<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997
COMMISSION FILE NUMBER: 1-14234
Caribiner International, Inc.
-------------------------------------
(Exact name of registrant as specified in its charter)
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<S> <C>
Delaware 13-3466655
- ---------------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
16 West 61st Street, New York, NY 10023
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(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code: (212) 541-5300
--------------
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 [ ]
The registrant had 11,556,111 shares of Common Stock (par value $0.01 per share)
outstanding as of May 2, 1997.
<PAGE>
INDEX
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Review Report of Independent Accountants.............. 2
Consolidated Balance Sheets as of September 30, 1996
and March 31, 1997................................... 3
Consolidated Statements of Operations for
the three months ended March 31, 1996 and 1997....... 4
Consolidated Statements of Operations for
the six months ended March 31, 1996 and 1997......... 5
Consolidated Statements of Cash Flows for
the six months ended March 31, 1996 and 1997......... 6
Consolidated Statement of Changes in Stockholders'
Equity for the six months ended March 31, 1997....... 7
Notes to Consolidated Financial Statements............ 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................. 12
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders... 17
Item 6. Exhibits and Reports on Form 8-K...................... 18
SIGNATURES............................................................. 20
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Review Report of Independent Accountants
Stockholders and Board of Directors
Caribiner International, Inc.
We have reviewed the accompanying consolidated balance sheet of Caribiner
International, Inc. as of March 31, 1997, and the related consolidated
statements of operations for the three months and six months ended March 31,
1996 and 1997, the consolidated statement of changes in stockholders' equity for
the six months ended March 31, 1997 and the consolidated statements of cash
flows for the six months ended March 31, 1996 and 1997. These financial
statements are the responsibility of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data, and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, which will be
performed for the full year with the objective of expressing an opinion
regarding the financial statements taken as a whole. Accordingly, we do not
express such an opinion.
Based on our reviews, we are not aware of any material modifications that should
be made to the accompanying consolidated financial statements in order for them
to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Caribiner International, Inc. as of
September 30, 1996, and the related consolidated statements of operations,
stockholders' equity, and cash flows for the year then ended, not presented
herein, and in our report dated December 6, 1996, except for Note 15 as to which
the date is December 20, 1996, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth in
the accompanying consolidated balance sheet as of September 30, 1996, is fairly
stated, in all material respects, in relation to the consolidated balance sheet
from which it has been derived.
/s/ Ernst & Young LLP
New York, New York
May 2, 1997
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CARIBINER INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
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<CAPTION>
September 30, March 31,
1996 1997
ASSETS (Note 1) (unaudited)
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<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 8,431,777 $ 28,694,113
Trade accounts receivable - net
of allowance for doubtful
accounts of $304,860 and
$331,956 at September 30, 1996
and March 31, 1997, respectively 36,201,774 66,258,547
Deferred charges 8,989,410 13,454,601
Prepaid expenses and other current
assets 3,394,951 6,222,146
------------ ------------
TOTAL CURRENT ASSETS 57,017,912 114,629,407
Property and equipment - net 21,954,660 32,062,094
Goodwill - net 46,681,520 80,407,237
Other intangibles - net 267,602 132,898
Other assets 399,696 2,179,986
------------ ------------
TOTAL ASSETS $126,321,390 $229,411,622
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Bank line of credit $ 6,000,000 $ --
Current portion of long-term debt 648,696 1,117,127
Trade accounts payable 7,529,536 11,756,533
Accrued expenses and other current
liabilities 11,070,856 23,086,617
Accrued production costs 11,355,416 13,039,218
Deferred income 13,334,965 21,686,031
------------ ------------
TOTAL CURRENT LIABILITIES 49,939,469 70,685,526
Long-term debt 16,189,922 1,962,523
Deferred income 5,007,183 8,921,758
Other liabilities 1,717,433 1,726,116
------------ ------------
TOTAL LIABILITIES 72,854,007 83,295,923
STOCKHOLDERS' EQUITY:
Preferred stock, $0.01 par value:
2,000,000 shares authorized, none
issued and outstanding at
September 30, 1996 and March 31,
1997, respectively -- --
Common stock, $0.01 par value:
40,000,000 voting shares
authorized, 9,598,159 and
11,516,176 shares issued and
outstanding at September 30, 1996
and March 31, 1997, respectively 95,982 115,162
Additional paid-in capital 60,032,954 147,969,037
Translation adjustment 85,723 321,352
Accumulated deficit (6,747,276) (2,289,852)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 53,467,383 146,115,699
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $126,321,390 $229,411,622
============ ============
See accompanying notes to the unaudited consolidated financial
statements.
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CARIBINER INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED
(UNAUDITED)
<TABLE>
<CAPTION>
March 31,
1996 1997
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<S> <C> <C>
Service revenue $31,219,805 $45,283,955
Rental revenue -- 32,151,645
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Total revenue 31,219,805 77,435,600
Cost of service revenue 21,030,289 31,299,618
Cost of rental revenue -- 20,051,328
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Total cost of revenue 21,030,289 51,350,946
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Gross profit 10,189,516 26,084,654
Operating expenses:
Selling, general and
administrative expenses 6,915,616 16,831,150
Non-cash compensation expense 979,000 --
Depreciation and amortization 718,406 2,350,548
----------- -----------
Total operating expenses 8,613,022 19,181,698
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Operating income 1,576,494 6,902,956
Interest expense with related parties 517,497 --
Other interest expense, net 255,877 575,544
----------- -----------
Income before taxes 803,120 6,327,412
Provision for taxes 159,767 2,606,516
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Net income $ 643,353 $ 3,720,896
=========== ===========
Earnings per common share $0.11 $0.36
=========== ===========
See accompanying notes to the unaudited consolidated financial
statements.
