditors' report with respect to the above-listed financial statement schedule appears on page F-2 of this report. All other financial statements and schedules not listed are omitted either because they are not applicable or not required, or the required information is included in the consolidated financial statements. (c) No reports on Form 8-K were filed during the last quarter of the year ended September 30, 2001. (d) Exhibits
EXHIBIT NO. DESCRIPTION - --------------------- ------------------------------------------------------------ 3.1 Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company's Registration Statement on Form S-1 No. 333-33559) 3.2 By-Laws of the Company (incorporated by reference to Exhibit 3.2 to the Company's Registration Statement on Form S-1 No. 333-33559) 3.3 Certificate of Designation of Rights, Preferences and Privileges of Series A Junior Participating Preferred Stock, dated September 22, 1999 (incorporated by reference to Exhibit 3.3 to the Company's Annual Report on Form 10-K for the year ended September 30, 1999) 4.1 Form of certificate representing shares of the Company's Common Stock (incorporated by reference to Exhibit 4.1 to the Company's Registration Statement on Form S-1 No. 333-33559) 4.2 Warrant Agreement, dated as of July 31, 1996, among the Company, Brown Brothers Harriman & Co., NBD Bank, SunTrust Bank, Atlanta (formerly known as Trust Company Bank) and Comerica Bank Texas (incorporated by reference to Exhibit 4.2 to the Company's Registration Statement on Form S-1 No. 333-33559) 4.3 Supplement, dated as of August 31, 1999, to the Warrant Agreement, dated as of July 31, 1996, between the Company and Chase Bank of Texas, N.A. (incorporated by reference to Exhibit 4.3 to the Company's Annual Report on Form 10-K for the year ended September 30, 1999) 4.4 Amendment No. 1, dated as of August 31, 1999, to the Warrant Agreement, dated as of July 31, 1996, between the Company and Brown Brothers Harriman & Co. (incorporated by reference to Exhibit 4.4 to the Company's Annual Report on Form 10-K for the year ended September 30, 1999) 4.5 Amendment No. 1, dated as of August 31, 1999, to the Warrant Agreement, dated as of July 31, 1996, between the Company and Suntrust Bank, Atlanta (incorporated by reference to Exhibit 4.5 to the Company's Annual Report on Form 10-K for the year ended September 30, 1999)
20
EXHIBIT NO. DESCRIPTION - --------------------- ------------------------------------------------------------ 4.6 Amendment No. 1, dated as of August 31, 1999, to the Warrant Agreement, dated as of July 31, 1996, between the Company and Comerica Bank-Texas (incorporated by reference to Exhibit 4.6 to the Company's Annual Report on Form 10-K for the year ended September 30, 1999) 4.7 Amendment No. 1, dated as of August 31, 1999, to the Warrant Agreement, dated as of July 31, 1996, between the Company and The First National Bank of Chicago (as successor to NBD Bank) (incorporated by reference to Exhibit 4.7 to the Company's Annual Report on Form 10-K for the year ended September 30, 1999) 4.8 Supplement, dated as of August 31, 1999, to the Warrant Agreement, dated as of July 31, 1996, between the Company, Brown Brothers Harriman & Co., the First National Bank of Chicago as successor to NBD Bank, Suntrust Bank, Comerica Bank-Texas, and Chase Bank of Texas, N.A. (CBT) (incorporated by reference to Exhibit 4.8 to the Company's Annual Report on Form 10-K for the year ended September 30, 1999) 10.1 Employment Agreement, dated as of July 1, 1995, between the Company and H.R. Brutsche III (incorporated by reference to Exhibit 10.1 to the Company's Registration Statement on Form S-1 No. 333-33559) 10.2 Amendment No. 1, dated as of August 11, 1997, to the Employment Agreement, dated as of July 1, 1995, between the Company and H.R. Brutsche III (incorporated by reference to Exhibit 10.2 to the Company's Registration Statement on Form S-1 No. 333-33559) 10.3 Consulting Agreement, dated as of July 1, 1995, between the Company and J. Anthony Smith (incorporated by reference to Exhibit 10.3 to the Company's Registration Statement on Form S-1 No. 333-33559) 10.4 Consulting Agreement, dated as of July 1, 1995, between the Company and John D. Maxson (incorporated by reference to Exhibit 10.4 to the Company's Registration Statement on Form S-1 No. 333-33559) 10.5 Amendment No. 1, dated as of August 11, 1997, to the Consulting Agreement, dated as of July 1, 1995, between the Company and John D. Maxson (incorporated by reference to Exhibit 10.5 to the Company's Registration Statement on Form S-1 No. 333-33559) 10.6 Consulting Agreement, dated as of July 1, 1995, between the Company and James H. Clark, Jr. (incorporated by reference to Exhibit 10.6 to the Company's Registration Statement on Form S-1 No. 333-33559) 10.7 Deferred Compensation Agreement, dated as of July 1, 1995, between the Company and H. R. Brutsche III (incorporated by reference to Exhibit 10.7 to the Company's Registration Statement on Form S-1 No. 333-33559) 10.8 Deferred Compensation Agreement, dated as of July 1, 1995, between the Company and John D. Maxson (incorporated by reference to Exhibit 10.8 to the Company's Registration Statement on Form S-1 No. 333-33559) 10.9 Deferred Compensation Agreement, dated as of July 1, 1995, between the Company and James H. Clark, Jr. (incorporated by reference to Exhibit 10.9 to the Company's Registration Statement on Form S-1 No. 333-33559) 10.10 Deferred Compensation Agreement, dated as of July 1, 1995, between the Company and J. Anthony Smith (incorporated by reference to Exhibit 10.10 to the Company's Registration Statement on Form S-1 No. 333-33559) 10.11 Compensation Continuation Agreement, dated as of March 31, 1994, among the Company, Vari-Lite, Inc., Showco, Inc. and H. R. Brutsche III (incorporated by reference to Exhibit 10.11 to the Company's Registration Statement on Form S-1 No. 333-33559)
21
EXHIBIT NO. DESCRIPTION - --------------------- ------------------------------------------------------------ 10.12 Compensation Continuation Agreement, dated as of March 31, 1994, among the Company, Vari-Lite, Inc., Showco, Inc. and John D. Maxson (incorporated by reference to Exhibit 10.12 to the Company's Registration Statement on Form S-1 No. 333-33559) 10.13 Compensation Continuation Agreement, dated as of March 31, 1994, among the Company, Vari-Lite, Inc., Showco, Inc. and James H. Clark, Jr. (incorporated by reference to Exhibit 10.13 to the Company's Registration Statement on Form S-1 No. 333-33559) 10.14 Statement and Terms of Employment, dated as of April 1, 1994, between Vari-Lite Europe Ltd. and Brian L. Croft (incorporated by reference to Exhibit 10.14 to the Company's Registration Statement on Form S-1 No. 333-33559) 10.15 Split-Dollar Agreement, dated as of October 12, 1995, among the Company, Brown Brothers Harriman Trust Company of Texas, trustee of the H.R. Brutsche III Insurance Trust, and H. R. Brutsche III (incorporated by reference to Exhibit 10.15 to the Company's Registration Statement on Form S-1 No. 333-33559) 10.16 Amended and Restated Split-Dollar Agreement, dated as of October 12, 1995, among the Company, Brown Brothers Harriman Trust Company of Texas, trustee of the H.R. Brutsche III Insurance Trust, and H. R. Brutsche III (incorporated by reference to Exhibit 10.16 to the Company's Registration Statement on Form S-1 No. 333- 33559) 10.17 Amended and Restated Split-Dollar Agreement, dated as of October 12, 1997, among the Company, Brown Brothers Harriman Trust Company of Texas, trustee of the John D. Maxson 1995 Irrevocable Trust, and John D. Maxson (incorporated by reference to Exhibit 10.17 to the Company's Registration Statement on Form S-1 No. 333- 33559) 10.18 Split-Dollar Life Insurance Agreement, dated as of October 12, 1995, among the Company, James Howard Cullum Clark and James H. Clark, Jr. (incorporated by reference to Exhibit 10.18 to the Company's Registration Statement on Form S-1 No. 333-33559) 10.19 Amended and Restated Split-Dollar Agreement, dated as of October 12, 1995, between the Company, James Howard Cullum Clark and James H. Clark, Jr. (incorporated by reference to Exhibit 10.19 to the Company's Registration Statement on Form S-1 No. 333-33559) 10.20 Vari-Lite International, Inc. 1997 Omnibus Plan (including forms of Incentive Stock Option Agreement and Nonqualified Stock Option Agreement) (incorporated by reference to Exhibit 10.20 to the Company's Registration Statement on Form S-1 No. 333-33559) 10.21 Vari-Lite International, Inc. Employees' Stock Ownership Plan (incorporated by reference to Exhibit 10.21 to the Company's Registration Statement on Form S-1 No. 333-33559) 10.22 Vari-Lite International, Inc. Employees' Stock Equivalence Plan (incorporated by reference to Exhibit 10.22 to the Company's Registration Statement on Form S-1 No. 333-33559) 10.23 Vari-Lite International, Inc. Annual Incentive Plan (as amended and restated) (incorporated by reference to Exhibit 10.23 to the Company's Registration Statement on Form S-1 No. 333-33559) 10.24 Employment Agreement, dated as of August 28, 1995, by and between the Company and James E. Kinnu (incorporated by reference to Exhibit 10.34 to the Company's Registration Statement on Form S-1 No. 333-33559) 10.25 Severance Agreement, dated as of September 30, 1996, by and between the Company and James E. Kinnu (incorporated by reference to Exhibit 10.35 to the Company's Registration Statement on Form S-1 No. 333-33559) 10.26 Ground Lease, dated as of December 21, 1995, among Brazos Beltline Development, Inc. and Vari-Lite, Inc., Showco, Inc., IGNITION! Creative Services, Inc., Concert Production Lighting, Inc. and Irideon, Inc. (incorporated by reference to Exhibit 10.36 to the Company's Registration Statement on Form S-1 No. 333-33559)
22
EXHIBIT NO. DESCRIPTION - --------------------- ------------------------------------------------------------ 10.27 Guaranty, dated as of December 21, 1995, by the Company (incorporated by reference to Exhibit 10.37 to the Company's Registration Statement on Form S-1 No. 333-33559) 10.28 Form of Indemnification Agreement with Directors and Officers (incorporated by reference to Exhibit 10.38 to the Company's Registration Statement on Form S-1 No. 333-33559) 10.29 Agreement and Plan of Merger, dated as of August 27, 1997, between the Company and Vari-Lite Texas (incorporated by reference to Exhibit 10.39 to the Company's Registration Statement on Form S-1 No. 333-33559) 10.30 International Swap Dealers Association, Inc. Master Agreement, dated as of November 23, 1993, between the Company and Brown Brothers, Harriman & Co. (along with confirmation of Interest Rate Swap Transaction) (incorporated by reference to Exhibit 10.40 to the Company's Registration Statement on Form S-1 No. 333- 33559) 10.31 International Swap Dealers Association, Inc. Master Agreement, dated as of September 13, 1996, between Vari-Lite, Inc. and SunTrust Bank, Atlanta (along with confirmations of Interest Rate Transactions) (incorporated by reference to Exhibit 10.41 to the Company's Registration Statement on Form S-1 No. 333-33559) 10.32 Multicurrency Credit Agreement, dated as of December 19, 1997, among the Company and SunTrust Bank, Atlanta, as agent for the other banks thereunder (incorporated by reference to Exhibit 10.32 to the Company's Annual Report on Form 10-K for the year ended September 30, 1997) 10.33 Amendment No.1, dated April 24, 1998 to the Multicurrency Credit Agreement, dated as of December 19, 1997, among the Company and SunTrust Bank, Atlanta, as agent for the other banks thereunder (incorporated by reference 10.33 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1998) 10.34 Amendment No. 2, dated July 31, 1998 to the Multicurrency Credit Agreement, dated as of December 19, 1997, among the Company and SunTrust Bank, Atlanta, as agent for the other banks thereunder (incorporated by reference to Exhibit 10.34 to the Company's Quarterly Report for the quarterly period ended June 30, 1998) 10.35 Amendment No. 3, dated December 15, 1998 to the Multicurrency Credit Agreement, dated as of December 19, 1997, among the Company and SunTrust Bank, Atlanta, as agent for the other banks thereunder (incorporated by reference to Exhibit 4.5 to the Company's Annual Report on Form 10-K for the year ended September 30, 1999) 10.36 Amendment No. 1, effective November 2, 1998, to the Deferred Compensation Agreement, dated as of July 1, 1995, between the Company and H.R. Brutsche III (incorporated by reference to Exhibit 4.5 to the Company's Annual Report on Form 10-K for the year ended September 30, 1999) 10.37 Amendment No. 1, effective November 2, 1998, to the Deferred Compensation Agreement, dated as of July 1, 1995, between the Company and John D. Maxson (incorporated by reference to Exhibit 4.5 to the Company's Annual Report on Form 10-K for the year ended September 30, 1999) 10.38 Amendment No. 1, effective November 2, 1998, to the Deferred Compensation Agreement, dated as of July 1, 1995, between the Company and James H. Clark, Jr. (incorporated by reference to Exhibit 10.38 to the Company's Quarterly Report for the quarterly period ended December 31, 1998) 10.39 Amendment No. 1, effective November 2, 1998, to the Deferred Compensation Agreement, dated as of July 1, 1995, between the Company and J. Anthony Smith (incorporated by reference to Exhibit 10.39 to the Company's Quarterly Report for the quarterly period ended December 31, 1998)
23
EXHIBIT NO. DESCRIPTION - --------------------- ------------------------------------------------------------ 10.40 Amendment No. 1, effective January 1, 1998, to the Vari-Lite International, Inc. Employees' Stock Ownership Plan dated September 27, 1995 (incorporated by reference to Exhibit 10.40 to the Company's Quarterly Report for the quarterly period ended March 31, 1999) 10.41 Amendment No. 1, effective January 1, 1998, to the Vari-Lite International, Inc. Employees' Stock Ownership Trust dated September 27, 1995 (incorporated by reference to Exhibit 10.41 to the Company's Quarterly Report for the quarterly period ended March 31, 1999) 10.42 Amendment No. 4, dated April 1, 1999, to the Multicurrency Credit Agreement, dated as of December 19, 1997, among the Company and SunTrust Bank, Atlanta, as agent for the banks thereunder (incorporated by reference to Exhibit 10.42 to the Company's Quarterly Report for the quarterly period ended March 31, 1999) 10.43 Temporary Waiver Agreement, dated August 12, 1999, to the Multicurrency Credit Agreement, dated as of December 19, 1997, among the Company and SunTrust Bank, Atlanta, as agent for the banks thereunder (incorporated by reference to Exhibit 10.43 to the Company's Quarterly Report for the quarterly period ended June 30, 1999) 10.44 Rights Agreement, dated September 27, 1999, by and between the Company and Chase Mellon Shareholder Services, L.L.C. (incorporated by reference to Exhibit 4.1 to the Company's Form 8-K filed September 22, 1999) 10.45 Amendment No. 5, dated August 25, 1999, to the Multicurrency Credit Agreement, dated as of December 19, 1997, among the Company and SunTrust Bank, Atlanta, as agent for the banks thereunder (incorporated by reference to Exhibit 10.45 to the Company's Annual Report on Form 10-K for the year ended September 30, 1999) 10.46 Amendment No. 6, dated January 11, 2000, to the Multicurrency Credit Agreement, dated as of December 19, 1997, among the Company and SunTrust Bank, Atlanta, as agent for the banks thereunder (incorporated by reference to Exhibit 10.46 to the Company's Annual Report on Form 10-K for the year ended September 30, 1999) 10.47 Share Purchase Agreement, dated October 26, 2000, between Vari-Lite International, Inc. and First Events B.V. (incorporated by reference to Exhibit 2.1 to the Company's Form 8-K filed November 13, 2000) 10.48 Asset Purchase Agreement, dated October 26, 2000, between Vari-Lite, Inc. and First Events B.V. (incorporated by reference to Exhibit 2.2 to the Company's Form 8-K filed November 13, 2000) 10.49 Asset Transfer Agreement, dated November 17, 2000, by and among Vari-Lite International, Inc., Showco, Inc. and Clearsho, LLC (incorporated by reference to Exhibit 2.1 to the Company's Form 8-K filed December 4, 2000) 10.50 Equity Purchase Agreement, dated November 17, 2000 by and among Vari-Lite International, Inc., Showco, Inc., Clair Brothers Audio Enterprises, Inc. and Clair Acquisition Corp. (incorporated by reference to Exhibit 2.2 to the Company's Form 8-K filed December 4, 2000) 10.51 Financing Agreement, dated December 29, 2000, between Vari-Lite, Inc. and U.S. Bank National Association, formerly known as Firstar Bank, National Association (incorporated by reference to Exhibit 10.51 to the Company's Annual Report on Form 10-K for the year ended September 30, 2000) 10.52 Security Agreement, dated December 29, 2000, between the Company and U.S. Bank National Association, formerly known as Firstar Bank, National Association (incorporated by reference to Exhibit 10.52 to the Company's Annual Report on Form 10-K for the year ended September 30, 2000)
