-----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, PpCo1x6hh4imgDEoFF40GtC/lFKT5kfnZCbRC/YBVFJAWwytgCoFapHpKQZ+ykUN d7d3Hm1qCDTRCwj2zGBp9A== 0000898430-97-002898.txt : 19970715 0000898430-97-002898.hdr.sgml : 19970715 ACCESSION NUMBER: 0000898430-97-002898 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970502 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19970714 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MATTHEWS STUDIO EQUIPMENT GROUP CENTRAL INDEX KEY: 0000855575 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EQUIPMENT RENTAL & LEASING, NEC [7359] IRS NUMBER: 951447751 STATE OF INCORPORATION: CA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-18102 FILM NUMBER: 97640196 BUSINESS ADDRESS: STREET 1: 2405 EMPIRE AVE CITY: BURBANK STATE: CA ZIP: 91504 BUSINESS PHONE: 8436715X32 MAIL ADDRESS: STREET 1: 2405 EMPIRE AVENUE CITY: BURBANK STATE: CA ZIP: 91504 8-K/A 1 MATTHEWS STUDIO EQUIPMENT GROUP FORM 8-K/A United States SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K/A CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) May 2, 1997 MATTHEWS STUDIO EQUIPMENT GROUP ------------------------------- (Exact name of registrant as specified in its charter) CALIFORNIA ---------- (State or other jurisdiction of incorporation) 0-18102 95-1447751 ------------------------------------------------ (Commission file number) (I.R.S. Employer Identification No.) 3111 NORTH KENWOOD STREET, BURBANK, CA 91505 ---------------------------------------------------- (Address of principal executive offices) (Zip Code) (818) 525-5200 -------------- (Registrant's telephone number, including area code) 2405 Empire Avenue, Burbank, CA 91504-3399 ------------------------------------------ (Former name, former address and former fiscal year, if changed since last report) Item 2. Acquisition or Disposition of Assets On May 2, 1997, Matthews Studio Equipment Group ("Matthews" or "the Company") acquired Duke City Video, Inc. ("Duke City"), pursuant to stock exchange agreements dated as of May 2, 1997, among the shareholders of Duke City and Duke City Holdings, Inc., a wholly-owned subsidiary of the Company. Pursuant to the stock exchange agreements the Duke City shareholders received 285,715 restricted shares of the Company's common stock in exchange for all of the common stock of Duke City, in a transaction exempt from registration under the Securities Act of 1933. The amount of consideration paid to the Duke City shareholders was reached through arms-length negotiations. Prior to the acquisition, the ownership in Duke City was held by Harold Jay Lefkovitz, Louise Lefkovitz, Patricia Brusati, Steve Ward and John Hensch. Duke City has operations in Albuquerque, New Mexico, Burbank, California and Dallas, Texas. Duke City provides rental services of audio, video, film and professional grip equipment, as well as various levels of production expertise, crews and expendable supplies to the film and television production industry. Duke City will continue its business and operations as a wholly owned subsidiary of the Company. Item 7. Financial Statements and Exhibits (a) Financial Statements of Business Acquired Duke City was acquired by Matthews on May 2, 1997. The audited financial statements of Duke City, and the related Independent Auditors' Report for the Duke City fiscal year ended December 31, 1996 are located at Addendum I. (b) Pro forma Financial Information (unaudited) The required pro forma combined financial data is located at Addendum II. (2) (c) Exhibits EXHIBIT INDEX
Exhibit Document Description - ------- -------------------- 1. Stock Exchange Agreement and Plan of Reorganization dated as of May 2, 1997, among Patricia M. Brusati, Harold Jay Lefkovitz, Louise K. Lefkovitz, Stephen F. Ward, Duke City Video, Inc. and Duke City Holdings, Inc., without the schedules and exhibits thereto, other than as listed below: i. Employment Agreement dated as of May 2, 1997, between Patricia M. Brusati and Duke City Video, Inc.; ii. Employment Agreement dated as of May 2, 1997, between Harold Jay Lefkovitz and Duke City Video, Inc.; iii. Employment Agreement dated as of May 2, 1997, between Stephen F. Ward and Duke City Video, Inc.; iv. Non-Competition Agreement dated as of May 2, 1997, among Patricia M. Brusati, Duke City Video, Inc. and Duke City Holdings, Inc.; v. Non-Competition Agreement dated as of May 2, 1997, among Harold Jay Lefkovitz, Duke City Video, Inc. and Duke City Holdings, Inc.; vi. Non-Competition Agreement dated as of May 2, 1997, among Louise K. Lefkovitz, Duke City Video, Inc. and Duke City Holdings, Inc.; vii. Non-Competition Agreement dated as of May 2, 1997, among Stephen F. Ward, Duke City Video, Inc. and Duke City Holdings, Inc.; viii. Promissory Note dated as of May 2, 1997 made by Duke City Video, Inc. in favor of Harold Jay Lefkovitz; ix. Promissory Note dated as of May 2, 1997 made by Duke City Video, Inc. in favor of Patricia M. Brusati.