</TABLE>
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CARIBINER INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED
(UNAUDITED)
<TABLE>
<CAPTION>
March 31,
1996 1997
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<S> <C> <C>
Service revenue $51,627,172 $ 83,590,469
Rental revenue -- 46,503,635
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Total revenue 51,627,172 130,094,104
Cost of service revenue 34,370,868 57,716,050
Cost of rental revenue -- 28,462,936
----------- ------------
Total cost of revenue 34,370,868 86,178,986
----------- ------------
Gross profit 17,256,304 43,915,118
Operating expenses:
Selling, general and
administrative expenses 13,371,610 31,186,981
Non-cash compensation expense 1,072,000 --
Depreciation and amortization 1,322,542 4,054,807
----------- ------------
Total operating expenses 15,766,152 35,241,788
----------- ------------
Operating income 1,490,152 8,673,330
Interest expense with related parties 1,199,281 --
Other interest expense, net 668,167 1,118,374
----------- ------------
Income (loss) before taxes (377,296) 7,554,956
Provision (benefit) for taxes (124,508) 3,097,534
----------- ------------
Net income (loss) $ (252,788) $ 4,457,422
============ ============
Earnings per common share $0.05 $0.45
=========== ============
See accompanying notes to the unaudited consolidated financial
statements.
</TABLE>
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CARIBINER INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED
(UNAUDITED)
<TABLE>
<CAPTION>
March 31,
1996 1997
--------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (252,788) $ 4,457,422
Adjustments to reconcile net income
(loss) to net cash provided by operating
activities:
Depreciation and amortization 1,322,542 4,944,255
Non-cash compensation 1,072,000 --
Change in assets and liabilities:
(Increase) in trade accounts receivable (6,511,247) (19,478,384)
(Increase) in deferred charges (7,078,405) (4,053,567)
(Increase) in prepaid expenses and
other current assets (924,066) (784,708)
Decrease (increase) in other assets 111,400 (1,774,434)
(Decrease) in trade accounts payable (573,714) (771,372)
Increase in deferred income 12,750,180 11,468,433
Increase in accrued expenses and other
liabilities 3,895,440 5,066,352
(Decrease) in accrued interest payable (7,250,375) --
----------- -------------
Net cash (used in) operating activities (3,439,033) (926,003)
----------- -------------
Cash flow used in investing activities:
Purchase of property and equipment (1,008,811) (4,951,870)
Acquisition of intangibles and
businesses, net of cash acquired (3,182,906) (39,615,941)
----------- -------------
Net cash used in investing activities (4,191,717) (44,567,811)
----------- -------------
Cash flow provided by financing activities:
Net proceeds from issuance of common stock 44,137,922 86,674,478
Proceeds from exercise of warrants 1,690,500 --
Repayments of long-term debt (14,590,994) (73,578,051)
Net (repayments) of bank line of credit (4,220,000) (6,000,000)
Proceeds from long-term debt 3,000,000 58,500,000
Payment of preferred stock dividends (2,201,618) --
Proceeds from issuance of common stock
under the Management Stock Plan 174,167 --
Repurchase of common stock (176,904) --
----------- -------------
Net cash provided by financing activities 27,813,073 65,596,427
----------- -------------
Translation effect on cash and cash equivalents -- 159,723
Net increase in cash 20,182,323 20,262,336
Cash, beginning of period 212,612 8,431,777
----------- -------------
Cash, end of period $20,394,935 $ 28,694,113
=========== =============
Supplemental disclosure of cash flow information:
Interest paid $ 7,844,344 $ 1,032,640
=========== =============
Income taxes paid $ 689,135 $ 1,959,300
=========== =============
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
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<CAPTION>
CARIBINER INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED MARCH 31, 1997
(UNAUDITED)
Common Stock Total
--------------------------------- Additional Accumulated Translation Stockholders'
Shares Amount Paid in Capital Deficit Adjustment Equity
------------- ------------ ---------------- ------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Balance at September
30, 1996 9,598,159 $ 95,982 $ 60,032,954 $ (6,747,276) $ 85,723 $ 53,467,383
Issuance of common stock
under non-employee directors'
stock plan 782 8 24,925 -- -- 24,933
Issuance of common stock
upon acquisition of Rome
Network, Inc. 15,495 155 749,803 -- -- 749,958
Issuance of common stock
upon acquisition of
Blumberg Communications,
Inc. 29,940 299 1,388,168 -- -- 1,388,467
Issuance of common stock
upon offering 1,871,800 18,718 85,773,187 -- -- 85,791,905
Translation adjustment -- -- -- -- 235,629 235,629
Net income -- -- -- 4,457,424 -- 4,457,424
---------- ----------- ------------ ------------- ---------- ------------
Balance at March 31, 1997 11,516,176 $ 115,162 $147,969,037 $ (2,289,852) $ 321,352 $146,115,699
========== =========== ============ ============= ========== ============
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
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CARIBINER INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(UNAUDITED)
1. INTERIM FINANCIAL INFORMATION
The accompanying unaudited consolidated financial statements of Caribiner
International, Inc. (the "Company") have been prepared in accordance with
generally accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, the consolidated financial
statements contain all adjustments, consisting of normal recurring
adjustments, considered necessary to present fairly the consolidated
financial position, results of operations and cash flows of the Company. The
results of operations for the six months ended March 31, 1997 are not
necessarily indicative of the results of operations that may be expected for
any other interim period or for the fiscal year ending September 30, 1997.