24
EXHIBIT NO. DESCRIPTION - --------------------- ------------------------------------------------------------ 10.53 Guaranty Agreement, dated December 29, 2000, made by the Company in favor of U.S. Bank National Association, formerly known as Firstar Bank, National Association (incorporated by reference to Exhibit 10.53 to the Company's Annual Report on Form 10-K for the year ended September 30, 2000) 10.54 Patent, Trademark and License Security Agreement, dated December 29, 2000, between Vari-Lite, Inc. and U.S. Bank National Association, formerly known as Firstar Bank, National Association (incorporated by reference to Exhibit 10.54 to the Company's Annual Report on Form 10-K for the year ended September 30, 2000) 10.55 Chattel Mortgage Facility Offer, dated November 9, 2000, between Vari-Lite Production Services Ltd. and Barclays Mercantile Business Finance Limited (incorporated by reference to Exhibit 10.55 to the Company's Annual Report on Form 10-K for the year ended September 30, 2000) 10.56 Mortgage, dated November 23, 2000, between Vari-Lite Production Services Ltd. and Barclays Mercantile Business Finance Limited (incorporated by reference to Exhibit 10.56 to the Company's Annual Report on Form 10-K for the year ended September 30, 2000) 10.57 Guarantee & Indemnity-Cross Border, dated November 23, 2000, between the Company and Barclays Mercantile Business Finance Limited on behalf of Vari-Lite Production Services, Ltd. (incorporated by reference to Exhibit 10.57 to the Company's Annual Report on Form 10-K for the year ended September 30, 2000) 10.58 Employment Agreement, dated January 1, 2001, between the Company and T. Clay Powers (incorporated by reference to Exhibit 10.58 to the Company's Quarterly Report for the quarterly period ended March 31, 2001) 10.59 Employment Agreement, dated January 1, 2001, between the Company and Jerome L. Trojan III (incorporated by reference to Exhibit 10.59 to the Company's Quarterly Report for the quarterly period ended March 31, 2001) 10.60 Employment Agreement, dated July 11, 2001, between the Company and Robert H. Schacherl (incorporated by reference to Exhibit 10.60 to the Company's Quarterly Report for the quarterly period ended June 30, 2001) 10.61 Amendment No. 1, dated March 30, 2001, to the Financing Agreement, dated as of December 29, 2000, between Vari-Lite, Inc. and U.S. Bank National Association, formerly known as Firstar Bank, National Association (incorporated by reference to Exhibit 10.61 to the Company's Quarterly Report for the quarterly period ended June 30, 2001) 10.62 Amendment No. 2, dated June 30, 2001, to the Financing Agreement, dated as of December 29, 2000, between Vari-Lite, Inc. and U.S. Bank National Association, formerly known as Firstar Bank, National Association (incorporated by reference to Exhibit 10.62 to the Company's Quarterly Report for the quarterly period ended June 30, 2001) 10.63 Amendment No. 1 to the Vari-Lite International, Inc. 1997 Omnibus Plan (incorporated by reference to Exhibit 4.2 to the Company's Registration Statement on Form S-8 No. 333-67664) *10.64 Amendment No. 3, dated December 31, 2001, to the Financing Agreement, dated as of December 29, 2000, between Vari-Lite, Inc. and U.S. Bank National Association, formerly known as Firstar Bank, National Association. *10.65 Master Lease Purchase Agreement, dated September 27, 2001, between Vari-Lite Europe Ltd., formerly known as Vari-Lite Production Services, Ltd., and Barclays Mercantile Business Finance Limited. *21.1 List of Company's Subsidiaries *23.1 Consent of Deloitte & Touche, LLP
- ------------------------ * Filed herewith. 25 SIGNATURES Pursuant to the requirements of the Section 13 or 15(d) of Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Dallas and State of Texas on the 31st day of December, 2001. VARI-LITE INTERNATIONAL, INC. By: /s/ H.R. BRUTSCHE III ----------------------------------------- H.R. Brutsche III CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities on the 31st day of December, 2001. /s/ H.R. BRUTSCHE III Chairman of the Board and Chief Executive - -------------------------------------------- Officer (Principal Executive Officer) H.R. Brutsche III /s/ JEROME L. TROJAN III Vice President--Finance, Chief Financial - -------------------------------------------- Officer, Treasurer and Secretary (Principal Jerome L. Trojan III Financial and Accounting Officer) /s/ JAMES H. CLARK, JR. Director - -------------------------------------------- James H. Clark, Jr. /s/ JOHN D. MAXSON Director - -------------------------------------------- John D. Maxson /s/ JOHN R. RETTBERG Director - -------------------------------------------- John R. Rettberg /s/ WILLIAM C. SCOTT Director - -------------------------------------------- William C. Scott /s/ J. ANTHONY SMITH Director - -------------------------------------------- J. Anthony Smith /s/ J.R.K. TINKLE Director - -------------------------------------------- J.R.K. Tinkle
26 INDEX TO FINANCIAL STATEMENTS CONSOLIDATED FINANCIAL STATEMENTS OF VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES Independent Auditors' Report................................ F-2 Consolidated Balance Sheets as of September 30, 2000 and 2001...................................................... F-3 Consolidated Statements of Operations and Comprehensive Income (Loss) for the Years Ended September 30, 1999, 2000, and 2001............................................ F-4 Consolidated Statements of Stockholders' Equity for the Years Ended September 30, 1999, 2000 and 2001............. F-5 Consolidated Statements of Cash Flows for the Years Ended September 30, 1999, 2000 and 2001......................... F-6 Notes to Consolidated Financial Statements.................. F-7 The following financial statement supplementary schedule of the Registrant and its subsidiaries required to be included in Item 14(b) is listed below: Schedule II--Valuation and Qualifying Accounts.............. S-1
F-1 INDEPENDENT AUDITORS' REPORT To the Stockholders of Vari-Lite International, Inc. Dallas, Texas We have audited the accompanying consolidated balance sheets of Vari-Lite International, Inc. and subsidiaries (herein referred to as "the Company") as of September 30, 2000 and 2001, and the related consolidated statements of operations and comprehensive income (loss), stockholders' equity and cash flows for each of the three years in the period ended September 30, 2001. Our audits also included the financial statement schedule listed in the index at Item 14(b). These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards 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. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2000 and 2001, and the results of its operations and its cash flows for each of the three years in the period ended September 30, 2001, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein. /s/ DELOITTE & TOUCHE LLP Dallas, Texas December 31, 2001 F-2 VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, 2000 AND 2001 (IN THOUSANDS EXCEPT SHARE DATA)
2000 2001 -------- -------- ASSETS CURRENT ASSETS: Cash...................................................... $ 4,315 $ 3,686 Receivables, less allowance for doubtful accounts of $740 and $603................................................ 12,369 9,679 Inventory................................................. 13,695 15,388 Prepaid expense and other current assets.................. 1,352 783 -------- -------- TOTAL CURRENT ASSETS.................................... 31,731 29,536 EQUIPMENT AND OTHER PROPERTY: Lighting and sound equipment.............................. 123,210 103,032 Machinery and tools....................................... 5,678 3,578 Furniture and fixtures.................................... 5,089 4,207 Office and computer equipment............................. 10,377 10,501 Work in progress and raw materials inventory.............. 680 -- -------- -------- 145,034 121,318 Less accumulated depreciation and amortization.......... 84,097 72,712 -------- -------- 60,937 48,606 OTHER ASSETS................................................ 2,035 2,076 -------- -------- TOTAL ASSETS............................................ $ 94,703 $ 80,218 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable and accrued expenses..................... $ 10,873 $ 8,079 Unearned revenue.......................................... 3,272 1,201 Income taxes payable...................................... 82 146 Current portion of long-term obligations.................. 19,599 4,893 -------- -------- TOTAL CURRENT LIABILITIES............................... 33,826 14,319 LONG-TERM OBLIGATIONS....................................... 18,136 18,363 DEFERRED INCOME TAXES....................................... 993 2,209 -------- -------- TOTAL LIABILITIES....................................... 52,955 34,891 COMMITMENTS AND CONTINGENCIES (Note F)...................... -- -- STOCKHOLDERS' EQUITY: Preferred Stock, $0.10 par value (10,000,000 shares authorized; no shares issued)........................... -- -- Common Stock, $0.10 par value (40,000,000 shares authorized; 7,845,167 shares issued; 7,800,003 shares outstanding)............................................ 785 785 Treasury Stock, at cost................................... (186) (186) Additional paid-in capital................................ 25,026 25,026 Stockholder notes receivable.............................. (19) -- Accumulated other comprehensive income (loss)--foreign currency translation adjustment......................... (319) 791 Retained earnings......................................... 16,461 18,911 -------- -------- TOTAL STOCKHOLDERS' EQUITY.............................. 41,748 45,327 -------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.............. $ 94,703 $ 80,218 ======== ========
See notes to consolidated financial statements. F-3 VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) YEARS ENDED SEPTEMBER 30, 1999, 2000 AND 2001 (IN THOUSANDS EXCEPT SHARE DATA)
1999 2000 2001 ---------- ---------- ---------- Rental revenues.......................................... $ 78,520 $ 76,366 $ 55,597 Product sales and services revenues...................... 13,012 17,322 17,466 ---------- ---------- ---------- TOTAL REVENUES......................................... 91,532 93,688 73,063 Rental cost.............................................. 39,557 35,990 25,534 Product sales and services cost.......................... 7,393 10,881 11,518 ---------- ---------- ---------- TOTAL COST OF SALES.................................... 46,950 46,871 37,052 ---------- ---------- ---------- GROSS PROFIT........................................... 44,582 46,817 36,011 Selling, general and administrative expense.............. 38,224 37,102 31,551 Research and development expense......................... 5,586 5,152 5,260 ---------- ---------- ---------- TOTAL OPERATING EXPENSES............................... 43,810 42,254 36,811 ---------- ---------- ---------- Impairment of assets..................................... -- (3,850) -- Restructuring costs...................................... (600) -- -- Gains on lawsuit settlement and sale of lease............ -- 3,993 -- Gain on sale of concert sound reinforcement business..... -- -- 7,100 ---------- ---------- ---------- OPERATING INCOME......................................... 172 4,706 6,300 Interest expense (net)................................... 4,540 5,180 2,294 ---------- ---------- ---------- INCOME (LOSS) BEFORE INCOME TAXES........................ (4,368) (474) 4,006 Income tax expense (benefit)............................. (1,725) (187) 1,556 ---------- ---------- ---------- NET INCOME (LOSS)........................................ (2,643) (287) 2,450 Other comprehensive income (loss)--foreign currency translation adjustment................................. 1,122 (1,211) 1,110 ---------- ---------- ---------- COMPREHENSIVE INCOME (LOSS).............................. $ (1,521) $ (1,498) $ 3,560 ========== ========== ========== WEIGHTED AVERAGE BASIC SHARES OUTSTANDING................ 7,800,003 7,800,003 7,800,003 ========== ========== ========== WEIGHTED AVERAGE DILUTED SHARES OUTSTANDING.............. 7,800,003 7,800,003 7,864,850 ========== ========== ========== PER SHARE INFORMATION BASIC: Net income (loss)...................................... $ (0.34) $ (0.04) $ 0.31 DILUTED: Net income (loss)...................................... $ (0.34) $ (0.04) $ 0.31
See notes to consolidated financial statements. F-4 VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY YEARS ENDED SEPTEMBER 30, 1999, 2000 AND 2001 (IN THOUSANDS EXCEPT SHARE DATA)
PREFERRED STOCK COMMON STOCK TREASURY STOCK ADDITIONAL STOCKHOLDER -------------------- -------------------- ------------------- PAID-IN NOTES SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL RECEIVABLE --------- -------- --------- -------- -------- -------- ---------- ----------- BALANCE, OCTOBER 1, 1998............ -- $ -- 7,845,167 $785 (45,164) $(186) $24,426 $ (82) Payments on stockholder notes receivable........................ 52 Revaluation of stock warrants....... 600 Other comprehensive income--foreign currency translation adjustment... Net loss............................ --------- ------ --------- ---- ------- ----- ------- ----- BALANCE, SEPTEMBER 30, 1999......... -- -- 7,845,167 785 (45,164) (186) 25,026 (30) Payments on stockholder notes receivable........................ 11 Other comprehensive income--foreign currency translation adjustment... Net loss............................ --------- ------ --------- ---- ------- ----- ------- ----- BALANCE, SEPTEMBER 30, 2000......... -- -- 7,845,167 785 (45,164) (186) 25,026 (19) Payments on stockholder notes receivable........................ 19 Other comprehensive income--foreign currency translation adjustment... Net income.......................... --------- ------ --------- ---- ------- ----- ------- ----- BALANCE, SEPTEMBER 30, 2001......... -- $ -- 7,845,167 $785 (45,164) $(186) $25,026 $ -- ========= ====== ========= ==== ======= ===== ======= ===== ACCUMULATED STOCK OTHER PURCHASE COMPREHENSIVE RETAINED WARRANTS INCOME (LOSS) EARNINGS TOTAL -------- ------------- -------- -------- BALANCE, OCTOBER 1, 1998............ $ 600 $ (230) $19,391 $44,704 Payments on stockholder notes receivable........................ 52 Revaluation of stock warrants....... (600) -- Other comprehensive income--foreign currency translation adjustment... 1,122 1,122 Net loss............................ (2,643) (2,643) ----- ------- ------- ------- BALANCE, SEPTEMBER 30, 1999......... -- 892 16,748 43,235 Payments on stockholder notes receivable........................ 11 Other comprehensive income--foreign currency translation adjustment... (1,211) (1,211) Net loss............................ (287) (287) ----- ------- ------- ------- BALANCE, SEPTEMBER 30, 2000......... -- (319) 16,461 41,748 Payments on stockholder notes receivable........................ 19 Other comprehensive income--foreign currency translation adjustment... 1,110 1,110 Net income.......................... 2,450 2,450 ----- ------- ------- ------- BALANCE, SEPTEMBER 30, 2001......... $ -- $ 791 $18,911 $45,327 ===== ======= ======= =======
See notes to consolidated financial statements. F-5 VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED SEPTEMBER 30, 1999, 2000 AND 2001 (IN THOUSANDS)