2. Subordination Agreement made by Harold Jay Lefkovitz in favor of Chase Manhattan Bank, as agent, but without the exhibit referenced therein. 3. Stock Exchange Agreement dated as of May 2, 1997, between Duke City Holdings, Inc. and John E. Hensch 23. Consent of Independent Auditors SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report on Form 8-K/A, to be signed on its behalf by the undersigned hereunto duly authorized. MATTHEWS STUDIO EQUIPMENT GROUP (Registrant) Date: July 10, 1997 By: S/Gary Borman ----------------------------------- Gary Borman Vice President, Corporate Controller & Principal Accounting Officer By: S/Carlos De Mattos ----------------------------------- Carlos De Mattos Chairman of the Board, President & Chief Financial Officer ADDENDUM I. - ----------- Financial Statements Duke City Video, Inc. dba Duke City Studio Year ended December 31, 1996 with Report of Independent Auditors Duke City Video, Inc. dba Duke City Studio Financial Statements Year ended December 31, 1996
CONTENTS Report of Independent Auditors............................................ 1 Audited Financial Statements Balance Sheet............................................................. 2 Statement of Operations................................................... 3 Statement of Shareholders' Equity......................................... 4 Statement of Cash Flows................................................... 5 Notes to Financial Statements............................................. 6
Report of Independent Auditors The Board of Directors and Shareholders Duke City Video, Inc. dba Duke City Studio We have audited the accompanying balance sheet of Duke City Video, Inc. dba Duke City Studio as of December 31, 1996, and the related statements of operations, shareholders' equity, and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. 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 audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Duke City Video, Inc. dba Duke City Studio at December 31, 1996, and the results of its operations and cash flows for the year then ended in conformity with generally accepted accounting principles. S/Ernst & Young LLP March 28, 1997 1 Duke City Video, Inc. dba Duke City Studio Balance Sheet December 31, 1996
ASSETS Current assets: Cash $ 60,468 Accounts receivable less allowance for doubtful accounts of $150,162 1,373,756 Deposits 266,739 Prepaid expenses 53,248 ----------- Total current assets 1,754,211 Property, plant and equipment, net (Notes 2, 3 and 4) 9,169,381 ----------- Total assets $10,923,592 =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 874,693 Accrued liabilities 195,463 Line of credit 278,017 Current portion of long-term debt (Notes 5 and 6) 1,056,330 Current portion of capital lease obligations (Notes 4 and 6) 2,395,043 ----------- Total current liabilities 4,799,546 Long-term debt, less current portion (Notes 5 and 6) 2,848,819 Notes payable - shareholders (Notes 5 and 6) 644,257 Capital lease obligations, less current portion (Notes 4 and 6) 3,908,439 Shareholders' equity: Common stock, no par value: Authorized shares - 500 Issued and outstanding shares - 116 204,874 Accumulated deficit (1,482,343) ----------- Total shareholders' equity (1,277,469) ----------- Total liabilities and shareholders' equity $10,923,592 ===========
See accompanying notes. 2 Duke City Video, Inc. dba Duke City Studio Statement of Operations Year ended December 31, 1996 Revenues from rental operations $8,692,103 Product sales 365,477 ---------- 9,057,580 Costs and expenses: Cost of rental operations 6,986,418 Cost of sales 171,641 Selling, general and administrative 1,409,075 Provision for doubtful accounts 121,109 Interest 1,097,153 ---------- 9,785,396 ---------- Loss before income taxes (727,816) Provision for income taxes 1,000 ---------- Net loss $ (728,816) ==========
See accompanying notes. 3 Duke City Video, Inc. dba Duke City Studio Statement of Shareholders' Equity
Common Stock ------------------------ Number of Accumulated Shares Amount Deficit Total ------------------------------------------------------------- Balance at December 31, 1995 100 $104,874 $ (753,527) $ (648,653) Net loss - - (728,816) (728,816) Stock issuance proceeds 16 100,000 - 100,000 ------------------------------------------------------------- Balance at December 31, 1996 116 $204,874 $(1,482,343) $(1,277,469) =============================================================