The balance sheet at September 30, 1996 has been derived from the Company's
audited financial statements at that date, but does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
Certain reclassifications have been made to the September 30, 1996
consolidated balance sheet and to the consolidated statements of operations
for the six months ended March 31, 1997 to conform to the current period's
classifications.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
Service revenue is recorded principally on the completed contract method of
accounting. The recognition of service revenue and cost of service revenue is
deferred until a project is completed which is often within a three- to six-
month time period. For those projects which provide for multiple events, the
contract revenue and costs are apportioned and revenue and profit are
recognized as each event occurs. If a client cancels a project after
production has begun, the client is obligated under contract to pay for
services performed and expenses incurred through the date of cancellation,
and there are no provisions for nonpayment by the client.
The Company recognizes rental revenue over the rental period.
Cost of Revenue
Cost of service revenue is comprised of production costs including salaries
and benefits of production, creative and technical personnel spent on
specific contracts, and other direct costs including contracted services,
equipment rentals and depreciation and costs associated with the production
of audio-visual effects. Such costs are deferred until project completion.
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Cost of rental revenue is comprised principally of direct labor costs,
commissions, equipment rentals and depreciation.
3. BUSINESS ACQUISITIONS
In December, 1996, the Company acquired all of the outstanding common stock
of Rome Network, Inc. ("Rome"), a regional producer of meetings and events
headquartered in San Francisco, for aggregate consideration of $3.2 million,
which consisted of approximately $2.4 million in cash and the issuance of
15,495 shares of the Company's common stock having a value of approximately
$0.8 million.
In January, 1997, the Company acquired Video Supply Company, Inc. d/b/a
Projexions Video Supply and Projections/Video Supply Company (together,
"Projexions"), a provider of audio visual equipment rentals and related
staging services in the southeastern U.S., for approximately $13.6 million
(subject to certain adjustments) in cash and $1.4 million in the repayment of
certain indebtedness.
In January, 1997, the Company completed the acquisition of all of the
outstanding capital stock of Blumberg Communications Inc. ("Blumberg"), a
provider of audio visual equipment rentals, sales and related staging
services, including hotel audio visual outsourcing services, in the upper
midwest and southern U.S. The Company paid aggregate consideration of $18.0
million (subject to certain adjustments), which consisted of approximately
$16.6 million in cash and the issuance of 29,940 shares of the Company's
common stock having a value of approximately $1.4 million. In addition, the
Company repaid $3.9 million in outstanding indebtedness of Blumberg at
closing.
The cash components of the transactions described above were financed by
additional drawings on one of the Company's credit facilities.
On April 30, 1997, the Company completed the acquisition of D&D Enterprises,
Inc. d/b/a/ Show Solutions ("Show Solutions"), a provider of staging and show
services based in Atlanta, for aggregate consideration of approximately $11.4
million (subject to certain adjustments), which consisted of $8.4 million in
cash paid at closing, $1.0 million placed in escrow to be paid at a later
date upon the satisfaction of certain terms and conditions and the issuance
of 38,180 shares of the Company's common stock having a value of
approximately $2.0 million. In addition, the Company repaid approximately
$0.6 million in outstanding indebtedness of Show Solutions. The cash
components of this transaction were paid from the Company's cash on hand.
On May 1, 1997, the Company completed the acquisition of Wavelength Corporate
Communications Pty Limited, a provider of business communications services in
Australia and New Zealand, for consideration of approximately $1.9 million in
cash and the issuance of 1,499 shares of the Company's common stock having a
value of approximately $78,200. The cash component of the purchase price was
financed by a drawing on one of the Company's credit facilities.
The following unaudited consolidated pro forma results of operations of the
Company for the six months ended March 31, 1996 and 1997 give effect to the
following transactions as if they occurred on October 1, 1995: (i) the
acquisitions of Koors Perry & Associates, Inc. ("Koors Perry"), Lighthouse,
Ltd. ("Lighthouse"), SCH International Limited ("Spectrum"), Total Audio
Visual Services ("TAVS"), Projexions and Blumberg, (ii)
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decreased interest expense and preferred stock dividends resulting from the
repayment of substantially all outstanding bank borrowings and other long-
term indebtedness of the Company from proceeds of the initial public offering
of common stock, which was consummated on March 15, 1996 and (iii) the
repayment with the proceeds of the initial public offering of a portion of
bank borrowings that would have been incurred in connection with the
acquisitions of Koors Perry, Lighthouse, Spectrum and TAVS as if such
acquisitions had occurred on October 1, 1995. The effect of the acquisition
of Rome on the Company's results of operations for the six months ended March
31, 1996 and 1997 is insignificant.
<TABLE>
<CAPTION>
Six Months Ended
March 31,
1996 1997
--------------------------------------
(in millions, except per share data)
<S> <C> <C>
Revenue $135.9 $154.8
Income before taxes 3.6 6.0
Net income 2.2 3.5
Pro forma net income per
common share 0.23 0.35
</TABLE>
The above calculation of pro forma net income per common share assumes that
approximately 9.6 million and 10.0 million shares were outstanding during the
six months ended March 31, 1996 and 1997, respectively.