1999 2000 2001 -------- -------- -------- Cash flows from operating activities: Net income (loss)......................................... $ (2,643) $ (287) $ 2,450 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization........................... 15,230 13,841 10,461 Amortization of note discount and deferred loan fees.... 136 453 401 Provision for doubtful accounts......................... 140 178 366 Impairment of assets.................................... -- 3,850 -- Gain on sale of lease................................... -- (2,251) -- Deferred income taxes................................... (2,194) (521) 1,216 Gain on sale of equipment and other property............ (159) (626) 131 Gain on sale of concert sound reinforcement business.... -- -- (7,100) Gains on sale of Brilliant Stages, cancellation of land lease and loss on sale of Dubai........................ (462) -- -- Net change in assets and liabilities: Accounts receivable................................... 268 (130) (111) Inventory............................................. (2,545) (6,852) (1,693) Prepaid expenses...................................... 12 324 483 Other assets.......................................... 1,668 2,583 (351) Accounts payable, accrued liabilities and income taxes payable.............................................. (1,869) (1,588) (1,168) Unearned revenue...................................... 912 679 (1,738) -------- -------- -------- Net cash provided by operating activities............... 8,494 9,653 3,347 Cash flows from investing activities: Capital expenditures, including rental equipment.......... (12,914) (3,980) (8,267) Acquisition of European companies, net of cash acquired... (1,192) -- -- Proceeds from sale of European company, lawsuit settlement and sale of lease....................................... -- 4,714 -- Proceeds from sale of Irideon, Brilliant Stages and Dubai assets and cancellation of land lease................... 3,666 -- -- Proceeds from sale of concert sound reinforcement business................................................ -- -- 11,946 Proceeds from sale of European operations................. -- -- 5,258 Proceeds from sale of equipment........................... 400 3,580 117 -------- -------- -------- Net cash provided (used) by investing activities........ (10,040) 4,314 9,054 Cash flows from financing activities: Proceeds from issuance of debt............................ 33,178 29,198 62,203 Principal payments on debt................................ (34,765) (39,214) (74,556) Principal payments on distributor advances................ (646) (279) -- Proceeds from payments on stockholder notes receivable.... 52 11 19 -------- -------- -------- Net cash used by financing activities................... (2,181) (10,284) (12,334) Effect of exchange rate changes on cash and cash equivalents............................................... 1,858 (1,337) (696) -------- -------- -------- Net increase (decrease) during the year..................... (1,869) 2,346 (629) Cash, beginning of year..................................... 3,838 1,969 4,315 -------- -------- -------- Cash, end of year........................................... $ 1,969 $ 4,315 $ 3,686 ======== ======== ======== SUPPLEMENTAL CASH FLOW INFORMATION Cash paid for interest expense............................ $ 3,958 $ 5,459 $ 2,374 Cash paid for income taxes................................ $ 821 $ 427 $ 96 Non-cash transactions: Warrants revalued....................................... $ (600) $ -- $ --
See notes to consolidated financial statements. F-6 VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED SEPTEMBER 30, 1999, 2000 AND 2001 (IN THOUSANDS EXCEPT SHARE DATA) NOTE A--ORGANIZATION: The Company is a leading worldwide designer and manufacturer of automated lighting systems and distributor of automated and conventional lighting and related equipment and services. The Company markets its products and services primarily to the entertainment industry, serving such markets as concert touring, theater, television and film and corporate events. The Company's manufacturing and sales division sells VARI*LITE automated lighting equipment through a dedicated sales staff and a worldwide network of independent dealers. Through its domestic and international offices, the Company's VLPS rental division offers complete automated and conventional lighting systems and lighting production services. NOTE B--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: PRINCIPLES OF CONSOLIDATION AND USE OF ESTIMATES The consolidated financial statements of Vari-Lite International, Inc. include the accounts of its wholly-owned subsidiaries which consist of operating and holding companies. The operating companies consist of Vari-Lite, Inc., Vari-Lite Asia, Inc. and Vari-Lite Production Services, Ltd. On September 23, 1999, the Company sold substantially all of the assets of its Dubai operation. On June 30, 2000, the Company sold its entire interest in Vari-Lite Production Services, S.A. and the VARI*LITE-Registered Trademark- equipment used in the operations for a loss of $650. On October 26, 2000, the Company sold its continental European operations. This transaction resulted in a pre-tax charge of $3,200 which included the write off of all the associated goodwill. All material intercompany transactions and balances have been eliminated. On November 17, 2000, the Company transferred substantially all of the assets of Showco, Inc. ("Showco") to Clearsho, Inc. ("Clearsho"), which assumed certain of Showco's contract liabilities, in exchange for the sole membership interest in Clearsho. On November 17, 2000, Showco sold 100% of its interest in Clearsho which resulted in a net pre-tax gain of $7,100. In April 2001, the Company closed IGNITION! Creative Services, Inc. ("Ignition"). Ignition provided design and production management services to corporations and business associations for conventions, business meetings and special events. 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 disclosure of contingent liabilities at the date of the financial statements. Actual results could differ from these estimates. INVENTORY Inventories are stated at the lower of cost (first-in, first-out method) or market. Cost includes certain indirect purchasing and handling costs incurred to acquire and manage inventory and certain overhead costs. Market for raw materials is based on replacement cost and for other inventory classifications on net realizable value. Appropriate consideration is given to deterioration, obsolescence and other factors in evaluating net realizable value. EQUIPMENT AND OTHER PROPERTY Equipment and other property are stated at cost or, in the case of capitalized leases, at the lower of the present value of future lease payments or the fair value of the equipment. Depreciation and F-7 VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED SEPTEMBER 30, 1999, 2000 AND 2001 (IN THOUSANDS EXCEPT SHARE DATA) amortization are provided on the straight-line method over the estimated useful lives ranging from three to ten years of the various classes of equipment and other property. LONG-LIVED ASSETS As required by Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and Assets to be Disposed Of," the Company assesses potential impairments to its long-lived assets when there is evidence that events or changes in circumstances have made recovery of the assets' carrying value unlikely. An impairment loss would be recognized when the sum of the expected future net cash flows is less than the carrying amount of the asset. OTHER ASSETS The Company capitalizes and includes in other assets deferred financing costs and the costs of acquiring patents and trademarks on its products. Deferred financing costs are amortized over the term of the related debt. Amortization on patents and trademarks is computed on the straight-line basis over the lives of the patents or trademarks or the period of expected benefit, if shorter. In addition, the Company capitalizes legal costs associated with the pursuit of third parties for infringement of certain of the Company's patents, copyrights and trademarks when the Company is successful, or management believes it will be successful, and that these costs will be recovered pursuant to SFAS No. 121. These costs are amortized over the lives of the applicable patents, copyrights and trademarks. FOREIGN CURRENCY TRANSLATION In accordance with SFAS No. 52, "Foreign Currency Translation," the asset and liability accounts of the Company's non-U.S. subsidiaries are translated into U.S. dollars using rates of exchange in effect at the balance sheet date. Revenues and expenses are translated at exchange rates which approximate the average rates prevailing during the year. The cumulative translation gains and losses are a component of comprehensive income and included in stockholders' equity. REVENUE RECOGNITION Revenues related to equipment rental and services are recognized as earned over the terms of the contracts. Revenues related to the sale of products are recognized when title passes. RESEARCH AND DEVELOPMENT Costs incurred in connection with the development of new products are considered research and development costs and are charged to operations as incurred. DERIVATIVE INSTRUMENTS Prior to fiscal year 1998, the Company had entered into an interest rate swap agreement to reduce the risks associated with variable interest rates. The interest rate swap agreement corresponded to a portion of the outstanding principal balance of the Company's line of credit. The Company recorded the amount paid or received pursuant to the swap agreement as an adjustment to interest expense, and the related payable or receivable to or from the counterparty as a liability or asset, respectively. In August 1999, the termination of the interest swap prior to the scheduled maturity resulted in a charge to expense for the F-8 VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED SEPTEMBER 30, 1999, 2000 AND 2001 (IN THOUSANDS EXCEPT SHARE DATA) amount of unamortized costs and payments required under the agreement. The Company terminated the interest rate swap agreement in August 1999 for $300 in cash from the counterparty. As a result, the Company recorded a gain for the amount of cash received in excess of the unamortized costs. The gain is included in selling, general and administrative expenses in the accompanying income statement. As of September 30, 2001, the Company did not have any derivative financial instruments. FAIR VALUE OF FINANCIAL INSTRUMENTS In assessing the fair value of financial instruments at September 30, 2000 and 2001, the Company has used available market information and other valuation methodologies. Some judgment is necessarily required in interpreting market data to develop the estimates of fair value, and, accordingly, the estimates are not necessarily indicative of the amounts that the Company could realize in a current market exchange. The carrying amounts of cash, receivables, payables and long term obligations approximated fair value as of September 30, 2000 and 2001. EQUITY-BASED COMPENSATION SFAS No. 123 establishes a method of accounting whereby recognized option pricing models are used to estimate the fair value of equity based compensation, including options. The Company has elected, as provided by SFAS No. 123, not to recognize compensation expense for employee equity based compensation as calculated under SFAS No. 123, but will recognize any related expense in accordance with the provisions of APB Opinion No. 25. Disclosure of amounts required by SFAS 123 are included in Note G. INCOME TAXES The Company accounts for income taxes under the provisions of SFAS No. 109, "Accounting for Income Taxes," and files a consolidated federal income tax return. Deferred tax assets and liabilities are recorded based on the difference between the tax basis of assets and liabilities and their carrying amounts for financial reporting purposes, referred to as temporary differences. Provision is made for deferred taxes relating to temporary differences in the recognition of income and expense for financial reporting and for income tax purposes. NET INCOME (LOSS) PER SHARE Net income per share is calculated by dividing net income by the weighted average shares outstanding for the applicable period. Common stock equivalents, including warrants and options, are included, to the extent considered dilutive, using the treasury stock method and are assumed to be outstanding for the full period in the period of issuance. Options to purchase 736,100, 657,900 and 743,700 shares of Common Stock at prices ranging from $13.20 to $1.125 were outstanding at September 30, 1999, 2000 and 2001, respectively. Warrants to purchase 296,057 shares of Common Stock at a price of $3.75 were outstanding at September 30, 1999, 2000 and 2001. None of the options or warrants in 1999 and 2000 were included in the computation of diluted EPS as they were antidilutive. At September 30, 2001, 64,847 options ranging from $1.125 to $1.375 were included in the computation of diluted EPS. F-9 VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED SEPTEMBER 30, 1999, 2000 AND 2001 (IN THOUSANDS EXCEPT SHARE DATA) NEW ACCOUNTING PRONOUNCEMENTS In June 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended by SFAS No. 137 and SFAS No. 138. SFAS 133, as amended, which establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities. The Company adopted SFAS No. 133 effective October 1, 2000 which adoption does not have any impact on the financial position or results of operations of the Company because the Company does not have any derivative financial instruments. On July 1, 2001, the Company adopted the Securities and Exchange Commission ("SEC") Staff Accounting Bulletin ("SAB") No. 101, Revenue Recognition in Financial Statements. The Company's revenue recognition policies were in substantial conformity with the SAB. SFAS No. 142, Goodwill and Other Intangible Assets, must be adopted by the Company in the first quarter of its fiscal year 2003, and will be applied to all goodwill and other intangible assets recognized on the balance sheet, regardless of when those assets were initially recognized. Goodwill must be tested for impairment as of the beginning of the fiscal year of adoption and annually thereafter. Goodwill acquired in a business combination completed after June 30, 2001 cannot be amortized. In October 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, that replaces SFAS No. 121 and certain provisions of Accounting Principles Board Opinion No. 30 relating to reporting of discontinued operations, effective for the Company's fiscal year 2003. Management does not anticipate that the adoption of SFAS Nos. 142 or 144 will significantly impact the results of operations or financial position of the Company. SEGMENT REPORTING The Company operates in geographic segments located in North America, Europe and Asia. The Company markets its products and services to the entertainment industry, including concert touring, theatre, television and film and corporate events markets, through various media including, but not limited to, trade shows, trade advertising and direct marketing. The Company solicits business from lighting and set designers, other specifiers and consultants, artist managers, producers, production managers, end users and production companies, promoters, rental companies, corporations and business associations. No customer has accounted for more than 10% of the Company's revenues for at least the last three fiscal years. The Company does not rely on any major customer for a significant amount of its operation. See Note M for segment information. F-10 VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED SEPTEMBER 30, 1999, 2000 AND 2001 (IN THOUSANDS EXCEPT SHARE DATA) NOTE C--INVENTORY: Inventory consists of the following:
2000 2001 -------- -------- Raw materials............................................. $12,341 $13,086 Work in progress.......................................... 698 567 Finished goods............................................ 656 1,735 ------- ------- $13,695 $15,388 ======= =======
NOTE D--OTHER ASSETS: Other assets consist of the following:
2000 2001 -------- -------- Cash surrender value of officer and director life insurance................................................. $ 977 $1,129 Patents and trademarks...................................... 263 231 Deferred financing costs.................................... 778 488 Other....................................................... 885 561 ------ ------ 2,903 2,409 Less accumulated amortization............................... (868) (333) ------ ------ $2,035 $2,076 ====== ======
NOTE E--LONG-TERM OBLIGATIONS: Long-term obligations expressed in U.S. dollars consist of the following:
2000 2001 -------- -------- Revolving line of credit in U.S. dollars................. $ 32,200 $ 2,916 Obligations under capital leases with interest at 2.3% to 10.35%, maturities through 2003........................ 1,692 820 Term loans with interest at 1.6% to 9.3%................. 3,843 19,520 -------- ------- 37,735 23,256 Less current portion..................................... (19,599) (4,893) -------- ------- $ 18,136 $18,363 ======== =======
