<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 DECEMBER 31, 1997
COMMISSION FILE NUMBER: 1-14234
Caribiner International, Inc.
-----------------------------------
(Exact name of registrant as specified in its charter)
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
------------------------------------- ---------
(Address of principal executive offices) (Zip Code)
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 23,517,069 shares of Common Stock (par value $0.01 per share)
outstanding as of February 9, 1998.
<PAGE>
<TABLE>
<CAPTION>
INDEX
-----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
<S> <C>
Review Report of Independent Accountants............................2
Consolidated Balance Sheets as of
September 30, 1997 and December 31, 1997............................3
Consolidated Statements of Operations for
the three months ended December 31, 1996 and 1997...................4
Consolidated Statements of Cash Flows for
the three months ended December 31, 1996 and 1997...................5
Consolidated Statement of Changes in Stockholders' Equity for
the three months ended December 31, 1997............................6
Notes to Consolidated Financial Statements..........................7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations......................11
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders................15
Item 6. Exhibits and Reports on Form 8-K...................................17
SIGNATURES.................................................................................19
</TABLE>
-1-
<PAGE>
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 December 31, 1997, and the related consolidated
statements of operations for the three months ended December 31, 1996 and 1997,
the consolidated statement of changes in stockholders' equity for the three
months ended December 31, 1997 and the consolidated statements of cash flows for
the three months ended December 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, 1997, 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 3, 1997, 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, 1997, 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
February 10, 1998
-2-
<PAGE>
<TABLE>
<CAPTION>
CARIBINER INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
ASSETS 1997 1997
(Note 1) (unaudited)
-------------- --------------
(amounts in thousands)
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 10,253 $ 10,769
Trade accounts receivable - net of allowance for
doubtful accounts of $740 and $900 at September
30, 1997 and December 31, 1997, respectively 77,780 124,428
Deferred charges 10,229 12,218
Prepaid expenses and other current assets 9,128 15,980
Assets held for sale (Note 3) -- 25,761
-------------- --------------
TOTAL CURRENT ASSETS 107,390 189,156
Property and equipment - net 45,714 86,372
Goodwill - net 157,154 414,177
Other assets 3,619 6,902
-------------- --------------
TOTAL ASSETS $ 313,877 $ 696,607
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 1,217 $ 1,307
Trade accounts payable 18,816 36,462
Accrued expenses and other current liabilities 23,200 57,758
Accrued production costs 11,055 11,031
Taxes payable 4,726 4,576
Deferred income 12,225 13,606
-------------- --------------
TOTAL CURRENT LIABILITIES 71,239 124,740
Long-term debt 60,642 385,787
Deferred income 5,617 7,764
Deferred tax liability 715 832
Other liabilities 4,230 2,714
-------------- --------------
TOTAL LIABILITIES 142,443 521,837
STOCKHOLDERS' EQUITY:
Preferred stock, $0.01 par value:
2,000 shares authorized, none issued and outstanding at
September 30, 1997 and December 31, 1997, respectively -- --
Common stock, $0.01 par value:
40,000 voting shares authorized, 23,417 and 23,513 shares
issued and outstanding at September 30, 1997 and
December 31, 1997, respectively 234 235
Additional paid-in capital 159,874 163,818
Translation adjustment 11 (121)
Retained earnings 11,315 10,838
-------------- --------------
TOTAL STOCKHOLDERS' EQUITY 171,434 174,770
-------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 313,877 $ 696,607
============== ==============
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
-3-
<PAGE>
<TABLE>
<CAPTION>
CARIBINER INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED
(UNAUDITED)
December 31,
1996 1997
------------- ---------------
(amounts in thousands)
<S> <C> <C>
Service revenue $ 38,307 $ 56,178
Rental revenue 14,352 66,271
------------- ---------------
Total revenue 52,659 122,449
Cost of service revenue 26,282 35,702
Cost of rental revenue 8,666 49,307
------------- ---------------
Total cost of revenue 34,948 85,009
------------- ---------------
Gross profit 17,711 37,440
Operating expenses:
Selling, general and administrative 14,357 31,362
expenses
Depreciation and amortization 1,583 3,631
------------- ---------------
Total operating expenses 15,940 34,993
------------- ---------------
Equity in income of Visual Action plc (Note 3) -- 688
------------- ---------------
Operating income 1,771 3,135
Interest expense, net 543 2,922
------------- ---------------
Income before taxes and extraordinary charge 1,228 213
Provision for taxes 491 85
------------- ---------------
Income before extraordinary charge 737 128
Extraordinary charge on early extinguishment