The unaudited pro forma consolidated results of operations do not purport to
be indicative of the actual results of operations that would have occurred
had the acquisitions described above been made on October 1, 1995 or of
results which may occur for any future period.
4. STOCK OFFERING
In March, 1997, the Company consummated an offering of 2,052,500 shares of
its common stock, which included the sale of 1,871,800 shares of common stock
by the Company for $48.875 per share. The Company received net proceeds of
approximately $85.8 million after deducting underwriting discounts and
expenses. Proceeds of approximately $64.5 million were used to repay all then
outstanding bank borrowings. The remaining net proceeds are available to make
acquisitions, fund working capital needs and for general corporate purposes.
5. EARNINGS PER COMMON SHARE
The weighted average number of shares of common stock outstanding during the
three and six months ended March 31, 1996 is 7,220,901 and 6,918,810,
respectively. The weighted average number of shares of common stock
outstanding during the three and six months ended March 31, 1997 is
10,375,429 and 10,000,136, respectively.
Earnings per common share for the three and six months ended March 31, 1996
has been computed on a pro forma basis assuming conversion of the convertible
note and all outstanding shares of preferred stock into common stock (which,
in each case, occurred on March 15, 1996 immediately prior to the Company's
initial public offering)
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as if such conversions occurred on October 1, 1995. The pro forma earnings
per share reflects adjustments to eliminate the interest expense incurred on
the convertible note and to eliminate accrued preferred stock dividends.
Pursuant to the requirements of the Securities and Exchange Commission,
common stock issued under the 1993 Management Stock Plan and warrants to
purchase common stock issued at prices below the initial public offering
price per share during the twelve months immediately preceding the date of
the initial filing of the Company's Registration Statement on Form S-1
(registration no. 33-80481) have also been included in the calculation of
common shares, using the treasury stock method, as if they were outstanding
for the period ended March 31, 1996.
Of the net proceeds from the sale of shares of common stock offered by the
Company in its public offering completed in March, 1997, approximately $64.5
million were used to repay aggregate outstanding bank borrowings. Assuming
the issuance and sale of only that number of shares of common stock which
would have generated net proceeds sufficient to repay indebtedness of $64.5
million, and assuming that such indebtedness had been repaid as of October 1,
1996, supplementary pro forma net income per share would have been $0.39 and
$0.52 for the three months and six months ended March 31, 1997, respectively.
For purposes of this computation, the weighted average number of shares of
common stock outstanding during the three months and six months ended March
31, 1997 is 10,899,567 and 11,128,634 respectively.
Of the net proceeds from the sale of shares of common stock offered by the
Company in the initial public offering completed in March, 1996,
approximately $25.6 million were used to repay aggregate bank borrowings and
other long-term indebtedness, including accrued interest and preferred stock
dividends. Assuming the issuance and sale of only that number of shares of
common stock which would have generated net proceeds sufficient to repay
indebtedness of $25.6 million, and assuming that such indebtedness had been
repaid as of October 1, 1995, supplementary pro forma net income per share
would have been $0.13 for the three months and six months ended March 31,
1996. For purposes of this computation, the weighted average number of shares
of common stock outstanding during the three months and six months ended
March 31, 1996 is 8,237,270.
6. STOCK SPLIT
The Company has declared a 2-for-1 split of its common stock to be effected
by paying a stock dividend of one new share for every share of the Company's
common stock outstanding. The stock dividend is payable June 20, 1997 to
stockholders of record on May 30, 1997. The accompanying consolidated
financial statements, including the earnings per common share calculation,
have not been restated to reflect such stock split.
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CARIBINER INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Six Months Ended March 31, 1997 Compared to
Six Months Ended March 31, 1996
Revenue. Revenue increased $78.5 million, or 152%, from $51.6 million in the
six months ended March 31, 1996 to $130.1 million in the six months ended March
31, 1997. The increase resulted primarily from expanded activities from
existing clients, projects for new clients and the acquisition of other business
communications services companies. Approximately 59% of the increase
represented revenue from the rental of audio visual equipment through the
Company's Total Audio Visual Services ("TAVS") division, which now includes the
results of the recently acquired companies, Video Supply Company, Inc. d/b/a
Projexions Video Supply and Projections/Video Supply Company (together
"Projexions") and Blumberg Communications, Inc. ("Blumberg"). Increases in
service revenue from clients in the telecommunications, automotive and
information technologies industries accounted for 28% of the total revenue
growth. The remainder of the increase in revenue was derived from clients in
several other industries.
Gross profit. The total gross profit increased $26.7 million, or 154%, from
$17.3 million in the six months ended March 31, 1996 to $43.9 million in the
same period of 1997, primarily as a result of the revenue growth described
above. As a percentage of service revenue, gross profit decreased to 31.0% in
the six month period ended March 31, 1997 from 33.4% in the prior comparable
period due primarily to project mix and a greater level of production
requirements. Gross profit as a percentage of rental revenue was 38.8%.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $17.8 million, or 133%, from $13.4 million in
the six month period ended March 31, 1996 to $31.2 million in the six month
period ended March 31, 1997. The increase was due primarily to acquisitions and
to support other revenue growth, as well as to normal inflationary increases.