Based on the total borrowings outstanding as of September 30, 2000 and 2001, the weighted average interest rates were 11.75% and 6.98%, respectively. On December 19, 1997, the Company entered into a $50.0 million multicurrency revolving credit facility ("Old Credit Facility"). Borrowings under the Old Credit Facility were $32,200 at September 30, 2000. Subsequent to September 30, 2000, the Company used proceeds of $22,200 from the sale of the Company's concert sound reinforcement business and continental European rental operations and the funding of the London Bank Loans to reduce borrowings under the Old Credit Facility to $10,000. F-11 VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED SEPTEMBER 30, 1999, 2000 AND 2001 (IN THOUSANDS EXCEPT SHARE DATA) On December 29, 2000, Vari-Lite, Inc. entered into the New Credit Facility which includes the $12,000 Term Loan, the $5,000 Revolver and the $3,000 Capital Expenditure Loan. The Term Loan and Capital Expenditure Loan amortize over 84 months (subject to a balloon payment on termination of the "New Credit Facility" as discussed below). Borrowings under the Revolver are subject to availability under a borrowing base of eligible inventory and accounts receivable (as defined in the New Credit Facility). As of September 30, 2001, there was $2,916 outstanding under the Revolver. Prior to January 15, 2002, all outstanding borrowings under the New Credit Facility bear interest at the lender's base rate or LIBOR, plus a rate margin of .75% and 2.50%, respectively. Beginning on January 15, 2002, all outstanding balances under the New Credit Facility will bear interest at the lender's base rate or LIBOR, plus a rate margin ranging from 0.25% to 0.75% or 2.00% to 2.50%, respectively, based upon the Company's ratio of Adjusted Funded Debt to EBITDA (as defined in the New Credit Facility). The New Credit Facility is guaranteed by the Company and is secured by all of the stock and substantially all of the assets of Vari-Lite, Inc., and a pledge of 65% of the outstanding capital stock of the Company's foreign subsidiaries. A commitment fee of 0.25% is charged on the average daily unused portion of the New Credit Facility. The New Credit Facility contains compliance covenants, including requirements that the Company achieve certain financial ratios, as amended on December 31, 2001. In addition, the New Credit Facility places limitations on annual capital expenditures and on the ability to incur additional indebtedness, make certain loans or investments, sell assets, pay dividends or reacquire the Company's stock. The New Credit Facility terminates on December 31, 2003. Upon termination of the New Credit Facility, the entire outstanding indebtedness thereunder becomes due and payable in full. On November 23, 2000, the Company entered into a British pounds sterling 4.0 million (USD 5.8 million) loan with a U.K. bank. On September 27, 2001, the Company entered into an additional British pounds sterling 0.5 million (USD 0.7 million) loan collectively, the "London Bank Loans". These loans accrue interest at the rate of 9.1% and 7.78% per annum and amortize over 48 months and 60 months, respectively. The London Bank Loans are secured by all of the assets of the Company's London operations and include certain financial covenants, limitations on capital expenditures and intercompany payments and the guarantee of the Company. The Company has typically hedged a portion of its currency fluctuation risk by borrowing foreign currencies under the Old Credit Facility. Cash generated from the Company's European and Asian operations is typically denominated in the local currencies of these foreign offices and is used to pay expenses incurred in those currencies and service the foreign currency borrowings. The London Bank Loans are serviced by cash generated from the Company's London operations and serves as an economic hedge for net cash generated from these operations. This would not qualify for hedge accounting under Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities." In the future, the Company may use other financial instruments to hedge its foreign currency fluctuation risk. In 1999, the Company expensed a portion of the deferred financing costs related to the Old Credit Facility as a result of the modification in terms. The write-off of $271 is included in the interest expense in the accompanying financial statements. F-12 VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED SEPTEMBER 30, 1999, 2000 AND 2001 (IN THOUSANDS EXCEPT SHARE DATA) Maturities of long-term obligations, including capital lease obligations, are approximately as follows: 2002........................................................ $ 4,893 2003........................................................ 3,942 2004........................................................ 13,757 2005........................................................ 664 2006........................................................ -- ------- $23,256 =======
NOTE F--COMMITMENTS AND CONTINGENCIES: In the ordinary course of its business, the Company is from time to time threatened with or named as a defendant in various lawsuits, including patent infringement claims. Additionally, the Company has filed lawsuits claiming infringements of its patents by third parties for which the Company has been subject to counterclaims. The Company is not currently involved in any material legal proceedings. NOTE G--STOCKHOLDERS' EQUITY: The Company authorized 10,000,000 shares of preferred stock which the Company's Board of Directors may issue for such consideration and on such terms as it deems desirable, including voting and conversion rights that could adversely affect the holders of common stock. The Company has a Stockholders Rights Plan (the "Rights Plan") that is designed to provide protection against coercive or unfair takeover tactics. Under the Rights Plan, the Company made a dividend distribution of one preferred stock purchase right for each share of common stock held of record as of September 27, 1999. Each right entitles the holder to buy one-one thousandth of a share of the Company's Series A Junior Participating Preferred Stock at an initial exercise price of $8.50. The Rights will be exercisable only if a person or group acquires beneficial ownership of 15% or more of the Company's common stock or announces a tender offer which would result in such a person or group beneficially owning 15% or more of the Company's common stock. At that time, each Right not owned by such person or group will entitle its holder to purchase, at the Rights then current exercise price, shares of the Company's common stock having a value of twice the Right's exercise price. The Rights are redeemable by the Company and expire on September 26, 2009. The Company has a fixed option plan which allows for the issuance of stock options and reserves shares of common stock for issuance to executives, key employees and directors. No compensation cost has been recognized for the stock options which were issued at or above fair value at the date of grant in fiscal 1999, 2000 and 2001. Had compensation cost for the Company's stock option plans been determined based on the fair value at the grant date for awards in fiscal 1999, 2000 and 2001 consistent with the provisions in SFAS No. 123, the Company's net income and earnings per share would have been as follows:
1999 2000 2001 -------- -------- -------- Net income (loss).................................. $(3,200) $ (745) $2,106 Basic and diluted net income (loss) per share...... $ (0.41) $(0.10) $ 0.27
F-13 VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED SEPTEMBER 30, 1999, 2000 AND 2001 (IN THOUSANDS EXCEPT SHARE DATA) The weighted-average fair value of the individual options granted during fiscal 1999, 2000 and 2001 was estimated at $1.52, $0.47 and $0.40, respectively, on the date of grant. The fair values were determined using a Black-Scholes option pricing model with the following assumptions for 1999, 2000 and 2001:
1999 2000 2001 -------- -------- -------- Dividend yield......................................... 0 0 0 Volatility............................................. 30% 30% 30% Risk-free interest rate................................ 6% 6% 4% Expected life.......................................... 5 yrs. 5 yrs. 5 yrs.
Under the plan, the total number of stock options that may be granted is 1,200,000. The price of the options granted pursuant to the plan are equal to the fair market value of the common stock on the date of grant. The options vest over a two month to five year period and expire after ten years from the date of grant.
1999 2000 2001 -------------------- -------------------- -------------------- WEIGHTED- WEIGHTED- WEIGHTED- AVERAGE AVERAGE AVERAGE OPTIONS EXERCISE OPTIONS EXERCISE OPTIONS EXERCISE (000) PRICE (000) PRICE (000) PRICE -------- --------- -------- --------- -------- --------- Outstanding--Beginning of year............ 556 $ 12.00 736 $ 4.58 658 $4.56 Granted................................... 651 3.07 77 1.38 285 1.18 Exercised................................. -- -- -- -- -- -- Forfeited................................. (74) 7.91 (155) 3.08 (199) 8.66 Canceled or expired....................... (397) 11.87 -- -- -- -- ---- ---- ---- Outstanding--End of year.................. 736 4.58 658 4.56 744 2.16 ==== ==== ==== Exercisable--End of year.................. 33 12.61 195 5.97 219 3.05 ==== ==== ====
F-14 VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED SEPTEMBER 30, 1999, 2000 AND 2001 (IN THOUSANDS EXCEPT SHARE DATA) At September 30, 2001, exercise prices, number of options outstanding and remaining contractual life are shown in the following table:
OUTSTANDING EXERCISABLE ----------------------- ----------- REMAINING NUMBER CONTRACTUAL NUMBER EXERCISE PRICE (000) LIFE (YEARS) (000) - -------------- -------- ------------ ----------- $ 1.125..................................................... 315 8.64 52 $ 1.200..................................................... 30 9.78 -- $ 1.300..................................................... 40 9.62 -- $ 1.375..................................................... 68 8.19 13 $ 1.500..................................................... 20 9.70 -- $ 3.750..................................................... 268 6.24 152 $12.000..................................................... 3 6.04 2
In July 1996, in connection with an amendment to the Company's credit facility, the Company issued warrants to purchase up to 242,233 shares of Common Stock at an exercise price based on the Company's earnings as defined in the warrant agreement ($11.53 per share). These warrants were valued at $600 and recorded in stockholders' equity. The terms of the warrants also provide for registration rights and adjustments to the price and number of shares in certain circumstances. In August 1999, as part of an amendment to the Company's credit facility, the Company issued additional warrants to purchase 53,824 shares of Common Stock at $3.75 per share. These warrants were assigned no value. The amendment also repriced the warrants to purchase 242,233 shares from a price of $11.53 per share to $3.75 per share. In connection with the repricing, the value of the warrants was written off to additional paid in capital. The warrants expire on December 31, 2004 and as of September 30, 2001, no warrants had been exercised. F-15 VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED SEPTEMBER 30, 1999, 2000 AND 2001 (IN THOUSANDS EXCEPT SHARE DATA) NOTE H--LEASES: AS LESSOR The Company was a lessor under sales-type leases. Leases classified as sales-type leases generally stipulated that all lease payments be made within 30 days of the commencement of the lease term; however, the Company had also entered into certain sales-type leases that allowed for periodic payments throughout the term of the lease. The Company recorded revenues of $4,665, $1,222 and $0 and cost of products and services of $1,674, $683 and $0 for the years ended September 30, 1999, 2000 and 2001, respectively, related to sales-type leases. AS LESSEE The Company leases certain computers and equipment. The following is a summary of assets held under capital leases:
2000 2001 -------- -------- Computers and equipment under capital leases.............. $ 3,664 $ 2,131 Less accumulated depreciation............................. (3,360) (2,129) ------- ------- Property under capital leases, net........................ $ 304 $ 2 ======= =======
The Company also leases manufacturing facilities and office space. The future minimum lease payments as of September 30, 2001, including those which relate to capital leases which are included in long-term obligations, are as follows:
CAPITAL OPERATING -------- --------- Year one................................................... $ 749 $ 2,795 Year two................................................... 125 2,579 Year three................................................. -- 2,194 Year four.................................................. -- 1,927 Year five.................................................. -- 1,759 Thereafter................................................. -- 4,587 ----- ------- Total minimum lease payments............................... 874 $15,841 ======= Less amount representing interest.......................... (54) ----- Present value of net minimum lease payments................ 820 Less current portion....................................... (697) ----- Long-term lease obligations................................ $ 123 =====
Rental expense for the years ended September 30, 1999, 2000 and 2001 was $3,100, $3,405 and $2,976, respectively. In December 1995, the Company entered into a lease with an unaffiliated developer for land. Rent expense under this lease was $99 for the year ended September 30, 1999. In December 1998, the lease was canceled as a result of the sale of the land by the lessor, resulting in a gain to the Company of approximately $500 which is included in selling, general and administrative expense in the accompanying financial statements. F-16 VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED SEPTEMBER 30, 1999, 2000 AND 2001 (IN THOUSANDS EXCEPT SHARE DATA) NOTE I--IMPAIRMENT OF ASSETS: On June 30, 2000, the Company sold its Madrid, Spain operations and related assets. On October 26, 2000, the Company sold the remainder of its continental European operations and related assets. These transactions resulted in a pre-tax charge of $3,850 in fiscal 2000. NOTE J--RESTRUCTURING COSTS: In the fourth quarter of fiscal 1999, the Company recorded a pre-tax charge of $600 (or $369 after taxes, $0.05 per basic and diluted share) for the estimated costs of restructuring certain of the Company's operations. The charge includes severance payments and other costs associated with the termination of approximately 15 employees. The charge also includes the cost associated with terminating leases and the write off of the net book value of leasehold improvements associated with the closing of two offices. Communication of the employee terminations and office closings occurred prior to September 30, 1999 and severance payments were completed by the end of fiscal 2000. NOTE K--INCOME TAXES: The provision (benefit) for income taxes consists of the following:
1999 2000 2001 -------- -------- -------- Current: U.S. Federal...................................... $ -- $ -- $ 70 State............................................. 8 4 15 International..................................... 461 330 255 Deferred: U.S. Federal...................................... (1,608) (494) 84 State............................................. (262) (44) 7 International..................................... (324) 17 1,125 ------- ----- ------ Income tax expense (benefit)........................ $(1,725) $(187) $1,556 ======= ===== ======
A reconciliation of income taxes computed at the U.S. Federal statutory tax rate to the provision for income taxes is as follows:
1999 2000 2001 -------- -------- -------- Income tax expense (benefit) at U.S. Federal statutory rate.................................... $(1,485) $(161) $1,362 International taxes................................. (126) (47) 130 State taxes......................................... (131) (24) 10 Other............................................... 17 45 54 ------- ----- ------ $(1,725) $(187) $1,556 ======= ===== ======
Deferred income taxes reflect the net tax effects of deductible temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income F-17 VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED SEPTEMBER 30, 1999, 2000 AND 2001 (IN THOUSANDS EXCEPT SHARE DATA) tax purposes. The tax effects of significant items comprising the Company's net deferred income taxes consists of the following:
2000 2001 -------- -------- Deferred tax asset Foreign tax credit carryover............................ $ 2,159 $ 2,531 Net operating loss carryover............................ 4,031 1,089 Alternative minimum tax credit carryover................ 507 597 General business credits................................ 636 780 Dividend from foreign operations........................ -- 1,170 Accrued impairment costs--sale of European Operations... 1,221 592 Other tax asset items................................... 455 368 Capitalized costs....................................... -- 805 Vacation pay............................................ -- 305 Deferred tax liability Depreciation............................................ (9,463) (9,438) Other tax liability items............................... (282) (215) ------- ------- Total..................................................... (736) (1,416) Less: Valuation allowance................................. (257) (793) ------- ------- Net deferred income taxes................................. $ (993) $(2,209) ======= =======