of debt (net of income taxes of $403)
(Note 4) -- (605)
------------- ---------------
Net income (loss) $ 737 $ (477)
============= ===============
Basic and diluted earnings (loss) per common
share:
Income before extraordinary charge $ 0.04 $ 0.01
Extraordinary charge -- (0.03)
============= ===============
Net income (loss) per common share $ 0.04 $ (0.02)
============= ===============
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
-4-
<PAGE>
<TABLE>
<CAPTION>
CARIBINER INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED
(UNAUDITED)
December 31,
1996 1997
------------- --------------
(amounts in thousands)
Cash flows from operating activities:
<S> <C> <C>
Net income (loss) $ 737 $ (477)
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 2,148 5,985
Extraordinary charge (net of tax) for
refinancing debt. -- 605
Change in assets and liabilities, net of amounts acquired:
(Increase) in trade accounts receivable (2,369) (7,463)
(Increase) in deferred charges (85) (600)
(Increase) in prepaid expenses and
other current assets (893) (4,985)
(Increase) decrease in other assets (48) 837
Decrease in trade accounts payable (69) (20,872)
Increase in deferred income 2,797 3,486
(Decrease) increase in accrued expenses and
other liabilities (1,413) 14,394
(Decrease) in taxes payable -- (3,990)
------------- --------------
Net cash provided by (used in) operating activities 805 (13,080)
------------- --------------
Cash flow used in investing activities:
Purchase of property and equipment (1,229) (9,085)
Acquisition of intangibles and businesses, net
of cash acquired (3,446) (255,906)
------------- --------------
Net cash (used) in investing activities (4,675) (264,991)
------------- --------------
Cash flow provided by financing activities:
Repayments of long-term debt (15,044) (74,800)
Net (repayments) of bank line of credit (6,000) --
Proceeds from long-term debt 23,000 358,019
Payment of debt issuance fees -- (4,499)
------------- --------------
Net cash provided by financing activities 1,956 278,720
------------- --------------
Translation effect on cash and cash equivalents 433 (133)
Net (decrease) increase in cash (1,481) 516
Cash, beginning of period 8,431 10,253
============= ==============
Cash, end of period $ 6,950 10,769
============= ==============
Supplemental disclosure of cash flow information:
Interest paid $ 345 1,090
============= ==============
Income taxes paid $ 1,632 3,990
============= ==============
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
-5-
<PAGE>
<TABLE>
<CAPTION>
CARIBINER INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED DECEMBER 31, 1997
(UNAUDITED)
(amounts in thousands)
Common Stock Total
--------------------- Additional Retained Translation Stockholders'
Shares Amount Paid in Capital Earnings Adjustment Equity
---------- --------- ----------------- ----------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1997 23,417 $234 $ 159,874 $11,315 $11 $171,434
Issuance of common stock upon acquisitions 92 1 3,877 -- -- 3,878
Issuance of common stock upon exercise of 4 * 67 -- -- 67
stock options
Translation adjustment -- -- -- -- (132) (132)
Net (loss) -- -- -- (477) -- (477)
--------- ----------- -------------- ----------- ---------- -------------
Balance at December 31, 1997 23,513 $235 $163,818 $10,838 $(121) $174,770
========= =========== ============== =========== ========== =============
</TABLE>
*Amount less than $1 thousand
See accompanying notes to the unaudited consolidated financial statements.
-6-
<PAGE>
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 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 three months ended December 31, 1997 are not
necessarily indicative of the results of operations that may be expected for
any other interim periods or for the fiscal year ending September 30, 1998.
The balance sheet at September 30, 1997 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 consolidated statement of
operations for the three months ending December 31, 1996 to conform to the
current period's presentation.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
New Accounting Pronouncements
In February, 1997, the Financial Accounting Standards Board issued Statement
No. 128, Earnings Per Share ("Statement 128"), which was required to be
adopted on December 31, 1997. At that time, the Company changed the method
used to compute earnings per share and has restated all prior periods. Under
the new requirements for calculating basic earnings per share, the dilutive
effect of stock options has been excluded.
In June 1997, the Financial Accounting Standards Boards issued SFAS No. 131,
Financial Reporting for Segments of a Business Enterprise ("Statement 131"),
which applies to all public business enterprises. Statement 131 establishes
standards for the way that public business enterprises report information
about operating segments in annual financial statements and requires that
those enterprises report selected information about operating segments in
interim financial reports issued to shareholders. Statement 131 is effective
for financial statements for periods beginning after December 15, 1997.
Management is in the process of determining the effect of Statement 131 on
its financial statement disclosures.