Salaries and related costs increased $11.4 million from increased personnel
resulting from acquisitions and to support the Company's overall significant
growth, as well as normal inflationary increases. Other general and
administrative expenses, including rent and related costs, telephone, postage
and other office supplies, as well as insurance costs, increased $4.7 million
due to acquisitions and to support the revenue growth. Direct selling expenses
such as travel, marketing and training, and other costs related to obtaining
business increased $1.7 million. Selling, general and administrative expenses
as a percentage of revenue declined from 25.9% in the six months ended March 31,
1996 to 24.0% in the six months ended March 31, 1997 as revenue increased more
rapidly than such expenses. The $1.1 million nonrecurring, non-cash
compensation charge during the six months ended March 31, 1996 was the
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result of the vesting of common stock sold pursuant to the Company's management
stock plan at a price lower than its fair market value. Excluding the effect of
the nonrecurring non-cash compensation charge of $1.1 million, pro forma net
income per common share would have been $0.16 for the six months ended March 31,
1996.
Depreciation and amortization. Depreciation and amortization expense for the
six months ended March 31, 1997 was $4.1 million, an increase of $2.8 million as
compared to $1.3 million for the corresponding period in the prior year.
Property and equipment acquired through acquisitions and the continued
investment in information technology resulted in increased depreciation expense
of $1.8 million. Amortization expense increased $0.9 million resulting
primarily from goodwill arising from acquisitions.
Interest expense. Interest expense with related parties decreased $1.2 million
due to the repayment and conversion of debt as of March 16, 1996 in connection
with the Company's initial public offering. Other interest expense, net
increased primarily due to higher average borrowings to finance acquisitions and
increased working capital requirements.
Income (loss) before taxes. Income (loss) before taxes increased to $7.6
million in the six months ended March 31, 1997 from a loss of $0.4 million in
the six months ended March 31, 1996.
Provision (benefit) for taxes. Taxes reflect an allocation based on the full
year anticipated effective tax rate. For the six months ended March 31, 1996,
there was a loss before taxes and, accordingly, an assumed benefit has been
reflected. The provision (benefit) for taxes as a percentage of income before
taxes was 33% and 41% for the six months ended March 31, 1996 and 1997,
respectively. The increase in the effective tax rate is due primarily to income
before tax in excess of the utilization of available net operating loss carry
forwards which are not subject to limitations.
Net income (loss). Net income was $4.5 million in the six months ended March 31,
1997 compared to a net loss of $0.3 million in the six months ended March 31,
1996. Earnings per common share for the six months ended March 31, 1997
increased to $0.45 from a pro forma net income per share of $0.05 for the
comparable period in fiscal 1996. The earnings per share for the six months
ended March 31, 1996 was computed on a pro forma basis assuming conversion of
the convertible note and all outstanding shares of preferred stock into common
stock (which, in each case, occurred on March 15, 1996 immediately prior to the
consummation of the Company's initial public offering) as if such conversions
occurred on October 1, 1995. The pro forma earnings per share computation
reflects adjustments to eliminate the interest expense incurred on the
convertible note and to eliminate accrued preferred stock dividends.
Three Months Ended March 31, 1997 Compared to
Three Months Ended March 31, 1996
Revenue. Revenue increased $46.2 million, or 148%, from $31.2 million in the
three months ended March 31, 1996 to $77.4 million in the three months ended
March 31, 1997. Through a combination of internal growth and acquisitions the
Company increased its revenues from clients across a broad range of industries.
Approximately 70% of the increase represented revenue from the rental of audio
visual equipment through the
-13-
<PAGE>
Company's TAVS division, which now includes the results of the recently acquired
companies, Projexions and Blumberg. Increases in service revenue from clients in
the automotive, information technology and telecommunications industries
accounted for 23% of the total revenue growth. The remainder of the increase in
revenue was derived from clients in several other industries.
Gross profit. The total gross profit increased $15.9 million, or 156%, from
$10.2 million in the three months ended March 31, 1996 to $26.1 million in the
three months ended March 31, 1997 as a result of the revenue growth described
above. Gross profit as a percentage of service revenue decreased to 30.9% for
the three months ended March 31, 1997 from 32.6% for the comparable period in
fiscal 1996 due primarily to project mix and a greater level of production
requirements. Gross profit as a percentage of rental revenue was 37.6% for the
three months ended March 31, 1997.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $9.9 million, or 143%, from $6.9 million in
the three months ended March 31, 1996 to $16.8 million in the three months ended
March 31, 1997. Salaries and related costs increased $6.2 million primarily
from increased personnel resulting from acquisitions and to support the
Company's overall growth, as well as normal annual inflationary increases.
Other general and administrative expenses, including rent and related expenses,
telephone, office supplies and insurance costs increased $2.4 million due to
acquisitions and to support the overall significant growth of the Company.
Direct selling expenses, including travel, marketing and other costs related to
obtaining business, increased $1.3 million. Selling, general and administrative
expenses as a percentage of revenue declined from 22.2% in the three months
ended March 31, 1996 to 21.7% in the three months ended March 31, 1997 as
revenue increased more rapidly than such expenses. During the three months
ended March 31, 1996, the Company also recorded a non-recurring non-cash
compensation expense of $1.0 million resulting from the vesting of common stock
sold pursuant to the management stock plan at a price lower than its fair value.
Excluding the nonrecurring non-cash compensation charge of $1.0 million, pro
forma net income per common share would have been $0.21 for the three months
ended March 31, 1996.