For tax purposes, the Company has approximately $2,531 of foreign tax credits that expire in 2006 and a net loss carryover of $3,721 that will expire in 2019 through 2020. In addition, approximately $597 of alternative minimum tax credits (which do not expire) are available to offset future regular tax liability. In addition, the Company has general business credit carryforwards of $780 that will expire in 2011 through 2019. The benefit of these tax credit carryforwards have been recognized for financial statement purposes as part of deferred taxes. In fiscal 2000 and 2001, there was a valuation allowance of $257 and $793, respectively, related to foreign tax credits. International income taxes relate to the Company's operations in England, Japan and Hong Kong. NOTE L--EMPLOYEE BENEFIT PLANS: The Company has a defined contribution 401(k) plan in which substantially all its U.S. employees can elect to be participants. Under the terms of the 401(k) plan, employees can defer up to 20% of their earnings up to the permitted maximum as defined by IRS regulations. The Company matches 50% of the employee's contribution up to 5% of the employee's earnings during the plan year. During the years ended September 30, 1999, 2000 and 2001, the Company's cost to match employee contributions was approximately $310, $320 and $208, respectively. Substantially all employees of the Company's London-based operations may elect to be participants in the Vari-Lite Europe Pension Plan. The plan is a defined contribution plan under which employees may contribute up to 3% of their base salaries. The Company makes contributions at a rate of 200% of the employee contributions, with additional contributions made for certain key employees. The Company incurred costs of $208, $154 and $119, representing matching contributions for the years ended September 30, 1999, 2000 and 2001, respectively. The Company adopted an employee stock ownership plan ("ESOP"), effective January 1, 1995, in which its U.S. employees are eligible to participate after completing one year of service, attaining age F-18 VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED SEPTEMBER 30, 1999, 2000 AND 2001 (IN THOUSANDS EXCEPT SHARE DATA) twenty-one and being a participant making elective deferrals in the Company's 401(k) Plan. Each year the Company may make discretionary contributions of cash to the ESOP as determined by the Board of Directors or a committee thereof. Participants' interests in the ESOP are distributed in the form of cash or stock upon normal retirement, disability, death or at a specific time after any other termination of employment. Prior to January 1, 2001, the Company maintained an employee stock equivalence plan ("ESEP") for the Company's non-U.S. subsidiaries, which was effective January 1, 1995, in which its employees were eligible to participate after completing one year of service, attaining age twenty-one and for London-based employees, participating in the VLEH Pension Plan. Each year the Company made discretionary contributions of stock to the ESEP as determined by the Board of Directors or a committee thereof. Participants' interests in the ESEP were distributed in the form of cash upon normal retirement, disability, death or at a specific time after any other termination of employment. Subsequent to yearend, the Company terminated the ESEP. In 1999, the Company accrued $250 for contribution to the ESOP and ESEP and subsequently in 2000 made a cash contribution to the Trustee. In 2000, the Company accrued $250 for contribution to the ESOP and ESEP and subsequently in 2000 and 2001 made a cash contribution to the Trustee. In 2001, the Company accrued $250 for contribution to the ESOP of which $109 was funded at September 30, 2001. NOTE M--SEGMENT INFORMATION: In 1999, the Company adopted SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information," which supersedes SFAS No. 14, "Financial Reporting for Segments of a Business Enterprise." SFAS No. 131 establishes standards for the reporting by public business enterprises of information about product lines, geographic areas and major customers. The method for determining what information to report is based on the way that management organizes the operation segments within the Company for making operational decisions and assessments of financial performance. The Company's chief operating decision maker is considered to be the Company's Chief Operating Officer ("COO"). The COO reviews financial information presented on a consolidated basis accompanied by disaggregated information about revenues by geographic region and by product lines for purposes of making operating decisions and assessing financial performance. The Company has three reportable segments: North America, Europe and Asia, which are organized, managed and analyzed geographically and operate in one F-19 VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED SEPTEMBER 30, 1999, 2000 AND 2001 (IN THOUSANDS EXCEPT SHARE DATA) industry segment. Information about the Company's operations for the fiscal years ended September 30, 1999, 2000 and 2001 is presented below:
NORTH AMERICA ASIA EUROPE INTERCOMPANY TOTAL -------- -------- -------- ------------ -------- SEPTEMBER 30, 1999: Net Revenues from unaffliliated customers... $47,598 $11,668 $32,266 $ -- $91,532 Intersegment sales.......................... 20,065 -- -- (20,065) -- ------- ------- ------- -------- ------- Total net revenues........................ 67,663 11,668 32,266 (20,065) 91,532 Operating income (loss)..................... 816 1,306 (1,950) -- 172 Depreciation and amortization............... 12,285 139 2,806 -- 15,230 Total assets................................ 93,747 7,585 15,386 (9,018) 107,700 SEPTEMBER 30, 2000: Net Revenues from unaffliliated customers... $57,004 $10,430 $26,254 $ -- $93,688 Intersegment sales.......................... 19,668 251 1,139 (21,058) -- ------- ------- ------- -------- ------- Total net revenues........................ 76,672 10,681 27,393 (21,058) 93,688 Operating income (loss)..................... 4,057 (8) 657 -- 4,706 Depreciation and amortization............... 11,654 182 2,005 -- 13,841 Total assets................................ 76,671 8,157 16,222 (6,347) 94,703 SEPTEMBER 30, 2001: Net Revenues from unaffliliated customers... $50,931 $ 8,782 $13,350 $ -- $73,063 Intersegment sales.......................... 8,139 84 166 (8,389) -- ------- ------- ------- -------- ------- Total net revenues........................ 59,070 8,866 13,516 (8,389) 73,063 Operating income (loss)..................... 2,102 875 3,323 -- 6,300 Depreciation and amortization............... 7,816 249 2,414 (18) 10,461 Total assets................................ 62,267 8,963 18,048 (9,060) 80,218
NOTE N--RELATED PARTY TRANSACTIONS: Certain directors provided consulting services to the Company and received fees totaling approximately $241, $241 and $236 for each of the years ended September 30, 1999, 2000 and 2001, respectively. At September 30, 2000 and 2001, the Company had notes receivable from stockholders totaling $19 and $0, respectively, related to common stock purchases. The notes bear interest at 9.75% and were collateralized by 16,937 shares of common stock as of September 30, 2000. These notes were paid in full on December 31, 2000. F-20 VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED SEPTEMBER 30, 1999, 2000 AND 2001 (IN THOUSANDS EXCEPT SHARE DATA) NOTE O--QUARTERLY RESULTS OF OPERATIONS (UNAUDITED): The following summarizes the unaudited quarterly results of operations for the years ended September 30, 1999, 2000 and 2001:
YEAR ENDED SEPTEMBER 30, 1999 ------------------------------------------------ DECEMBER 31 MARCH 31 JUNE 30 SEPTEMBER 30 ----------- -------- -------- ------------ Total Revenues.................................... $25,248 $23,170 $20,066 $23,048 Operating income (loss)........................... 1,466 347 (661) (980) Net income (loss)................................. 242 (409) (1,100) (1,376) Net income (loss) per basic and diluted share..... 0.03 (0.05) (0.14) (0.18) Common stock price per share High............................................ 4.750 4.250 2.813 2.125 Low............................................. 2.000 2.625 2.000 0.875
YEAR ENDED SEPTEMBER 30, 2000 ------------------------------------------------ DECEMBER 31 MARCH 31 JUNE 30 SEPTEMBER 30 ----------- -------- -------- ------------ Total Revenues.................................... $27,679 $20,719 $21,509 $23,781 Operating income (loss)........................... 3,362 (791) 549 1,586 Net income (loss)................................. 1,272 (1,241) (392) 74 Net income (loss) per basic and diluted share..... 0.16 (0.16) (0.05) 0.01 Common stock price per share High............................................ 1.688 4.000 2.750 1.500 Low............................................. 0.938 0.938 0.875 0.688
YEAR ENDED SEPTEMBER 30, 2001 ------------------------------------------------ DECEMBER 31 MARCH 31 JUNE 30 SEPTEMBER 30 ----------- -------- -------- ------------ Total Revenues.................................... $20,378 $18,337 $15,584 $18,764 Operating income (loss)........................... 8,229 115 (1,800) (244) Net income (loss)................................. 4,403 (229) (1,301) (423) Net income (loss) per basic and diluted share..... 0.56 (0.03) (0.17) (0.05) Common stock price per share High............................................ 2.500 2.250 2.000 1.540 Low............................................. 0.625 0.750 1.210 0.780
The operating loss for the quarter ended September 30, 1999, includes charges totaling $600 for employee termination costs associated with restructuring the Company's operations. The operating loss for the quarter ended June 30, 2000, includes a $650 write-down of VLPS Madrid assets to their net realizable value. The operating income for the quarter ended September 30, 2000, includes gains on the settlement of the patent infringement lawsuit and the sale of a building lease in New York of $3,993 partially offset by charges of $3,200 for the impairment of assets used in the Company's continental European operations. The operating income for the quarter ended December 31, 2000, includes a $7,100 gain on the sale of the Company's sound reinforcement business. F-21 VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED SEPTEMBER 30, 1999, 2000 AND 2001 (IN THOUSANDS EXCEPT SHARE DATA) NOTE P--SUBSEQUENT EVENTS: Subsequent to September 30, 2001, the Company amended the financial covenants included in the New Credit Facility (See Note E). This amendment provides for lower financial covenants through September 30, 2002 and is effective on December 31, 2001. Subsequent to September 30, 2001, the Company reduced its work force by approximately 11% and reduced other overhead costs. These cuts will result in reductions to general and administrative and research and development costs that should provide annualized savings of approximately $4.0 million. Management believes that cash flow generated from operations and borrowing capacity under the New Credit Facility will be sufficient to meet the anticipated operating cash needs and capital expenditures for the next twelve months. Because the Company's future operating results will depend on a number of factors, including the demand for the Company's products and services, the Company's ability to market, sell and support products, competition, the success of the Company's research and development programs, the ability to achieve competitive and technological advances, general and economic conditions and other factors beyond the Company's control, there can be no assurance the sufficient capital resources will be available to fund the expected expansion of its business beyond such period. F-22 SCHEDULE II VARI-LITE INTERNATIONAL, INC. VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED SEPTEMBER 30, 1999, 2000 AND 2001 (IN THOUSANDS OF DOLLARS)
CHARGED TO WRITE-OFFS BEGINNING COSTS AND AND DISCOUNTS ENDING DESCRIPTION BALANCE EXPENSES ALLOWED BALANCE - ----------- --------- ---------- ------------- -------- September 30, 1999 Allowances deducted from assets to which they apply Allowance for doubtful accounts................... 900 140 (320) 720 Allowance for excess and obsolete inventory....... 424 200 -- 624 Allowance for foreign tax credits................. 544 -- -- 544 September 30, 2000 Allowances deducted from assets to which they apply Allowance for doubtful accounts................... 720 178 (158) 740 Allowance for excess and obsolete inventory....... 624 -- (232) 392 Allowance for foreign tax credits................. 544 -- (287) 257 September 30, 2001 Allowances deducted from assets to which they apply Allowance for doubtful accounts................... 740 366 (503) 603 Allowance for excess and obsolete inventory....... 392 16 -- 408 Allowance for foreign tax credits................. 257 536 -- 793
S-1 EX-10.64 3 a2066739zex-10_64.txt EXHIBIT 10.64 Exhibit 10.64 AMENDMENT NO.3 TO FINANCING AGREEMENT This AMENDMENT NO.3 TO FINANCING AGREEMENT (this "Amendment"), made as of December 31, 2001, between U.S. BANK NATIONAL ASSOCIATION (formerly known as Firstar Bank, National Association), a national banking association ("Bank") and VARI-LITE, INC., a Delaware corporation ("Borrower"), WITNESSETH: WHEREAS, Borrower and Bank have entered into that certain Financing Agreement, dated as of December 29, 2000, as amended by that certain Amendment No.1 to Financing Agreement, dated as of March 30, 2001, and Amendment No.2 to Financing Agreement, dated as of June 30, 2001 (as so amended, the "Financing Agreement"), pursuant to which Bank has made certain loans and financial accommodations available to Borrower; and WHEREAS, Borrower and Bank desire to further amend the Financing Agreement as hereinafter set forth; NOW, THEREFORE, in consideration of the mutual promises and agreements contained herein and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Bank and Borrower agree as follows: 1. DEFINED TERMS. Each defined term used herein and not otherwise defined herein has the meaning ascribed to such term in the Financing Agreement. 2. AMENDMENT TO FINANCING AGREEMENT. The Financing Agreement is amended, effective as of the date of this Agreement, as follows: AMENDMENT TO EXHIBIT J. Exhibit J to the Financing Agreement is amended in its entirety to read as set forth on Exhibit J attached hereto and by reference made a part hereof. 3. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Bank as follows: 3.1 THE AMENDMENT. This Amendment has been duly and validly executed by an authorized executive officer of Borrower and constitutes the legal, valid and binding obligation of Borrower enforceable against Borrower in accordance with its terms. 3.2 FINANCING AGREEMENT. The Financing Agreement as amended by this Amendment remains in full force and effect and remains the valid and binding obligation of Borrower enforceable against Borrower in accordance with its terms. Borrower hereby ratifies and confirms the Financing Agreement as amended by this Amendment. 3.3 NONWAIVER. Neither the execution, delivery, performance or effectiveness of this Amendment shall operate nor be deemed to be nor construed as a waiver (i) of any right, power or remedy of Bank under the Financing Agreement, nor (ii) of any term, provision, representation, warranty or covenant contained in the Financing Agreement or any other documentation executed in connection therewith. Further, none of the provisions of this Amendment shall constitute, or be deemed to be or construed as, a waiver of any Event of Default under the Financing Agreement as amended by this Amendment. 3.4 REFERENCE TO AND EFFECT ON THE FINANCING AGREEMENT. Upon the effectiveness of this Amendment, each reference in the Financing Agreement to "this Agreement", "hereunder", "hereof", "herein", or words of like import shall mean and be a reference to the Financing Agreement as amended hereby, and each reference to the Financing Agreement in any other document, instrument or agreement executed and/or delivered in connection with the Financing Agreement shall mean and be a reference to the Financing Agreement as amended hereby. 3.5 CLAIMS AND DEFENSES. As of the date of this Amendment, Borrower has no defenses, claims, counterclaims or setoffs with respect to the Financing Agreement or its Obligations thereunder or with respect to any actions of the Bank or any of its officers, directors, shareholders, employees, agents or attorneys, and Borrower irrevocably and absolutely waives any such defenses, claims, counterclaims and setoffs and releases the Bank and each of its officers, directors, shareholders, employees, agents and attorneys from the same. 4. CONDITIONS PRECEDENT TO EFFECTIVENESS OF THIS AMENDMENT NO.3 In addition to all of the other conditions and agreements set forth herein, the effectiveness of this Amendment is subject to the each of the following conditions precedent: 4.1 AMENDMENT NO. 3 TO FINANCING AGREEMENT. Bank shall have received an original counterpart of this Amendment No.3to Financing Agreement, executed and delivered by a duly authorized officer of Borrower. 4.2 ACKNOWLEDGMENT OF GUARANTOR. Bank shall have received an original of the attached Acknowledgment of Vari-Lite International, Inc., a Delaware corporation, executed and delivered by a duly authorized officer of Vari-Lite International, Inc. 4.3 NO MATERIAL ADVERSE CHANGE. There shall have occurred no material and adverse change in the Borrower's assets, liabilities or financial condition since the date of the last Financials delivered by Borrower to Bank nor shall there have been any material damage to or loss of any of Borrower's assets or properties since such date. 4.4 AMENDMENT FEE. Borrower shall have paid Bank an amendment fee in an amount of Twenty Thousand Dollars ($20,000.00). J-2 5. SECTION MISCELLANEOUS. 