See accompanying notes. 4 Duke City Video, Inc. dba Duke City Studio Statement of Cash Flows Year ended December 31, 1996 OPERATING ACTIVITIES Net loss $ (728,816) Adjustments to reconcile net loss to net cash provided by operating activities: Provision for doubtful accounts 121,109 Depreciation and amortization 3,288,110 Gain on sale of assets (27,018) Changes in operating assets and liabilities: Accounts receivable (609,433) Deposits (104,042) Prepaid and other assets 57,681 Accounts payable and accrued liabilities 135,327 --------------- Net cash provided by operating activities 2,132,918 INVESTING ACTIVITIES Purchase of property, plant and equipment (226,464) Proceeds from sale of property, plant and equipment 41,685 --------------- Net cash used in investing activities (184,779) FINANCING ACTIVITIES Proceeds from note payable -- shareholder 236,000 Proceeds from borrowings Repayments of borrowings (2,334,933) Proceeds from stock issuance 100,000 -------------- Net cash used in financing activities (1,998,933) -------------- Net decrease in cash (50,794) Cash at beginning of year 111,262 -------------- Cash at end of year $ 60,468 ============== Cash paid during the year for: Taxes $ 800 Interest $ 1,125,748 Schedule of noncash investing and financing transaction: Long-term loans incurred to acquire equipment $ 4,727,536
See accompanying notes. 5 DUKE CITY VIDEO, INC. dba Duke City Studio NOTES TO FINANCIAL STATEMENTS December 31, 1996 1. ACCOUNTING POLICIES BUSINESS Duke City Video, Inc. conducts its business under the trade name of Duke City Studio (the Company). The Company provides rental services of audio, video, film and professional grip equipment, as well as various levels of production expertise, crews and expendable supplies to the film and television production communities. In addition, the Company provides tape duplication services and sells an immaterial amount of its equipment. The Company provides, as a single source, the necessary production equipment which is otherwise only available by using many different suppliers. The Company serves customers both domestically and internationally. The Company's headquarters are located in Albuquerque, New Mexico, with branch offices located in Burbank, California and Dallas, Texas. USE OF ESTIMATES The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. CONCENTRATION OF CREDIT RISK The Company's customers are located around the world and are principally engaged in the motion picture and television production, theatrical production or commercial photography. The Company generally rents its products or provides its services on credit terms of 30 days and does not require collateral. Credit losses on receivables are provided for in the financial statements and have historically been within management's expectations. Two customers accounted for 16% and 11% of the Company's total net revenues for the year ended December 31, 1996. 6 DUKE CITY VIDEO, INC. dba Duke City Studio NOTES TO FINANCIAL STATEMENTS December 31, 1996 1. ACCOUNTING POLICIES (continued) REVENUE RECOGNITION The Company recognizes revenue from rentals when the equipment has been delivered or when the services have been provided, pursuant to the contract terms. LONG-LIVED ASSETS Long-lived assets used in operations are reviewed periodically to determine that the current carrying values are not impaired and if indicators of impairment are present or if long-lived assets are expected to be disposed of, impairment losses are recorded. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment, including capital leases, are stated at cost. For financial reporting purposes, depreciation of automotive equipment, rental equipment and furniture and fixtures is provided using the double-declining balance method of depreciation. Depreciation and amortization on buildings and improvements is calculated using the straight-line method. The Company uses the following estimated useful lives:
Years ------- Automotive 5 Rental equipment 5 Furniture and fixtures 5 Buildings and improvements 10-40
Amortization of capital leases is included in depreciation expense. 7 DUKE CITY VIDEO, INC. dba Duke City Studio NOTES TO FINANCIAL STATEMENTS December 31, 1996 1. ACCOUNTING POLICIES (continued) ADVERTISING EXPENSES The Company expenses its advertising costs as incurred. Total advertising costs for 1996 were $47,834. PREPAID LEASE FEES Prepaid lease fees are capitalized and amortized over the life of the lease. DEPOSITS Deposits represent prepayments on capital lease obligations and are capitalized until the payment is due. Deposits made during the year totaled $101,274. INCOME TAXES The Company, with the consent of its shareholders, has elected to be taxed as an S corporation for federal and state income tax purposes. Accordingly, the Company's taxable income is included in the income tax returns of its shareholders. The state tax provision reflects the California S Corporation tax rate of 1.5% of taxable income, or $800, whichever is greater, and the S Corporation tax rate for other states that tax the income of S Corporations. 2. NET INVESTMENT IN LEASED ASSETS OPERATING LEASES The Company is a lessor of audio, video, film and professional grip equipment to the film and television production industries. The lease terms generally range from a few days to several weeks. Substantially all of the leases are noncancelable. The original cost and accumulated depreciation of rental equipment held for operating leases was $15,459,468 and $8,710,125, respectively at December 31, 1996. 8 DUKE CITY VIDEO, INC. dba Duke City Studio NOTES TO FINANCIAL STATEMENTS December 31, 1996 3. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consists of the following at December 31, 1996: Rental equipment $15,459,468 Vehicles 204,022 Office equipment, furniture and fixtures 299,550 Leasehold improvements 138,351 Land and building 2,210,184 ----------- 18,311,575 Less depreciation and amortization 9,142,194 ----------- $ 9,169,381 ===========