3. BUSINESS ACQUISITIONS
In October, 1997, the Company acquired all of the outstanding common shares
of Spectrum Data Systems, Inc. ("Spectrum Data"), an Atlanta-based provider
of audio-visual presentation systems, design and installation services, with
a customer base in the southeastern United States. Aggregate consideration
paid for the acquisition was $2.8 million in cash and the issuance of 43,628
shares of the Company's common stock having a fair market value of $1.9
million.
-7-
<PAGE>
Pursuant to an offer document dated November 1, 1997, the ("Offer
Document"), the Company extended a cash offer (the "Offer") to acquire all
of the outstanding capital shares of Visual Action Holdings plc, a United
Kingdom company ("Visual Action").
As of November 24, 1997, by means of open market purchases and shares
tendered pursuant to the Offer Document, the Company owned or had the
obligation to acquire a total of 46,680,682 shares of Visual Action (or
approximately 93.2% of the issued shares capital). Thereafter, the Company
began the process of acquiring those shares of Visual Action not tendered
pursuant to the Offer by compulsory purchases pursuant to the provisions of
the UK Companies Act of 1985. Such compulsory purchases were completed
during January 1998. Prior to the November 24, 1997, the Company acquired a
minority interest of Visual Action through open market purchases resulting
in the equity in income reflected for the period. The Company consolidated
the financial results of Visual Action as of December 1, 1997.
The total acquisition price for the shares acquired through December 31,
1997 was approximately $265.0 million, including transaction costs. In
addition, the Company assumed approximately $44.3 million in outstanding
indebtedness of Visual Action. The Company expects to incur transaction
costs of approximately $15.0 million. The acquisition was financed through
the Company's new loan agreement (see Note 4). The goodwill resulting from
the acquisition of Visual Action is being amortized over 40 years.
Visual Action provides corporate meeting services, including audio-visual
and exhibition and broadcast services in the United States and the United
Kingdom. The Company has announced that it intends to dispose of Visual
Action's broadcast services unit as soon as practicable. The assets of the
broadcast services unit which the Company intends to sell have been
reflected separately in the accompanying consolidated balance sheet at their
estimated fair market value.
In December, 1997, the Company acquired substantially all of the assets and
assumed certain of the liabilities of Consumer Access Limited ("Consumer
Access"), a business communications services provider based in Hong Kong.
Aggregate consideration of $3.8 million was paid, consisting of cash of $2.8
million and the issuance of 22,859 shares having a fair market value of
approximately $1.0 million.
The following unaudited consolidated pro forma results of operations of the
Company for the three months ended December 31, 1996 and 1997 give effect to
the acquisitions of Projexions, Blumberg, Show Solutions, WCT, Bauer and
Visual Action, and reflect the extraordinary charge resulting from the
write-off of unamortized fees relating to the Company's former bank
facilities (see Note 4), as if such transactions had occurred on October 1,
1996. The acquisitions of Spectrum Data and Consumer Access would not have a
significant effect on the Company's pro forma results of operations during
the three months ended December 31, 1997.
-8-
<PAGE>
Three Months Ended
December 31,
1996 1997
------------------------------------
(in millions, except per share data)
Revenue $136.9 $155.1
(Loss) income before taxes
and extraordinary charge (2.1) 0.7
Net (loss) (1.9) (0.2)
Pro forma basic (loss)
per share $(0.09) $(0.01)
The above calculation of pro forma net (loss) per common share assumes that
approximately 21.2 million and 23.7 million shares were outstanding during
the three months ended December 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, 1996 or of
results which may occur in any future period.
Subsequent Event
In January, 1998, the Company acquired Right Source, Inc. for an initial
consideration of $17 million in cash, plus the repayment of approximately
$2.4 million in outstanding indebtedness. In addition, Caribiner will pay
additional consideration of up to $17 million in cash and common stock in
the event that the acquired business meets certain performance goals during
the fiscal year ending September 30, 1998. Right Source, Inc., with offices
in South Carolina and Connecticut, is a marketing support and training
services company, focusing primarily on product launches for the information
technology industry.