5.1 GOVERNING LAW. This Amendment has been delivered and accepted at and shall be deemed to have been made at Cleveland, Ohio. This Amendment shall be interpreted and the rights and liabilities of the parties hereto determined in accordance with the laws of the State of Ohio, without regard to principles of conflict of law, and all other laws of mandatory application. 5.2 SEVERABILITY. Each provision of this Amendment shall be interpreted in such manner as to be valid under applicable law, but if any provision hereof shall be invalid under applicable law, such provision shall be ineffective to the extent of such invalidity, without invalidating the remainder of such provision or the remaining provisions hereof. 5.3 COUNTERPARTS. This Amendment may be executed in one or more counterparts, each of which, when taken together, shall constitute but one and the same agreement. [REMAINDER OF PAGE INTENTIONALLY BLANK] J-3 IN WITNESS WHEREOF, Borrower has caused this Amendment No.3 to Financing Agreement to be duly executed and delivered by its duly authorized officer as of the date first above written. Signed and acknowledged VARI-LITE, INC. in the presence of: By: - ------------------------- --------------------------- Name: -------------------- Its: - ------------------------- -------------------------- Name: -------------------- J-4 STATE OF ) ) ss: COUNTY OF ) The foregoing instrument was acknowledged before me this ___ day of December, 2001, by _______________, the ___________________ of Vari-Lite, Inc., a Delaware corporation, on behalf of the corporation. ---------------------------------- Notary Public Accepted at Cleveland, Ohio, Effective as of December 31, 2001. U.S. BANK NATIONAL ASSOCIATION By: --------------------------- Its: -------------------------- J-5 ACKNOWLEDGMENT OF GUARANTOR The undersigned, Vari-Lite International, Inc., a Delaware corporation, having guaranteed all of the obligations of Vari-Lite, Inc. to U.S. Bank National Association (formerly known as Firstar Bank, National Association) ("Bank"), hereby acknowledges and agrees, effective as of December 31, 2001, to the terms of the foregoing Amendment No.3 to Financing Agreement. The undersigned represents and warrants to Bank that the Guaranty executed and delivered by the undersigned to Bank, dated as of December 29, 2000, remains the valid and binding obligation of the undersigned, enforceable against it in accordance with its terms. VARI-LITE INTERNATIONAL, INC. By: --------------------------- Its: -------------------------- STATE OF ___________________ ) )ss: COUNTY OF __________________ ) The foregoing instrument was acknowledged before me this ___ day of August, 2001, by ___________________, the ________________ of VARI-LITE INTERNATIONAL, INC., a Delaware corporation, on behalf of the company. ------------------------------ Notary Public J-6 EXHIBIT J FINANCIAL COVENANTS FINANCIAL COVENANTS. Borrower agrees that it shall: (A) NET CAPITAL EXPENDITURES. Not make nor permit International to make Net Capital Expenditures in an aggregate amount exceeding $6,000,000 for any fiscal year. (B) EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION. Not permit International's Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") to be less than the following amounts for the following periods:
EBIDTA PERIOD ------ ------ $2,931,000 10/01/00 - 12/31/00 $6,234,000 10/01/00 - 03/31/01 $7,461,000 10/01/00 - 06/30/01 $9,491,000 10/01/00 - 09/30/01 $7,650,000 01/01/01 - 12/31/01 $7,700,000 04/01/01 - 03/31/02 $9,550,000 07/01/01 - 06/30/02 $10,600,000 10/01/01 - 09/30/02 $16,314,000 01/01/02 - 12/31/02 $16,882,000 04/01/02 - 03/31/03 $17,385,000 07/01/02 - 06/30/03 $18,123,000 10/01/02 - 09/30/03
(C) NET WORTH. Not permit International's Net Worth to be less than the following amounts as of the following dates:
Net Date Period -------- ------ $45,000,000 12/31/00 $45,000,000 03/31/01 $45,000,000 06/30/01 $44,600,000 09/30/01 $44,000,000 12/31/01 $44,000,000 03/31/02 $44,000,000 06/30/02 $44,000,000 09/30/02 $47,750,000 12/31/02 $47,750,000 03/31/03 $47,750,000 06/30/03 $47,750,000 09/30/03
J-7 (D) MAXIMUM DEBT. Not permit International's Total Funded Indebtedness to exceed the following amounts at any time during the following periods:
Total Funded Indebtedness Period ------------------------- ------ $29,000,000 01/01/01 - 06/30/01 $27,000,000 07/01/01 - 09/30/01 $25,000,000 10/01/01 - 12/31/01 $25,000,000 01/01/02 - 03/31/02 $25,000,000 04/01/02 - 06/30/02 $25,000,000 07/01/02 - 09/30/02 $25,000,000 10/01/02 - 12/31/02 $27,000,000 01/01/03 - 03/31/03 $27,000,000 04/01/03 - 06/30/03 $27,000,000 07/01/03 - 09/30/03 $27,000,000 at any time thereafter
(E) LEVERAGE RATIO. Not permit International's Leverage Ratio to exceed the following ratios as of the following dates:
Leverage Ratio Date -------------- ---- 4.65 to 1 03/31/01 3.23 to 1 06/30/01 2.56 to 1 09/30/01 2.90 to 1 12/31/01 2.80 to 1 03/31/02 2.30 to 1 06/30/02 2.05 to 1 09/30/02 1.80 to 1 12/31/02 1.75 to 1 03/31/03 1.65 to 1 06/30/03 1.65 to 1 09/30/03
J-8 (F) TOTAL DEBT SERVICE RATIO. Not permit International's Total Debt Service Ratio to be less than the following ratios as of the following dates:
Total Debt Service Ratio Date ------------------------ ---- 0.61 to 1 09/30/01 0.60 to 1 12/31/01 0.70 to 1 03/31/02 0.90 to 1 06/30/02 1.00 to 1 09/30/02 1.20 to 1 12/31/02 1.20 to 1 03/31/03 1.20 to 1 06/30/03 1.20 to 1 09/30/03
II. Definitions (A) The term "NET CAPITAL EXPENDITURES" for purposes of this Exhibit J shall mean the sum of (a) International's consolidated capital expenditures (including, but not by way of limitation, expenditures for fixed assets or leases capitalized or required to be capitalized on International's consolidated books by purchase, lease-purchase agreement, option or otherwise), minus (b) the net book value of capital assets previously sold and replaced by such capital expenditures. (B) The term "EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION, AND AMORTIZATION" or "EBITDA" for purposes of this Exhibit J shall mean International's consolidated earnings from operations before income taxes and interest income or expense plus depreciation, plus amortization of all non-cash charges, all as determined in accordance with generally accepted accounting principles, and shall not include any gains or losses from the sale of assets outside the normal course of business or any other extraordinary accounting adjustments or non-recurring items of income or loss. (C) The term "NET WORTH" for purposes of this Exhibit J shall mean the total of International's consolidated shareholders equity, as determined in accordance with generally accepted accounting principles, consistently applied. (D) The term "TOTAL FUNDED INDEBTEDNESS" for purposes of this Exhibit J shall have the meaning and be determined in accordance with generally accepted accounting principles consistently applied by International on a consolidated basis in accordance with past practices. J-9 (E) The term "LEVERAGE RATIO" for purposes of this EXHIBIT J shall mean: 1. AS OF 03/31/01, the ratio of Total Funded Indebtedness as of such date to EBITDA as measured from 10/01/00 to 03/31/01; 2. AS OF 06/30/01, the ratio of Total Funded Indebtedness as of such date to EBITDA as measured from 10/01/00 to 06/30/01; 3. AS OF 09/30/01, the ratio of Total Funded Indebtedness as of such date to EBITDA as measured from 10/01/00 to 09/30/01; and 4. AS OF 12/31/01 AND AS OF THE LAST DAY OF ANY FISCAL QUARTER THEREAFTER, the ratio of Total Funded Indebtedness as of such date to EBITDA as measured on a four quarter trailing basis. (F) The term "UNFUNDED CAPITAL EXPENDITURE PAYMENTS" for purposes of this EXHIBIT J shall mean the amount of consolidated capital expenditures of International which are not financed under the CapEx Facility nor any other financing arrangement with any other person. (G) The term "TOTAL DEBT SERVICE RATIO" for purposes of this EXHIBIT J shall mean: 1. FOR THE PERIOD COMMENCING ON THE 07/01/01 AND ENDING ON 09/30/01, the ratio of (a) EBITDA as measured from 01/01/01 to 09/30/01 to (b) the SUM of (i) the total consolidated and regularly scheduled principal and interest payments of Total Funded Indebtedness for the period 01/01/01 to 09/30/01, PLUS (ii) Unfunded Capital Expenditure Payments for the period 01/01/01 to 09/30/01, MINUS (iii) the US $1,000,000 Japanese principal payment paid by Vari-Lite Asia, Inc. in March, 2001; 2. FOR THE PERIOD COMMENCING ON THE 10/01/01 AND ENDING ON 12/31/01, the ratio of (a) EBITDA as measured on a four quarter trailing basis to (b) the SUM of (i) the total consolidated and regularly scheduled principal and interest payments of Total Funded Indebtedness for such four quarter trailing period, PLUS (ii) Unfunded Capital Expenditure Payments for such four quarter trailing period, MINUS (iii) the US $1,000,000 Japanese principal payment paid by Vari-Lite Asia, Inc. in March, 2001, PLUS (iv) the amount of taxes paid by International on a consolidated basis during such four quarter trailing period, MINUS (v) the amount of Japanese taxes paid by Vari-Lite Asia, Inc. in February, 2001; and 3. FOR ALL PERIODS AFTER 12/31/01, the ratio of (a) EBITDA as measured on a four quarter trailing basis to (b) the SUM of (i) the total consolidated and regularly scheduled principal and interest payments of Total Funded Indebtedness for such four quarter trailing period, PLUS (ii) Unfunded Capital Expenditure Payments for such four quarter trailing period, PLUS (iii) the amount of taxes paid by International on a consolidated basis during such four quarter trailing period. J-10 EX-10.65 4 a2066739zex-10_65.txt EXHIBIT 10.65 EXHIBIT 10.65 BARCLAYS MASTER LEASE PURCHASE Date 27th September 2001 YOU ARE: Name Vari-Lite Europe Limited Address 20-22 Fairway Drive Greenford Middlesex Postcode UB6 8PW Registered no. 2876045 WE ARE BARCLAYS MERCANTILE BUSINESS FINANCE LIMITED OF CHURCHILL PLAZA, CHURCHILL WAY, BASINGSTOKE, HAMPSHIRE, RG21 7GL. REGISTERED IN ENGLAND NO. 898129. OUR VAT REGISTRATION NO. IS 243 8522 62. THIS IS HOW YOUR MASTER LEASE PURCHASE AGREEMENT OPERATES You may request us to enter into leases with you by giving us details of the equipment, from whom you propose we acquire title to it, and any financial or other information we may require. By signing this agreement you acknowledge that we may exchange information about you with companies in the Barclays Bank group for credit and risk assessment purposes and marketing purposes. You agree that (i) you may be contacted with details of other products or services - write to us, if you do not wish to be contacted (ii) we may disclose and use information about this agreement for credit scoring, administration and financing purposes and for fraud prevention. These expressions are used throughout this agreement and any schedule to it: SCHEDULE: Is any agreement under which we let equipment to you on hire on the terms of this agreement and the particular schedule. LEASE: In relation to any hiring, is this agreement and the schedule which together constitute a single contract. EQUIPMENT, TERM, RENT, LOCATION: Are as described in the particular schedule. THESE ARE THE TERMS OF YOUR MASTER LEASE PURCHASE AGREEMENT 1. GENERAL (1) We and you may sometimes be referred to respectively as 'owner' and 'hirer' in this agreement, schedules or any supplemental agreement or appendix. (2) This is a master agreement; signature of it does not commit either us or you to enter into any lease. We are only obliged to hire equipment (which includes any replacement) to you, if you sign a schedule, the terms of which are agreed and which we then sign. (3) Headings are for convenience only. The singular includes the plural and vice versa. (4) The equipment remains our property until you have validly exercised your option to purchase it (see clause 9). If any clause (or part of it) is not enforceable, the rest of the lease will not be affected. (5) We may require you to arrange for any purchase contract you may have entered into to be changed so title to the equipment passes direct to us. We will pay for the equipment on the terms agreed with you or otherwise on receipt by us of the supplier's invoice, or reimburse you (if you have an agency purchase appointment) on presentation of your invoice, as applicable. (6) We do not agree to any terms other than those in the lease; in particular, we are not liable by any contract to deliver the equipment or to service or maintain it or, other than hiring out the equipment, to provide you with any thing or any service. (7) We may want someone to guarantee your obligations; if we do, we will ask you to suggest someone suitable. (8) If, at any time, we make any concession or allow extra time to pay, this will not affect our rights on that or any subsequent occasion; variations to any lease must be in writing and signed by us. (9) You acknowledge that you will be treated as having received any communication we send you 48 hours after posting to your usual or last known address. Our address for notices is above. (10)Whatever in any lease you agree to indemnify us, your indemnity extends to us and any owner of the equipment and will apply even if the hiring or the lease has ended. We will calculate it to compensate for the full amount of the loss suffered as a result of each claim (including any expenses and VAT we may incur). Our calculations will be conclusive and you must pay us on our written demand. 2. PERIOD The hiring lasts for the term shown in the schedule and then until you have exercised your option to purchase (see clause 9) or it is otherwise terminated (see clauses 7 and 10). So long as you are not in default (see clause 7) you are entitled to possession of the equipment throughout this period. 3. PAYMENTS (1) The rentals you must pay (without our making demand on you) are shown in the schedule and are payable without set-off or counterclaim. If you send us cheques, you do so at your risk. It is vital to us that we receive payment in full on the due dates shown in the schedule; you agree that this is a condition (in Scotland an essential condition) of each lease. A breach of this condition may be treated by us as repudiation (see clause 7). (2) Any sum not paid by you on its due date will (unless we decide otherwise) accrue interest on a day to day basis from the date payment was due until receipt by us of the unpaid amount. The interest rate will be Finance House Base Rate at that time plus 5%. Payment of interest will not affect our right to terminate (see clause 7). (3) If we need to apportion rentals to individual items of equipment, we will do so by reference to the respective prices paid by us for the items. 4. EQUIPMENT (1) You must make sure the equipment is safe, correctly used and kept in good condition and must arrange any maintenance that is needed; any replacement parts become our property. (2) You may only alter the equipment with our written permission or if the law means it must be altered. Any alteration will be at your expense. (3) Any damage, loss or injury, to anything or anyone, until the equipment is returned to us, caused to or by the equipment or by its use is your risk and liabilities arising or penalties or fines imposed in respect of its use or possession are your responsibility; you agree to indemnify us if any claim is made on us. (4) You must keep the equipment in your possession and may not sub-let it unless you first have our written permission. If the equipment is plant or machinery, you may not move it from the location shown in the schedule or, if none, from the United Kingdom unless we have first agreed in writing where it will then be located. If the equipment is a commercial vehicle, you may take it anywhere within the European Community for no longer than 28 days on any trip and you must keep us informed of its whereabouts when we ask you to. If the equipment is a motor car, you may take it anywhere within the European Community for no longer than 28 days in any year and you must keep us informed of its whereabouts when we ask you to. (5) If we want to inspect the equipment, you must allow us access and we may mark it with our name if we choose to do so. Identification and registration marks may not be removed or changed. (6) Until you have validly exercised your option to purchase (see clause 9) you may not agree to sell or otherwise dispose of the equipment in any way or use it or allow it to be used as security. The same applies to your rights under each lease. You must not allow the equipment or our rights in it to be put in jeopardy. 5. LIMIT TO OUR LIABILITY (1) You have selected the equipment and its supplier and established its suitability; we have not examined it or considered its suitability.