Depreciation and amortization. Depreciation and amortization expense increased
$1.7 million from $0.7 million in the three months ended March 31, 1996 to $2.4
million in the three months ended March 31, 1997. Property and equipment
acquired through acquisitions and the continued investment in information
technology resulted in increased depreciation expense of $1.0 million in the
three months ended March 31, 1997. Amortization expense increased $0.6 million
resulting primarily from goodwill arising from acquisitions.
Interest expense. Interest expense with related parties decreased due to the
repayment and conversion of debt as of March 15, 1996 in connection with the
Company's initial public offering of its common stock, which was completed on
such date. Other interest expense, net, increased $0.3 million due to increased
borrowings incurred in connection with the consummation of acquisitions.
-14-
<PAGE>
Income before taxes. Income before taxes increased from $0.8 million in the
three months ended March 31, 1996 to $6.3 million in the three months ended
March 31, 1997 as revenue growth from acquired businesses as well as internal
growth contributed to the improved earnings of the Company.
Provision for taxes. The provision for taxes reflects an allocation based on
the full year anticipated tax provision. The provision for taxes as a
percentage of income before taxes was 20.0% and 41.2% for the three months ended
March 31, 1996 and 1997, respectively. The increase in the effective tax rate
is due primarily to income before tax in excess of the utilization of available
net operating loss carry forwards which are not subject to limitations.
Net income. Net income increased to $3.7 million in the three months ended
March 31, 1997 from $0.6 million in the three months ended March 31, 1996.
Earnings per common share for the three months ended March 31, 1997 increased to
$0.36 from a pro forma net income per share of $0.11 for the comparable period
in fiscal 1996. The net income per share for the three months ended March 31,
1996 was computed on a pro forma basis assuming conversion of the convertible
note and all outstanding shares of preferred stock into common stock (which, in
each case, occurred on March 15, 1996 immediately prior to the consummation of
the Company's initial public offering) as if such conversions occurred on
October 1, 1995. The pro forma income per share computation reflects
adjustments to eliminate the interest expense incurred on the convertible note
and to eliminate accrued preferred stock dividends.
LIQUIDITY AND CAPITAL RESOURCES
On December 4, 1996, the Company entered into a new loan agreement with a
syndicate of banks pursuant to which the Company increased its aggregate
available bank financing from $27 million to $100 million, consisting of a $75
million six year reducing revolving credit facility (the "Reducing Revolver") to
be utilized in connection with the financing of acquisitions and a $25 million
six year revolving line of credit (the "Revolving Line" and together with the
Reducing Revolver, the "1996 Facilities"). Amounts outstanding under the
Company's former bank facilities were repaid with proceeds from the 1996
Facilities. The maturity date of each of the 1996 Facilities is December 31,
2002. Interest on outstanding amounts under the 1996 Facilities is payable
quarterly in arrears and, at the option of the Company, interest accrues at
either (i) LIBOR plus an applicable margin or (ii) an alternate base rate based
on the greatest of (a) the agent bank's prime rate, (b) the three month
secondary certificate of deposit rate and (c) the federal funds rate. The
interest rate will increase by 2.0% if principal or interest is not paid when
due (after applicable grace periods). Pursuant to the terms of the 1996
Facilities, the Company is required to reduce outstanding amounts under the
Revolving Line to less than $5.0 million for a period of not less than 30 days
during every 12-month period commencing on December 4, 1996.
-15-
<PAGE>
The following table sets forth certain information from the Company's
Consolidated Statement of Cash Flows for the six months ended March 31, 1996 and
1997:
<TABLE>
<CAPTION>
Six Months Ended March 31,
1996 1997
------------- --------------
<S> <C> <C>
Net cash provided by (used in):
Operating activities $(3,439,033) $ (926,003)
Investing activities (4,191,717) (44,567,811)
Financing activities 27,813,073 65,596,427
</TABLE>
For the six months ended March 31, 1997, $0.9 million was used in operating
activities. The net income adjusted for depreciation and amortization provided
$9.4 million. The net change in working capital used $10.3 million, with an
increase in deferred income and accrued expenses and other liabilities, which
was more than offset by increases in trade accounts receivable, deferred
charges, prepaid expenses and other assets, and a decrease in trade accounts
payable. Investing activities required $44.6 million due to acquisition-related
expenditures and property and equipment additions. Financing activities provided
$65.6 million in the six months ended March 31, 1997, of which $86.7 million of
net proceeds were received during the period from the issuance of common stock
and $58.5 million was provided by drawings under the Company's Reducing
Revolver, offset by repayments of $79.6 million on each of the 1996 Facilities.
For the six months ended March 31, 1996, $3.4 million was used in operating
activities. The net loss adjusted for depreciation and amortization and the
non-cash compensation charge of $1.0 million provided $2.1 million. The net
change in working capital used $5.6 million, with increases in deferred income
and accrued expenses and other liabilities more than offset by increases in
accounts receivable, deferred charges and a decrease in accrued interest.
Investing activities required $4.2 million due to acquisition-related
expenditures and property and equipment additions. Financing activities
provided $27.8 million in the six month period ended March 31, 1996, of which an
aggregate of $46.0 million of net proceeds were received during the period from
the issuance of common stock and the exercise of warrants to purchase common
stock and $3.0 million was provided by the Term Loan, offset by $21.0 million
used to repay all outstanding bank borrowings and substantially all other long-
term indebtedness (including accrued interest), and pay all accrued preferred
stock dividends. In addition, $0.2 million was used to repurchase common stock
during the period.