4. DEBT
On October 28, 1997, 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 $100 million to $550 million, consisting of a
$300 million six year revolving line of credit to be used in connection with
future acquisitions and for working capital and general corporate purposes
and a $250 million six year term loan (together, "the 1997 Facilities"),
which was utilized in connection with the acquisition of Visual Action (See
-- Note 3). Amounts outstanding under the Company's former bank facilities
were repaid with the proceeds from the 1997 Facilities. The Company has
recognized an extraordinary charge of $0.6 million, net of taxes of $0.4
million, in the quarter ending December 31, 1997 resulting from the
write-off of the unamortized debt issuance fees relating to the Company's
former bank facilities. The Company incurred approximately $5.0 million of
debt issuance fees relating to the 1997 Facilities. Such fees will be
amortized over the term of the 1997 Facilities. The maturity date of each of
the 1997 Facilities is September 30, 2003. Interest on outstanding amounts
under the 1997 Facilities is payable quarterly in arrears and at the option
of the Company accrues at either (i) LIBOR plus an applicable margin or (ii)
an alternate base rate
-9-
<PAGE>
based upon 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 on the 1997 Facilities is currently LIBOR plus
1.125%. The applicable interest rates will increase by 2.0% if principal or
interest is not paid when due (after applicable grace periods). As of
February 6, 1998, the Company had approximately $381.0 million outstanding
under the 1997 Facilities. In addition, approximately $33.3 million was
outstanding under credit facilities assumed in connection with the
acquisition of Visual Action.
5. EARNINGS PER COMMON SHARE
A reconciliation of the number of shares used for the calculation of basic
and dilutive earnings per common share is as follows:
Three Months Ended
December 31,
1996 1997
-----------------------
Weighted average number of common
shares outstanding 19,201,354 23,469,368
Effect of stock options 64,564 198,526
---------- ----------
Weighted average number of common
shares outstanding, including
effect of dilutive securities 19,265,918 23,667,894
========== ==========
-10-
<PAGE>
CARIBINER INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three months Ended December 31, 1997 Compared to
Three months Ended December 31, 1996
Revenue. Revenue increased $69.8 million, or 133%, from $52.7 million in the
three months ended December 31, 1996 to $122.5 million in the three months ended
December 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 74% of the increase represented
revenue from the rental of audio visual equipment through the Company's audio
visual services division. Increases in service revenue primarily from clients in
the government, consumer products, financial services, telecommunications and
pharmaceutical industries accounted for 26% of the total revenue growth.
Gross profit. Total gross profit increased $19.7 million, or 111%, from $17.7
million in the three months ended December 31, 1996 to $37.4 million in the same
period of 1997, primarily as a result of the revenue growth described above. As
a percentage of service revenue, the gross profit margin increased from 31.4% in
the three months ended December 31, 1996 to 36.4% in the three months ended
December 31, 1997. The increased gross profit margin is due to the specific
production requirements of the contracts completed during the period. Gross
profit as a percentage of rental revenue was 25.6% for the three months ended
December 31, 1997 compared to 39.6% in the prior comparable quarter. The
decrease in the gross margin resulted primarily from a higher level of equipment
sales and installations revenue, which generates a lower gross margin, the
impact of acquired rental businesses which have historically operated at lower
gross margins, increased costs relating to the strengthening of the rental
infrastructure enabling it to handle future revenue growth and the inclusion of
Visual Action plc for the month of December, a period with fixed costs but lower
revenue due to the holidays.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $17.0 million, or 118%, from $14.4 million in
the three months ended December 31, 1996 to $31.4 million in the three months
ended December 31, 1997. The increase was due primarily to acquisitions and
costs incurred to support other revenue growth, as well as to normal
inflationary increases. Salaries and related costs increased $10.4 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, office
supplies, telephone, as well as insurance costs, and other miscellaneous
expenses, increased $5.2 million due to acquisitions and to support the revenue
growth. Direct selling expenses such as travel,
-11-
<PAGE>
marketing and other costs related to obtaining business increased $1.4 million.
Selling, general and administrative expenses, as a percentage of total revenue,
decreased from 27.3% during the three months ended December 31, 1996 to 25.6% in
the three months ended December 31, 1997 as a result of cost management controls
and leveraging the Company's existing core infrastructure.
Depreciation and amortization. Depreciation and amortization expense for the
three months ended December 31, 1997 was $3.6 million, an increase of $2.0
million as compared to $1.6 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 $0.2 million. Amortization expense increased $1.8 million resulting primarily
from goodwill arising from acquisitions.
Equity in Income of Visual Action. Prior to the November 24, 1997, the Company
acquired a minority interest of Visual Action through open market purchases
resulting in the equity in income reflected for the period. The Company
consolidated the financial results of Visual Action as of December 1, 1997.
Interest expense, net. Interest expense, net increased primarily due to higher
average borrowings to finance acquisitions and increased working capital
requirements.
Provision for taxes. Taxes are provided based on an estimated annual effective
tax rate. The provision for taxes as a percentage of income before taxes was 40%
for the three months ended December 31, 1996 and 1997.