LEASE PURCHASE SCHEDULE FIXED RATE ---------------------------------------------------- Hirer Vari-Lite Production Services Limited BARCLAYS ---------------------------------------------------- CF no. Customer no. This schedule shall be read and construed as forming an agreement under which equipment is let and as a schedule incorporated in the master lease purchase 96810-01 01268 45 3 00 agreement made between the undersigned and dated the ---------------------------------------------------- Plan code Account no. 27 09 2001 10 75/4654 9525-7 ---- -- ------ ---------------------------------------------------- HIRER - ----------------------------------------------------------------------------- Name Vari-Lite Production Services FINANCE DETAILS - ----------------------------------------------------------------------------- ---------------------------------------------------- Price (excl. VAT) Limited L 659,477.71 - ----------------------------------------------------------------------------- ---------------------------------------------------- Address VAT al 20-22 Fairway Drive, Greenford, 17.5 % L 115,408.60 - ----------------------------------------------------------------------------- ---------------------------------------------------- Non taxable items Middlesex L 0.00 - ----------------------------------------------------------------------------- ---------------------------------------------------- Total cost of equipment (a) L 774,886.31 - ----------------------------------------------------------------------------- ---------------------------------------------------- Postcode Less: Part exchange/initial payment payable on the UB6 8PW date of this schedule (b) L 274,886.31 - ----------------------------------------------------------------------------- ---------------------------------------------------- Company registration no. Balance financed (c=a-b) L 500,000.00 - ----------------------------------------------------------------------------- ---------------------------------------------------- Add. Charges EQUIPMENT (SEE APPENDIX) (d) L 105,206.20 - ----------------------------------------------------------------------------- ---------------------------------------------------- Description (inc. serial and/or reg. no.) Balance HP price Automated lighting (c+d) L 605,206.20 - ----------------------------------------------------------------------------- ---------------------------------------------------- Administration fee (payable on the date of the agreement (e) L 2,500.00 - ----------------------------------------------------------------------------- ---------------------------------------------------- Option payment (see clause 9) (f) L 50.00 - ----------------------------------------------------------------------------- ---------------------------------------------------- Location of equipment New/Used Hire Purchase price (a+d+e+f) L 882,642.51 - ----------------------------------------------------------------------------- ---------------------------------------------------- TERM AND RENT - ----------------------------------------------------------------------------- ---------------------------------------------------- The term from the date of this schedule is The balance HP price is payable by the rentals 60 months scheduled in the table below - ------------------------------------------------------------------------------------------------------------------------------------ No. of consecutive rentals: Rental frequency: Amount of each rental: Commencing on: 60 Monthly L 10086.77 31/10/01 - ------------------------------------------------------------------------------------------------------------------------------------ Followed by L - ------------------------------------------------------------------------------------------------------------------------------------ Followed by L - ------------------------------------------------------------------------------------------------------------------------------------ Followed by L - ------------------------------------------------------------------------------------------------------------------------------------ Followed by L - ------------------------------------------------------------------------------------------------------------------------------------ Followed by L - ------------------------------------------------------------------------------------------------------------------------------------ DATA PROTECTION - ------------------------------------------------------------------------------------------------------------------------------------ You acknowledge that we may exchange information about you with companies in the Barclays Bank group for credit and risk assessment purposes and marketing purposes. You may be contacted with details of other products or services - write to us if you do not wish to be contacted. You agree we may disclose and use information about this agreement for credit scoring, administration and financing purposes and for fraud prevention. - ------------------------------------------------------------------------------------------------------------------------------------ SIGNATURE FOR HIRER SIGNATURE FOR OWNER - ----------------------------------------------------------------------------- ---------------------------------------------------- Signed for and on behalf Date/Tax point of this agreement of the hirer 01/10/01 ---------------------------------------------------- Signed for and on behalf of Barclays Mercantile Business Finance Ltd of Churchill Plaza, /s/ Sarah Blair Churchill Way, Basingstoke, Hampshire RG21 7GL. - ----------------------------------------------------------------------------- Regd. no. 898129 VAT registration no. 243 8522 62 Name and title of signatory Please Leave Blank SARAH BLAIR FC Authorised to sign /s/ signature illegible Authorised to sign - ----------------------------------------------------------------------------- ----------------------------------------------------
APPENDIX Not for use with agreements regulated by the Consumer Credit act 1974 BARCLAYS ---------------------------------------------------- Lessee/Hirer Vari-Lite Production Services Limited ---------------------------------------------------- CF no. Customer no. This appendix shall be read and construed as forming part of the agreement 96810-01 01268 45 3 00 under which equipment is let made between the undersigned and Barclays ---------------------------------------------------- Mercantile Business Finance Ltd and dated the Plan code Account no. 01 10 01 10 75/4654 9525-7 ---- -- ---- ---------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------------ EQUIPMENT - ------------------------------------------------------------------------------------------------------------------------------------ 1. Description (inc. serial and/or reg. no.) Upgrade Kit for Consol Location of equipment New/Used Fairway Drive, UB6 8PW New 2. Description (inc. serial and/or reg. no.) 3D Illuminated Letters Location of equipment New/Used Fairway Drive, UB6 8PW New 3. Description (inc. serial and/or reg. no.) Colour Scrollers x13 Location of equipment New/Used Fairway Drive, UB6 8PW New 4. Description (inc. serial and/or reg. no.) Residual Circuit Distributors x2 Location of equipment New/Used Fairway Drive, UB6 8PW New 5. Description (inc. serial and/or reg. no.) Residual Circuit Distributors x2 Location of equipment New/Used Fairway Drive, UB6 8PW New 6. Description (inc. serial and/or reg. no.) Residual Circuit Distributors x2 Location of equipment New/Used Fairway Drive, UB6 8PW New 7. Description (inc. serial and/or reg. no.) Light Transportation Cases x2 Location of equipment New/Used Fairway Drive, UB6 8PW New 8. Description (inc. serial and/or reg. no.) Transportation Cases x6 Location of equipment New/Used Fairway Drive, UB6 8PW New 9. Description (inc. serial and/or reg. no.) DMX converter Location of equipment New/Used Fairway Drive, UB6 8PW New 10.Description (inc. serial and/or reg. no.) DMX Converter Location of equipment New/Used Fairway Drive, UB6 8PW New 11.Description (inc. serial and/or reg. no.) Portable Clocking On Machine Serial no. 1310100299409094334 Location of equipment New/Used Fairway Drive, UB6 8PW New - ------------------------------------------------------------------------------------------------------------------------------------ SIGNATURE FOR LESSEE OR HIRER SIGNATURE FOR LESSOR OR OWNER - ----------------------------------------------------------------------------- ---------------------------------------------------- Signed for and on behalf For and on behalf of the lessor/owner of the lessee/hirer /s/ Sarah Blair Date 01/10/01 - ----------------------------------------------------------------------------- ---------------------------------------------------- Title of signatory Signed FINANCIAL CONTROLLER Authorised to sign /s/ signature illegible Authorised to sign - ----------------------------------------------------------------------------- ----------------------------------------------------
APPENDIX Not for use with agreements regulated by the Consumer Credit act 1974 BARCLAYS ---------------------------------------------------- Lessee/Hirer Vari-Lite Production Services Limited ---------------------------------------------------- CF no. Customer no. This appendix shall be read and construed as forming part of the agreement 96810-01 01268 45 3 00 under which equipment is let made between the undersigned and Barclays ---------------------------------------------------- Mercantile Business Finance Ltd and dated the Plan code Account no. 01 10 01 10 75/4654 9525-7 ---- -- ---- ---------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------------ EQUIPMENT - ------------------------------------------------------------------------------------------------------------------------------------ 12.Description (inc. serial and/or reg. no.) Chain Hoist Location of equipment New/Used Fairway Drive, UB6 8PW New 13.Description (inc. serial and/or reg. no.) Cabling Location of equipment New/Used Fairway Drive, UB6 8PW New 14.Description (inc. serial and/or reg. no.) Cyclite transportation case x3 Location of equipment New/Used Fairway Drive, UB6 8PW New 15.Description (inc. serial and/or reg. no.) Trussing Location of equipment New/Used Fairway Drive, UB6 8PW New 16.Description (inc. serial and/or reg. no.) VL2402 Broad Beam Lights x11 Location of equipment New/Used Fairway Drive, UB6 8PW New 17.Description (inc. serial and/or reg. no.) VL2201/2400 Transportation cases x6 Location of equipment New/Used Fairway Drive, UB6 8PW New 18.Description (inc. serial and/or reg. no.) VL2402 Broad Beam Light Location of equipment New/Used Fairway Drive, UB6 8PW New 19.Description (inc. serial and/or reg. no.) Iris 4 Lighting x12 Location of equipment New/Used Fairway Drive, UB6 8PW New 20.Description (inc. serial and/or reg. no.) VL2402 Broad Beam Lights x30 Location of equipment New/Used Fairway Drive, UB6 8PW New 21.Description (inc. serial and/or reg. no.) VL2201/2400 Transportation Cases x1 Location of equipment New/Used Fairway Drive, UB6 8PW New 22.Description (inc. serial and/or reg. no.) Socapex Racks x2 Location of equipment New/Used Fairway Drive, UB6 8PW New - ------------------------------------------------------------------------------------------------------------------------------------ SIGNATURE FOR LESSEE OR HIRER SIGNATURE FOR LESSOR OR OWNER - ----------------------------------------------------------------------------- ---------------------------------------------------- Signed for and on behalf For and on behalf of the lessor/owner of the lessee/hirer /s/ Sarah Blair Date 01/10/01 - ----------------------------------------------------------------------------- ---------------------------------------------------- Title of signatory Signed FINANCIAL CONTROLLER Authorised to sign /s/ signature illegible Authorised to sign - ----------------------------------------------------------------------------- ----------------------------------------------------
APPENDIX Not for use with agreements regulated by the Consumer Credit act 1974 BARCLAYS ---------------------------------------------------- Lessee/Hirer Vari-Lite Production Services Limited ---------------------------------------------------- CF no. Customer no. This appendix shall be read and construed as forming part of the agreement 96810-01 01268 45 3 00 under which equipment is let made between the undersigned and Barclays ---------------------------------------------------- Mercantile Business Finance Ltd and dated the Plan code Account no. 01 10 01 10 75/4654 9525-7 ---- -- ---- ---------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------------ EQUIPMENT - ------------------------------------------------------------------------------------------------------------------------------------ 23.Description (inc. serial and/or reg. no.) 36-Way MCB Location of equipment New/Used Fairway Drive, UB6 8PW New 24.Description (inc. serial and/or reg. no.) 36-Way MCB Location of equipment New/Used Fairway Drive, UB6 8PW New 25.Description (inc. serial and/or reg. no.) Voltech PM300 Analyser Location of equipment New/Used Fairway Drive, UB6 8PW New 26.Description (inc. serial and/or reg. no.) Short Nose Latern Location of equipment New/Used Fairway Drive, UB6 8PW New 27.Description (inc. serial and/or reg. no.) Altman Zip Strip Location of equipment New/Used Fairway Drive, UB6 8PW New 28.Description (inc. serial and/or reg. no.) 2 Way Maxi Beam Location of equipment New/Used Fairway Drive, UB6 8PW New 29.Description (inc. serial and/or reg. no.) Transportation Cases x55 Location of equipment New/Used Fairway Drive, UB6 8PW New 30.Description (inc. serial and/or reg. no.) 6B Conversion Kits x30 Location of equipment New/Used Fairway Drive, UB6 8PW New 31.Description (inc. serial and/or reg. no.) Fresnel Lamp Location of equipment New/Used Fairway Drive, UB6 8PW New 32.Description (inc. serial and/or reg. no.) Console 800 Channel Location of equipment New/Used Fairway Drive, UB6 8PW New 33.Description (inc. serial and/or reg. no.) Reiche & Vogel Lights x11 Location of equipment New/Used Fairway Drive, UB6 8PW New - ------------------------------------------------------------------------------------------------------------------------------------ SIGNATURE FOR LESSEE OR HIRER SIGNATURE FOR LESSOR OR OWNER - ----------------------------------------------------------------------------- ---------------------------------------------------- Signed for and on behalf For and on behalf of the lessor/owner of the lessee/hirer /s/ Sarah Blair Date 01/10/01 - ----------------------------------------------------------------------------- ---------------------------------------------------- Title of signatory Signed FINANCIAL CONTROLLER Authorised to sign /s/ signature illegible Authorised to sign - ----------------------------------------------------------------------------- ----------------------------------------------------
APPENDIX Not for use with agreements regulated by the Consumer Credit act 1974 BARCLAYS ---------------------------------------------------- Lessee/Hirer Vari-Lite Production Services Limited ---------------------------------------------------- CF no. Customer no. This appendix shall be read and construed as forming part of the agreement 96810-01 01268 45 3 00 under which equipment is let made between the undersigned and Barclays ---------------------------------------------------- Mercantile Business Finance Ltd and dated the Plan code Account no. 01 10 01 10 75/4654 9525-7 ---- -- ---- ---------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------------ EQUIPMENT - ------------------------------------------------------------------------------------------------------------------------------------ 34.Description (inc. serial and/or reg. no.) Trussing Location of equipment New/Used Fairway Drive, UB6 8PW New 35.Description (inc. serial and/or reg. no.) VL6B Transportation Cases x10 Location of equipment New/Used Fairway Drive, UB6 8PW New 36.Description (inc. serial and/or reg. no.) 6B Conversion Kits x 60 Location of equipment New/Used Fairway Drive, UB6 8PW New 37.Description (inc. serial and/or reg. no.) V16B Transportation Case Location of equipment New/Used Fairway Drive, UB6 8PW New 38.Description (inc. serial and/or reg. no.) 6B Conversion Kits x 6 Location of equipment New/Used Fairway Drive, UB6 8PW New 39.Description (inc. serial and/or reg. no.) VL2416 Broad Beam Lights x64 Location of equipment New/Used Fairway Drive, UB6 8PW New 40.Description (inc. serial and/or reg. no.) V12201/2400 Transportation Cases x3 Location of equipment New/Used Fairway Drive, UB6 8PW New 41.Description (inc. serial and/or reg. no.) 36-Way MCB x2 Location of equipment New/Used Fairway Drive, UB6 8PW New 42.Description (inc. serial and/or reg. no.) Scroller Transportation Cases x2 Location of equipment New/Used Fairway Drive, UB6 8PW New 43.Description (inc. serial and/or reg. no.) VL2402 Broad Beam Lights x30 Location of equipment New/Used Fairway Drive, UB6 8PW New 44.Description (inc. serial and/or reg. no.) VL2201/2400 Transportation Cases x15 Location of equipment New/Used Fairway Drive, UB6 8PW New - ------------------------------------------------------------------------------------------------------------------------------------ SIGNATURE FOR LESSEE OR HIRER SIGNATURE FOR LESSOR OR OWNER - ----------------------------------------------------------------------------- ---------------------------------------------------- Signed for and on behalf For and on behalf of the lessor/owner of the lessee/hirer /s/ Sarah Blair Date 01/10/01 - ----------------------------------------------------------------------------- ---------------------------------------------------- Title of signatory Signed FINANCIAL CONTROLLER Authorised to sign /s/ signature illegible Authorised to sign - ----------------------------------------------------------------------------- ----------------------------------------------------
APPENDIX Not for use with agreements regulated by the Consumer Credit act 1974 BARCLAYS ---------------------------------------------------- Lessee/Hirer Vari-Lite Production Services Limited ---------------------------------------------------- CF no. Customer no. This appendix shall be read and construed as forming part of the agreement 96810-01 01268 45 3 00 under which equipment is let made between the undersigned and Barclays ---------------------------------------------------- Mercantile Business Finance Ltd and dated the Plan code Account no. 01 10 01 10 75/4654 9525-7 ---- -- ---- ---------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------------ EQUIPMENT - ------------------------------------------------------------------------------------------------------------------------------------ 45.Description (inc. serial and/or reg. no.) VL6B Transportation Cases x7 Location of equipment New/Used Fairway Drive, UB6 8PW New 46.Description (inc. serial and/or reg. no.) 6b Conversion Kits x40 Location of equipment New/Used Fairway Drive, UB6 8PW New - ------------------------------------------------------------------------------------------------------------------------------------ SIGNATURE FOR LESSEE OR HIRER SIGNATURE FOR LESSOR OR OWNER - ----------------------------------------------------------------------------- ---------------------------------------------------- Signed for and on behalf For and on behalf of the lessor/owner of the lessee/hirer /s/ Sarah Blair Date 01/10/01 - ----------------------------------------------------------------------------- ---------------------------------------------------- Title of signatory Signed FINANCIAL CONTROLLER Authorised to sign /s/ signature illegible Authorised to sign - ----------------------------------------------------------------------------- ----------------------------------------------------