Substantially all of the property, plant and equipment serves as collateral for the Company's lease and debt obligations. 4. LEASES The Company leases its facilities in California and Texas under noncancelable operating leases expiring in May 1998 and May 2001, respectively. These leases require the Company to pay utilities, insurance and other taxes. The California facility lease contains a buyout clause for $15,600 which allows the Company to cancel the remaining term of the lease beginning April 1997. The Company also leases a furnished condominium in California for use by employees on temporary assignment at the Burbank office which expires in 1997. The Company also leases equipment and vehicles under noncancelable operating leases. Subsequent to December 31, 1996, the Company entered into leases to acquire additional rental equipment resulting in future payment obligations of $580,000. Property and equipment includes the following assets recorded under capital leases at December 31, 1996: Property and equipment $13,909,872 Less accumulated amortization 7,839,113 ----------- $ 6,070,759 ===========
9 DUKE CITY VIDEO, INC. dba Duke City Studio NOTES TO FINANCIAL STATEMENTS December 31, 1996 4. LEASES (continued) Future minimum payments under capital leases and noncancelable operating leases with initial terms of one year or more consisted of the following at December 31, 1996:
Capital Operating Leases Leases ---------------------------- 1997 $2,652,384 $147,104 1998 2,363,938 107,330 1999 1,338,396 78,210 2000 435,092 68,397 2001 18,926 22,425 Thereafter 16,295 -- ---------------------------- 6,825,031 423,466 Amounts representing interest (521,549) -- ---------------------------- Present value of net minimum lease payments (including current portion of $2,395,043) $6,303,482 $423,466 ============================
Rental expense under operating leases approximated $1,165,158 for 1996. 5. DEBT Debt consists of the following components (including capitalized lease obligations) as of December 31, 1996: Obligations incurred to acquire equipment, with interest rates ranging from 5.64% to 22.0% and with maturity dates ranging from April 1997 to February 2003 $ 8,388,039 Obligations incurred to acquire building, with interest rates ranging from 6.35% to 9.75% and with maturity dates ranging from December 2010 to December 2015 2,098,609 Notes payable to shareholders, payable upon demand with interest rates ranging from 4.0% to 10.25% 644,257 ----------- $11,130,905 ===========
10 DUKE CITY VIDEO, INC. dba Duke City Studio NOTES TO FINANCIAL STATEMENTS December 31, 1996 5. DEBT (continued) The aggregate annual maturities of debt consists of the following at December 31, 1996: 1997 $1,056,330 1998 554,596 1999 253,101 2000 76,394 2001 72,313 Thereafter 1,892,415 ---------- $3,905,149 ===========
The weighted average interest rate at December 31, 1996 for short-term borrowings was 10.25%. 6. RELATED PARTIES A shareholder of the Company has provided loans to the Company under various notes and at various interest rates and maturities. Loans were made by the shareholder in the amount of $185,000 during 1996. No payments were made on the principal of these notes during 1996; however, the Company has provided expense advances to the shareholder which have been offset against the interest incurred on these notes, resulting in no unpaid interest expense at December 31, 1996 related to these notes. The total expense advances incurred in 1996 was $49,951. The outstanding principal balance on the notes owed to the shareholder was $580,257 at December 31, 1996. These notes are subordinate to the Company's other note and lease obligations. A shareholder of the Company has provided a loan to the Company during 1996 in the amount of $51,000 with an interest rate of 9.25%. No payments were made on the note during 1996, resulting in an outstanding principal balance and accrued interest of $51,000 and $3,307, respectively. A majority of the notes payable and capital lease obligations are personally guaranteed by certain of the shareholders. 11 DUKE CITY VIDEO, INC. dba Duke City Studio NOTES TO FINANCIAL STATEMENTS December 31, 1996 7. EMPLOYEE BENEFIT PLAN The Company sponsors a defined contribution benefit plan covering its employees who meet the service and age requirements. The Plan allows an eligible employee to contribute up to 15% of their salary subject to certain limits established by the Internal Revenue Code. The Company provides a 50% matching contribution of the employee's eligible contributions. The Company recognized expense under the plan of $8,586 in 1996. 