Capital expenditures were $1.0 million and $5.0 million during the six months
ended March 31, 1996 and 1997, respectively, with the purchase of additional
personal computers and expanded capabilities for the computer system accounting
for the largest areas of expenditure.
-16-
<PAGE>
PART II
-------
OTHER INFORMATION
- -----------------
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
(a) Annual Meeting of Stockholders
Date held: May 6, 1997
(b) Directors elected:
Errol M. Cook
Raymond S. Ingleby
Bryan D. Langton
Sidney Lapidus
David E. Libowitz
C. Anthony Wainwright
(c) Matters Voted Upon:
1. Election of Directors
<TABLE>
<CAPTION>
Nominee Votes For Votes Withheld
- ------- --------- --------------
<S> <C> <C>
Errol M. Cook 9,607,789 41,381
Raymond S. Ingleby 9,607,789 41,381
Bryan D. Langton 9,610,989 38,181
Sidney Lapidus 9,607,789 41,381
David E. Libowitz 9,607,789 41,381
C. Anthony Wainwright 9,610,989 38,181
</TABLE>
2. Approval of Appointment of Ernst & Young, LLP as independent
auditors for the fiscal year ending September 30, 1997
Votes for: 9,648,570
Votes against: 400
Votes abstaining: 200
(d) Not applicable.
-17-
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(A) EXHIBITS REQUIRED BY ITEM 601 OF REGULATION S-K:
-----------------------------------------------
<TABLE>
<C> <S>
2.1 Agreement of Purchase and Sale of Stock, dated December 19, 1996, by and among Caribiner International, Inc. (the
"Company"), Blumberg Communications, Inc. and each of the Stockholders listed on Schedule A thereto (schedules
omitted -- the Company agrees to furnish a copy of any Schedule to the Commission upon request) (filed as Exhibit
2.1 to the Company's Current Report on Form 8-K filed with the Commission on February 12, 1997 and incorporated
herein by reference).
2.2 Agreement of Purchase and Sale of Assets, dated January 8, 1997, by and among the Company, Video Supply Company,
Inc., Projections/Video Supply Company and Robert Haney (schedules omitted -- the Company agrees to furnish a copy
of any schedule to the Commission upon request) (filed as Exhibit 2.1 to the Company's Current Report on Form 8-K
filed with the Commission on January 24, 1997 and incorporated herein by reference).
3.1 Restated Certificate of Incorporation (filed as Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q for the
three months ended March 31, 1996 and incorporated herein by reference).
3.2 Second Amended and Restated By-Laws (filed as Exhibit 3.2 (b) to the Company's Registration Statement on Form S-1
(Registration No. 33-80481) and incorporated herein by reference.
11.1 Computation of Earnings Per Common Share for the three months ended March 31, 1996 and 1997
11.2 Computation of Earnings Per Common Share for the six months ended March 31, 1996 and 1997
27.1 Financial Data Schedule
</TABLE>
-18-
<PAGE>
(B) REPORTS ON FORM 8-K:
--------------------
The Company filed the following reports on Form 8-K during the
three months ended March 31, 1997:
<TABLE>
<CAPTION>
Date of Filing Items Reported Subject of Report
- --------------------------- -------------- -----------------------------------
<S> <C> <C>
January 24, 1997 2 Announcing the acquisition of
substantially all of the assets of
Video Supply Company, Inc. d/b/a
Projexions Video Supply and
Projections/Video Supply Company
February 12, 1997 2 Announcing the completion of the
acquisition of all of the
outstanding capital stock of
Blumberg Communications, Inc.
</TABLE>
-19-
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CARIBINER INTERNATIONAL, INC.
(Registrant)
Date: May 13, 1997 By: /s/ Raymond S. Ingleby
------------------------
Raymond S. Ingleby
Chairman of the Board and
Chief Executive Officer
By: /s/ Arthur F. Dignam
----------------------
Arthur F. Dignam
Executive Vice President and
Chief Financial and Administrative Officer
(Principal Financial Officer and
Chief Accounting Officer)
-20-
<PAGE>
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C> <C>
2.1 Agreement of Purchase and Sale of Stock, dated December 19, 1996, by and
among Caribiner International, Inc. (the "Company"), Blumberg
Communications, Inc. and each of the Stockholders listed on Schedule A
thereto (schedules omitted -- the Company agrees to furnish a copy of any
Schedule to the Commission upon request) (filed as Exhibit 2.1 to the
Company's Current Report on Form 8-K filed with the Commission on
February 12, 1997 and incorporated herein by reference).
2.2 Agreement of Purchase and Sale of Assets, dated January 8, 1997, by and
among the Company, Video Supply Company, Inc., Projections/Video Supply
Company and Robert Haney (schedules omitted -- the Company agrees to
furnish a copy of any schedule to the Commission upon request) (filed as
Exhibit 2.1 to the Company's Current Report on Form 8-K filed with the
Commission on January 24, 1997 and incorporated herein by reference).
3.1 Restated Certificate of Incorporation (filed as Exhibit 3.1 to the
Company's Quarterly Report on Form 10-Q for the three months ended March
31, 1996 and incorporated herein by reference).
3.2 Second Amended and Restated By-Laws (filed as Exhibit 3.2 (b) to the
Company's Registration Statement on Form S-1 (Registration No. 33-80481)
and incorporated herein by reference).