THIS SALE AGREEMENT is made the 01/10/01 BETWEEN (1) VARI-LITE EUROPE LIMITED, A COMPANY REGISTERED IN ENGLAND UNDER NUMBER 2876045 WHOSE REGISTERED OFFICE IS AT 20-22 FAIRWAY DRIVE, GREENFORD, MIDDLESEX UB6 8PW (THE "VENDOR"); AND (2) BARCLAYS MERCANTILE BUSINESS FINANCE LIMITED A COMPANY REGISTERED IN ENGLAND UNDER NUMBER 898129 WHOSE REGISTERED OFFICE IS AT CHURCHILL PLAZA, CHURCHILL WAY, BASINGSTOKE, HAMPSHIRE RG21 7GP ("THE PURCHASER"). WHEREBY IT IS HEREBY AGREED as follows:- 1. As obligations separate and independent from any other obligations of the Vendor and the Purchaser and subject only to the terms of this Agreement and the relevant VAT invoice the Vendor agrees to sell outright and the Purchaser agrees to purchase, the equipment described in the Schedule attached. 2. The total price payable by the Purchaser to the Vendor for the Equipment shall be as stated in the Schedule attached (the "Purchase Price") plus value added tax. 3. Full title to and risk in the Equipment shall pass to the Purchaser from the Vendor on payment of the Purchase Price plus value added tax. 4. In consideration of the Purchaser entering into this Agreement, the Vendor hereby represents and warrants to the Purchaser that:- (i) the entering into of this Agreement by the Vendor and the due and proper performance of its obligations hereunder will not conflict with or result in a breach of any term of or constitute a default under or result in the creation or imposition of any lien security interest, charge or encumbrance upon the Equipment; (ii) the description and other details of the Equipment set out in the Schedule attached are accurate and the Equipment is complete and of satisfactory quality and fit for its purpose; (iii) the Vendor is the legal owner of the Equipment free and clear of all liens, mortgages, charges and encumbrances; and (iv) there are no outstanding disputes claims or proceedings relating to or arising from the condition, possession or operation of the Equipment. 5. This Agreement shall be governed by English law. IN WITNESS whereof this Agreement has been entered into the day and year first before written. Page 1 of 2 Schedule of Assets for Vari-Lite Europe Limited
- ------------------------------------------------------------------------------------------------ DATE SUPPLIER ASSET NET VAT TOTAL - ------------------------------------------------------------------------------------------------ 23-Aug ETC Upgrade Kit for Consol L 16,110.00 L 2,819.25 L 18,929.25 - ------------------------------------------------------------------------------------------------ 25-Jun Prestige 3D illuminated letters L 3,887.00 L 680.22 L 4,567.22 - ------------------------------------------------------------------------------------------------ 7-Aug Wybron Colour Scrollers x13 L 8,608.54 L 1,506.49 L 10,115.03 - ------------------------------------------------------------------------------------------------ 1-Aug SES Residual Circuit Distributor x2 L 750.00 L 131.25 L 881.25 - ------------------------------------------------------------------------------------------------ 1-Aug SES Residual Circuit Distributor x2 L 750.00 L 131.25 L 881.25 - ------------------------------------------------------------------------------------------------ 2-Aug SES Residual Circuit Distributor x2 L 750.00 L 131.25 L 881.25 - ------------------------------------------------------------------------------------------------ 12-Jan 5 Star Light Transportation cases x2 L 580.00 L 98.46 L 678.46 - ------------------------------------------------------------------------------------------------ 26-Apr ABS Transportation cases x6 L 2,580.00 L 451.50 L 3,031.50 - ------------------------------------------------------------------------------------------------ 16-May DHA DMX Converter L 650.00 L 113.75 L 763.75 - ------------------------------------------------------------------------------------------------ 5-Apr DHA DMX Converter L 894.50 L 156.54 L 1,051.04 - ------------------------------------------------------------------------------------------------ 20-Apr Parker Portable Clocking Machine L 3,165.00 L 553.89 L 3,718.89 - ------------------------------------------------------------------------------------------------ 23-Jul Out Board Chain Hoist L 4,160.00 L 728.00 L 4,888.00 - ------------------------------------------------------------------------------------------------ 6-Nov TMB Cabling L 3,271.17 L 572.45 L 3,843.62 - ------------------------------------------------------------------------------------------------ 19-Jun ABS Cyclite Cases x4 L 1,375.00 L 240.63 L 1,615.63 - ------------------------------------------------------------------------------------------------ 29-May Slick Trussing L 4,285.71 L 750.01 L 5,035.72 - ------------------------------------------------------------------------------------------------ 25-Jun Vari-Lite VL2402 Broad beam Lights x11 L 24,328.59 L 4,257.50 L 28,586.09 - ------------------------------------------------------------------------------------------------ VL2201/2400 Transportation cases x6 L 2,074.90 L 363.10 L 2,438.00 - ------------------------------------------------------------------------------------------------ 22-Jun Vari-Lite VL2402 Broad beam Lights x1 L 2,211.69 L 387.04 L 2,598.73 - ------------------------------------------------------------------------------------------------ 11-May LCA Iris 4 lighting x12 L 9,600.00 L 1,680.00 L 11,280.00 - ------------------------------------------------------------------------------------------------ 30-Apr Vari-Lite VL2402 Broad beam lights x30 L 77,286.24 L 13,525.09 L 90,811.33 - ------------------------------------------------------------------------------------------------ VL2201/2400 Transportation cases x15 L 5,187.30 L 907.77 L 6,095.07 - ------------------------------------------------------------------------------------------------ 16-Jul SES Socapex Rack x2 L 7,440.00 L 1,302.00 L 8,742.00 - ------------------------------------------------------------------------------------------------ 13-Jun SES 36-Way MCB L 3,720.00 L 651.00 L 4,371.00 - ------------------------------------------------------------------------------------------------ 13-Jun SES 36-Way MCB L 3,720.00 L 651.00 L 4,371.00 - ------------------------------------------------------------------------------------------------ 4-Apr TTI Viotech PM300 Analyser L 1,843.30 L 322.58 L 2,165.88 - ------------------------------------------------------------------------------------------------ 21-Feb AC Lighting Short Nose Latern L 1,032.60 L 180.71 L 1,213.31 - ------------------------------------------------------------------------------------------------ 28-Mar TMB Altman Zip Strip L 1,855.60 L 324.73 L 2,180.33 - ------------------------------------------------------------------------------------------------ 28-Feb Slick 2 Way Maxi Beam L 1,460.34 L 255.56 L 1,715.89 - ------------------------------------------------------------------------------------------------ 21-Mar Vari-Lite Transportation cases x55 L 80,330.69 L 14,057.87 L 94,388.56 - ------------------------------------------------------------------------------------------------ 6B Conversion Kits L 21,292.92 L 3,726.26 L 25,019.18 - ------------------------------------------------------------------------------------------------ 27-Feb LCA Fresnel Lamp L 1,090.00 L 190.75 L 1,280.75 - ------------------------------------------------------------------------------------------------ 21-Feb ETC Console 800 Channel L 4,580.00 L 801.50 L 5,381.50 - ------------------------------------------------------------------------------------------------ 1-Feb LTG Reiche&Vogel Light x11 L 4,240.50 L 742.09 L 4,982.59 - ------------------------------------------------------------------------------------------------ 8-Feb Tomcat Trussing L 8,556.00 L 1,497.30 L 10,053.30 - ------------------------------------------------------------------------------------------------ 21-Mar Vari-Lite VL6B Transportation cases x10 L 5,148.89 L 901.05 L 6,049.94 - ------------------------------------------------------------------------------------------------ 6B Conversion Kits x60 L 42,585.83 L 7,452.52 L 50,038.35 - ------------------------------------------------------------------------------------------------ 15-Feb Vari-Lite V16B Transportation case L 507.83 L 88.87 L 5,967.00 - ------------------------------------------------------------------------------------------------ 6B Conversion Kits x6 L 4,200.25 L 735.04 L 4,935.29 - ------------------------------------------------------------------------------------------------ 9-Feb Vari-Lite VL2416 Broad beam lights x64 L163,082.96 L 28,539.52 L191,622.48 - ------------------------------------------------------------------------------------------------ VL2201/2400 Transportation cases x32 L 8,306.85 L 1,453.69 L 9,760.54 - ------------------------------------------------------------------------------------------------ 7-Jun SES 36-Way MCB x2 L 8,100.00 L 1,417.50 L 9,517.50 - ------------------------------------------------------------------------------------------------ 23-Feb Vari-Lite Scroller transportation cases x2 L 356.71 L 62.42 L 419.13 - ------------------------------------------------------------------------------------------------ 31-May Vari-Lite VL2402 Broad beam lights x30 L 76,745.78 L 13,430.51 L 90,176.29 - ------------------------------------------------------------------------------------------------ VL2201/V12400 Trnsptatn Cases x15 L 5,151.02 L 901.43 L 6,052.50 - ------------------------------------------------------------------------------------------------ 9-Jan Vari-Lite VL6B Transportation Cases x7 L 3,414.53 L 597.54 L 4,012.07 - ------------------------------------------------------------------------------------------------ 6B Conversion Kits x40 L 28,209.47 L 4,936.66 L 33,146.13 - ------------------------------------------------------------------------------------------------ L659,477.71 L115,405.54 L780,253.59 - ------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------ 31-Jan NegEarth HPL Lamp 30.5 5.34 35.84 - ------------------------------------------------------------------------------------------------ - -----------------------------------------------------------===================================== GRAND TOTAL L659,447.21 115400.2 780217.75 - -----------------------------------------------------------===================================== /s/ S. Blair ---------------------------------------------------------------- Authorised to sign for and on behalf of Vari-Lite Europe Limited Name & title of Signatory: S. BLAIR FINANCIAL CONTROLLER /s/ signature illegible ---------------------------------------------------------------- Authorised to sign for and on behalf of Barclays Mercantile Business Finance Limited Name & Title of Signatory: Business Co-Ordinator
You are responsible for taking delivery of the equipment; on delivery you must make sure it is as described in the schedule and anything additional needed to start it working or to use it must be arranged by you. (2) We make no statement about the equipment other than that we have the right to hire it out to you. We have not authorised the supplier or anyone else to make any statement about it. (3) Any condition, warranty or other term implied by law is excluded to the full extent permitted by law. If you wish to have the benefit of any equipment or service guarantee or warranty, you should arrange this directly with the supplier, but we will, on request, let you have the benefit of any that the supplier gives to us. (4) Rentals are payable even if you are not satisfied with the equipment or it does not work or do what you expected it to, needs maintenance or is damaged; we are not liable for any loss of business, revenue, profit or anticipated savings however caused. 6. INSURANCE (1) You must insure the equipment until it is returned to us for its full replacement value against loss or damage and against third party risks or with comprehensive cover in the case of vehicles. (2) We may require to approve your insurers and the terms of insurance, to see your insurance policy and to have our ownership noted. If we are not satisfied with your insurance, we may take out our own insurance at your expense; you will reimburse us on demand. (3) If the equipment is a total loss or stolen, you must promptly inform us and we may either require the equipment to be replaced or you to pay us the amount required to discharge your outstanding liability to us (see clause 8). (4) You authorise us to contact your insurers and, if the equipment is a total loss or is stolen, consent to us disclosing the amount required to discharge your outstanding liability to us and as your agent to negotiate and agree with your insurers the terms of any insurance claim in respect of the equipment and to receive any insurance proceeds payable. (5) If any insurance cover you take out fails to cover your liability to us, you will still be liable to us for any shortfall. 7. DEFAULT (1) Certain events, which you must not allow to occur, are a default and repudiation by you of each lease; they are that: (a) we do not receive any rental within 10 days of its due date; or (b) you breach any other term (and, if it can be remedied, you fail to remedy the breach within 10 days of our notice requiring you to do so); or (c) (if you are an individual) an application for an interim order is made against you or a petition for a bankruptcy order (in Scotland for sequestration) is presented against you; or (d) (if you are a company, trust or corporation) a receiver, administrative receiver or liquidator is appointed to you or you are dissolved or otherwise wound up; or (e) distress (is Scotland diligence) or execution is threatened or made against you (any of which automatically terminates each lease); or (f) a meeting of your creditors is called or you propose a voluntary arrangement or cease to trade or a petition for the appointment to you of an administrator is presented; or (g) (if in Scotland) you are apparently insolvent; or (h) any company in the Barclays PLC Group withdraws any facility or demands payment as a result of a default by you. (2) If any of the events in clause 7(1) occurs, our consent to your possession of the equipment ceases. We may then terminate any hiring, enter your premises and take back the equipment. If we do not act immediately, we will still have these rights. (3) If we terminate the hiring or the agreement has terminated automatically, without affecting our rights (including any right to damages and to our costs of recovering the equipment), you must then pay us the amount required to discharge your outstanding liability to us (see clause 8). Receipt by us of part payment will not affect our rights. 8. YOUR LIABILITY ON TERMINATION (1) Your outstanding liability to us (see clauses 6(3), 7(3) and 10) should the hiring or lease terminate, will be any arrears of rental accrued and by way of agreed compensation, a sum equal to the unpaid balance HP price shown on the schedule less a rebate calculated by us for early payment of any charges included in it. (2) We shall deduct the value of the equipment from your liability; the value will be what we have sold it for (net of expenses) or what we have received from insurers. 9. YOUR OPTION TO PURCHASE (1) You have the option to (but do not have to) purchase the equipment at the expiry of the term if: (a) we have received on the terms of this agreement all rentals shown in the schedule and other sums then payable to us in respect of the lease; (b) you are not in default (see clause 7); and (c) you pay us any option payment stated in the schedule plus any VAT chargeable. The equipment then becomes your property. We confirm that we will have the right to pass title to you. (2) If you wish to exercise your option to purchase prior to the expiry of the term, you may only do so with our permission and on receipt by us of the amount we quote to you as payable. (3) Where the equipment includes computer software, ownership of the software will remain with the owner or licensor of it and we grant you no option to purchase it. 10. YOUR RIGHT TO TERMINATE (1) You may terminate the hiring under any schedule without exercising your option to purchase (see clause 9), but only if you: (a) terminate the hiring of all other equipment under all other hire or lease purchase agreements that are not regulated (by consumer credit law) between us and you and your associated companies (defined by tax law); (b) pay the amount we quote you as payable under all such agreements, which will include your outstanding liability to us under that schedule (see clause 8); and (c) return the equipment (see clause 11). (2) Without our permission you may only pre-pay in compliance with these terms. 11. RETURN OF EQUIPMENT (1) Unless you validly exercise your option to purchase (see clause 9) you must return the equipment (including any instruction books, registration documents and service records) to us, to an address specified by us, when the hiring of it has ended. (2) On return the equipment must be in working order and good condition (fair wear and tear excepted). Any costs incurred in returning the equipment are payable by you. THESE ARE YOUR DECLARATIONS WHEN YOU SIGN A SCHEDULE You request us to (i) accept your offer to hire the equipment from us on the terms and conditions of the lease (ii) upon our acceptance, date the schedule and forward your payment instructions to your bankers. You acknowledge that we have had no part in selecting the equipment and exclude liability for its condition and suitability. - ----------------------------------------------------------------------- SIGNATURE OF HIRER Signed for and on behalf of the hirer /s/ S. Blair - -------------------------------------------------------------- Name and title of signatory S. BLAIR FINANCIAL CONTROLLER Authorised to sign - ----------------------------------------------------------------------- - ----------------------------------------------------------------------- SIGNATURE OF OWNER Signed for and on behalf of Barclays Mercantile Business Finance Ltd. /s/ signature illegible PLEASE LEAVE BLANK Authorised to sign - ----------------------------------------------------------------------- EX-21.1 5 a2066739zex-21_1.txt EX-21.1 EXHIBIT 21.1 LIST OF SUBSIDIARIES OF VARI-LITE INTERNATIONAL, INC.
NAME JURISDICTION OF INCORPORATION OWNER - ---- ----------------------------- ----- Vari-Lite, Inc. Delaware Vari-Lite International, Inc. Concert Production Lighting, Inc. Delaware Vari-Lite International, Inc. Woosch, Inc. Delaware Vari-Lite International, Inc. IGNITION! Creative Group, Inc. Delaware Vari-Lite International, Inc. Vari-Lite Europe Holdings, Ltd. United Kingdom Vari-Lite International, Inc. Vari-Lite Europe, Ltd. United Kingdom Vari-Lite Europe Holdings, Ltd. Theatre Projects Lighting Services, Ltd. United Kingdom Vari-Lite Europe Holdings, Ltd. B. S. Ltd. United Kingdom Vari-Lite Europe Holdings, Ltd. Irideon, Ltd. United Kingdom Vari-Lite Europe Holdings, Ltd. VLPS, Ltd. United Kingdom Vari-Lite Europe Holdings, Ltd. Vari-Lite Production Services Europe, NV Belgium Vari-Lite International, Inc. Vari-Lite Asia, Inc. Japan Vari-Lite International, Inc. Vari-Lite Production Services Hong Kong Limited Hong Kong Vari-Lite International, Inc. Vari-Lite Hong Kong, Ltd. Hong Kong Vari-Lite International, Inc.
EX-23.1 6 a2066739zex-23_1.txt EX-23.1 EX 23.1 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statement No. 333-67664 of Vari-Lite International, Inc. on Form S-8 of our report dated December 31, 2001 appearing in this Annual Report on Form 10-K of Vari-Lite International, Inc. for the year ended September 30, 2001. Dallas, Texas December 31, 2001 -----END PRIVACY-ENHANCED MESSAGE-----