8. SUBSEQUENT EVENT (UNAUDITED) Subsequent to year end, the shareholders of the Company approved an agreement to exchange all of the outstanding shares of the Company's stock for stock of Matthews Studio Equipment Group. The merger was consummated in May 1997. 12 ADDENDUM II. - ------------ Pro forma combined financial data The following unaudited pro forma combined statements of operations for the year ended September 30, 1996 (December 31, 1996 for Duke City), and the six months ended March 31, 1997 give effect to the acquisition of Duke City by the Company. The pro forma information is based on the historical financial statements of the Company and Duke City giving effect to the combination under the purchase method of accounting and the assumptions and adjustments described in the accompanying notes to the unaudited pro forma financial statements. The following unaudited pro forma combined balance sheet also gives effect to the combination under the purchase method of accounting. The unaudited pro forma statements have been prepared by the management of the Company and Duke based upon the historical information included herein and other financial information. These pro forma statements do not purport to be indicative of the results of operations or financial position which would have occurred had the acquisition been made at the beginning of the periods or as of the date indicated or of the financial position or results of operations which may be obtained in the future. The Company will account for the transaction under the purchase method of accounting. Accordingly, the cost to acquire Duke City will be allocated to the assets acquired and liabilities assumed according to their respective fair values. The final allocation of the purchase price is dependent upon completion of certain studies that are not yet complete. Accordingly, the purchase allocation adjustments are preliminary and have been made solely for the purpose of preparing such pro forma statements. MATTHEWS STUDIO EQUIPMENT GROUP AND SUBSIDIARIES Pro Forma Condensed Consolidated Statements of Operations (in thousands, except per share data)
Historical ----------------------------- Matthews Duke ------------- ----------- For the Year Ended September 30, December 31, Pro forma Pro forma 1996 1996 Adjustments Combined ------------- ----------- ----------- --------- Net product sales $ 16,079 $ 365 $ $ 16,444 Revenues from rental operations 14,125 8,692 22,817 ------------- ----------- ----------- --------- 30,204 9,057 39,261 Costs and expenses: Cost of sales 10,257 172 10,429 Cost of rental operations 8,016 6,986 15,002 Selling, general and administrative 8,849 1,530 82 (1) 10,461 Interest 2,044 1,097 3,141 ------------- ----------- ----------- --------- 29,166 9,785 82 39,033 Income (loss) before income taxes 1,038 (728) (82) 228 Provision for income taxes 35 1 36 ------------ ----------- ----------- --------- Net income (loss) $ 1,003 $ (729) $ (82) $ 192 ============= =========== =========== ========= Earnings per common share $ 0.10 $ 0.02 ============= ========= Weighted average number of common shares outstanding 10,328 285 (2) 10,613
See notes to pro forma condensed consolidated statements of operations See accompanying notes. MATTHEWS STUDIO EQUIPMENT GROUP AND SUBSIDIARIES Pro Forma Condensed Consolidated Statements of Operations For the Six Months Ended March 31, 1997 (in thousands, except per share data)
Historical Pro forma Pro forma ----------------------------- Matthews Duke Adjustments Combined ------------ ----------- ----------- --------- Net product sales $ 8,703 $ 309 $ $ 9,012 Revenues from rental operations 11,394 3,902 15,296 ------------ -------- ---------- --------- 20,097 4,211 24,308 Costs and expenses: Cost of sales 5,869 83 5,952 Cost of rental operations 6,380 3,680 10,060 Selling, general and administrative 5,235 797 41 (1) 6,073 Interest 1,130 673 1,803 ------------ -------- ----------- --------- 18,614 5,233 41 23,888 Income (loss) before income taxes 1,483 (1,022) (41) 420 Provision for income taxes 593 1 594 ------------ -------- ----------- --------- Net income (loss) $ 890 $ (1,023) $ (41) $ (174) ============ ======== =========== ========= Earnings per common share $ 0.09 $ (0.02) ============ ========= Weighted average number of common shares outstanding 10,333 285 (2) 10,618 See notes to pro forma condensed consolidated statements of operations
MATTHEWS STUDIO EQUIPMENT GROUP AND SUBSIDIARIES NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS 1. To record the estimated goodwill attributable to the transaction which is amortized over a period of twenty five years. 2. To give effect to the issuance of Matthews restricted common stock in connection with the acquisition. 3. The three month period ended December 31, 1996 for Duke City is included in both the pro forma condensed statements of operations for the twelve month period ended December 31, 1996 and the six month period ended March 31, 1997.