11.1 Computation of Earnings Per Common Share for the three months ended
March 31, 1996 and 1997
11.2 Computation of Earnings Per Common Share for the six months ended March
31, 1996 and 1997
27.1 Financial Data Schedule
</TABLE>
-21-
<PAGE>
EXHIBIT 11.1
CARIBINER INTERNATIONAL, INC.
COMPUTATION OF EARNINGS PER COMMON SHARE
FOR THE THREE MONTHS ENDED MARCH 31
<TABLE>
<CAPTION>
1996 1997
------------ --------------
<S> <C> <C>
Weighted average common stock
outstanding during the period 3,189,587(a) 10,341,260
Effect of outstanding employee
stock options -- 34,169
Conversion of convertible note
into shares of preferred stock
and the subsequent conversion of
such shares into shares of
common stock 2,055,000 --
Conversion of all outstanding
shares of preferred stock and
preferred stock into shares of
common stock 1,541,250 --
Exercise of warrants 534,505 --
Effect of exercise of warrants
computed in accordance with the
treasury stock method (99,441) --
---------- -----------
Total weighted average common
stock outstanding during the
period 7,220,901 10,375,429
========== ===========
Income before taxes $ 803,120 $ 6,327,412
Plus: reduction in interest
expense from the conversion of
the convertible note 427,539 --
---------- -----------
Income before taxes 1,230,659 6,327,412
Income tax expense 418,214 2,606,516
---------- -----------
Net income $ 812,445 $ 3,720,896
========== ===========
Earnings per common share $0.11(b) $0.36
========== ===========
</TABLE>
(a) Pursuant to the Securities and Exchange Commission Staff Accounting
Bulletin No. 83, common stock and common stock equivalents issued at prices
below the assumed initial public offering price per share during the twelve-
month period immediately preceding the initial filing date of the Company's
Registration Statement for its public offering have been included as outstanding
for the period.
(b) Computed on a pro forma basis assuming conversion of the convertible note
and all outstanding shares of preferred stock into common stock (which, in each
case, occurred on March 15, 1996 immediately prior to the initial public
offering) as if such conversion occurred on October 1, 1995. Pro forma earnings
per share reflects adjustments to eliminate the interest expense on the
convertible note and to eliminate accrued preferred stock dividends.
-22-
<PAGE>
EXHIBIT 11.2
CARIBINER INTERNATIONAL, INC.
COMPUTATION OF EARNINGS PER COMMON SHARE
FOR THE SIX MONTHS ENDED MARCH 31
<TABLE>
<CAPTION>
1996 1997
--------- ----------
<S> <C> <C>
Weighted average
common stock
outstanding during
the period 2,887,496(a) 9,966,900
Effect of
Outstanding
employee stock
options -- 33,236
Conversion of
Convertible note
into shares of
preferred stock and
the subsequent
conversion of such
shares into shares
of common stock 2,055,000 --
Conversion of all
outstanding shares
of preferred stock
and preferred stock
into shares of
common stock 1,541,250 --
Exercise of warrants 534,505 --
Effect of exercise
of warrants
computed in
accordance with the
treasury stock
method (99,441) --
----------- -----------
Total weighted
average common
stock
outstanding
during the
period 6,918,810 10,000,136
=========== ===========
Income (loss) before
taxes $ (377,296) $ 7,554,956
Plus: reduction in
interest expense
from the conversion
of the Convertible
Note 926,248 --
----------- -----------
Income before taxes 548,952 7,554,956
Income tax expense 179,617 3,097,534
----------- -----------
Net income share $ 369,335 $ 4,457,422
=========== ===========
Earnings per common
share $0.05(b) $0.45
=========== ===========
</TABLE>
(a) Pursuant to the Securities and Exchange Commission Staff Accounting
Bulletin No. 83, common stock and common stock equivalents issued at prices
below the assumed initial public offering price per share during the
twelve-month period immediately preceding the initial filing date of the
Company's Registration Statement for its public offering have been included
as outstanding for all periods presented prior to the initial public
offering.
(b) Computed on a pro forma basis assuming conversion of the convertible note
and all outstanding shares of preferred stock into common stock (which, in
each case, occurred on March 15, 1996 immediately prior to the initial
public offering) as if such conversion occurred on October 1, 1995. Pro
forma earnings per share reflects adjustments to eliminate the interest
expense on the convertible note and to eliminate accrued preferred stock
dividends.
-23-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1997 AND THE CONSOLIDATED
STATEMENT OF INCOME FOR THE THREE MONTHS ENDED MARCH 31, 1997 OF CARIBINER
INTERNATIONAL, INC. AS SET FORTH IN THIS FORM 10-Q AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 28,694
<SECURITIES> 0
<RECEIVABLES> 66,591
<ALLOWANCES> 332
<INVENTORY> 0
<CURRENT-ASSETS> 114,629
<PP&E> 41,131
<DEPRECIATION> 9,069
<TOTAL-ASSETS> 229,412
<CURRENT-LIABILITIES> 70,686
<BONDS> 0
0
0
<COMMON> 115
<OTHER-SE> 146,001
<TOTAL-LIABILITY-AND-EQUITY> 229,412
<SALES> 77,436
<TOTAL-REVENUES> 77,436
<CGS> 51,351
<TOTAL-COSTS> 51,351
<OTHER-EXPENSES> 19,182
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 576
<INCOME-PRETAX> 6,327
<INCOME-TAX> 2,607
<INCOME-CONTINUING> 6,327
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,721
<EPS-PRIMARY> 0.36
<EPS-DILUTED> 0
</TABLE>