MATTHEWS STUDIO EQUIPMENT GROUP AND SUBSIDIARIES Pro Forma Condensed Consolidated Balance Sheets March 31, 1997 ($ in thousands) Historical Pro forma Pro forma ---------------------------- Matthews Duke Adjustments Combined ------------- ----------- ----------- --------- ASSETS: Current Assets: Cash and cash equivalents $ 685 $ 145 $ $ 830 Accounts receivable 6,242 1,187 7,429 Current portion of net investment in leases 771 771 Inventories 6,363 6,363 Prepaid expenses and other current assets 1,124 339 1,463 ------------- ----------- ----------- --------- Total current assets 15,185 1,671 16,856 Property, plant and equipment 39,469 19,093 58,562 Less accumulated depreciation (18,537) (9,815) (28,352) ------------- ----------- ----------- --------- Net property, plant and equipment 20,932 9,278 30,210 Investment in leases, less current portion 660 660 Other assets 1,431 2,052 (2) 3,483 ------------- ------------ ----------- --------- Total assets $ 38,208 $ 10,948 $ 2,052 $ 51,208 ============= ============ =========== ========= LIABILITIES AND SHAREHOLDERS' EQUITY: Current liabilities: Accounts payable $ 2,814 $ 819 $ $ 3,633 Accrued liabilities 2,302 571 2,873 Current portion of long-term debt and capital lease obligations 165 3,622 3,787 Income taxes payable 158 158 ------------- ------------ ----------- -------- Total current liabilities 5,439 5,012 10,451 Long-term debt and capital leases 20,658 7,525 28,183 Deferred income taxes 2,142 2,142 Shareholders' equity: Preferred stock Common stock 5,589 205 81 (1) 5,875 Retained earnings (deficit) 4,380 (1,794) 1,971 (1) 4,557 ------------- ------------ ----------- -------- Total shareholders' equity 9,969 (1,589) 2,052 10,432 ------------- ------------ ----------- -------- Total liabilities and shareholders' equity $ 38,208 $ 10,948 $ 2,052 $ 51,208 ============= ============ =========== ======== See notes to pro forma condensed consolidated balance sheets
5 MATTHEWS STUDIO EQUIPMENT GROUP AND SUBSIDIARIES NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS 1. To record the acquisition of Duke City in exchange for 285,715 shares of the Company's common stock. 2. To record as unallocated assets, the net effect of pro forma adjustments for the excess purchase price over the fair value of net assets acquired which is estimated at $2,052,000. EX-23 2 CONSENT OF ERNST & YOUNG Exhibit 23. Consent of Independent Auditors We consent to the reference to our firm under the caption "Experts" in the Registration Statement (Form S-8 No. 333-3446) pertaining to the 1994 Stock Option Plan and 1994 Stock Option Plan for Directors of Matthews Studio Equipment Group and to the incorporation by reference therein of our report dated March 28, 1997, with respect to the financial statements of Duke City Video, Inc. dba Duke City Studio for the year ended December 31, 1996, included in the Form 8-K/A of Matthews Studio Equipment Group, filed with the Securities and Exchange Commission. S/Ernst & Young LLP Los Angeles, California July 7, 1997 -----END PRIVACY-ENHANCED MESSAGE-----