Extraordinary Charge on Early Extinguishment of Debt. In connection with the
acquisition of Visual Action, the Company entered into a new credit facility in
October, 1997. As a result, during the three months ended December 31, 1997, the
Company wrote off approximately $0.6 million (net of taxes of $0.4 million) of
the remaining unamortized debt issuance costs related to its former bank
facilities.
Net income (loss). There was a net loss of $0.5 million in the three months
ended December 31, 1997 compared to net income of $0.7 million in the three
months ended December 31, 1996. The loss per common share for the three months
ended December 31, 1997 was $0.02 as compared with an earnings per common share
of $0.04 for the comparable period in fiscal 1996. Earnings per common share
before the extraordinary charge was $0.04 and $0.01 for the three months ended
December 31, 1996 and 1997, respectively.
-12-
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
On October 28, 1997, 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 $100 million to $550 million, consisting of a $300
million six year revolving line of credit to be used in connection with future
acquisitions and for working capital and general corporate purposes and a $250
million six year term loan ("the 1997 Facilities") to be utilized in connection
with the acquisition of Visual Action Holdings plc. Amounts outstanding under
the 1996 Facilities were repaid with the proceeds from the 1997 Facilities. The
Company has recognized an extraordinary loss of $0.6 million, net of taxes of
$0.4 million, in the quarter ending December 31, 1997 resulting from the
write-off of the unamortized debt issuance fees relating to the Company's former
bank facilities. The Company incurred approximately $5.0 million of debt
issuance fees relating to the 1997 Facilities. Such fees will be amortized over
the term of the 1997 Facilities. The maturity date of each of the 1997
Facilities is September 30, 2003. Interest on outstanding amounts under the 1997
Facilities is payable quarterly in arrears and at the option of the Company
accrues at either (i) LIBOR plus an applicable margin or (ii) an alternate base
rate based upon 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 on the 1997 Facilities is currently LIBOR plus 1.125%.
The applicable interest rates will increase by 2.0% if principal or interest is
not paid when due (after applicable grace periods). As of February 6, 1998, the
Company had approximately $381.0 million outstanding under the 1997 Facilities.
In addition, approximately $33.3 million was outstanding under credit facilities
assumed in connection with the acquisition of Visual Action.
-13-
<PAGE>
The following table sets forth certain information from the Company's
Consolidated Statement of Cash Flows for the three months ended December 31,
1996 and 1997:
Three months Ended December 31,
1996 1997
-------------------- --------------------
Net cash provided by (used in):
Operating activities $ 805 $ (13,080)
Investing activities (4,675) (264,991)
Financing activities 1,956 278,720
For the three months ended December 31, 1997, $13.1 million was used in
operating activities. The net loss adjusted for depreciation and amortization
and the extraordinary charge provided $6.1 million. The net change in working
capital used $19.2 million, with increases in accrued expenses, other
liabilities, and deferred income and a decrease in other assets which were more
than offest by decreases in trade accounts payable and taxes payable, as well as
increases in trade accounts receivable, prepaid expenses, other current assets
and deferred charges. Investing activities required $265.0 million due to
acquisition-related expenditures and property and equipment additions. Financing
activities provided $278.7 million in the three months ended December 31, 1997,
of which $358.0 million was provided by drawings under the Company's 1997
Facilities, offset by repayments on each of the 1996 Facilities and payment of
debt issuance fees.
For the three months ended December 31, 1996, $0.8 million was provided by
operating activities. The net income adjusted for depreciation and amortization
provided $2.9 million. The net change in working capital used $2.1 million, with
an increase in deferred income, which was more than offset by increases in
accounts receivable, prepaid expenses and other current assets, and a decrease
in accrued expenses and other liabilities. Investing activities required $4.7
million due to acquisition-related expenditures and property and equipment
additions. Financing activities provided $2.0 million in the three months ended
December 31, 1996, of which $23.0 million was provided by drawings under the
Company's Reducing Revolver, offset by repayments on each of the 1996
Facilities.
Capital expenditures were $1.2 million and $9.1 million during the three months
ended December 31, 1996 and 1997, respectively. During the three months ended
December 31, 1996, the purchase of additional personal computers and expanded
capabilities for the computer system accounted for the largest areas of
expenditure. During the three months ended December 31, 1997, the purchase of
audio visual equipment and the continued investment in information technology
comprised the major portion of capital expenditures.
-14-
Year 2000
The Company has determined that it will need to modify or replace some portions
of its software so that its computer systems will function properly with respect
to dates in the Year 2000 and beyond. Furthermore, certain systems are being
replaced as part of the Company's ongoing systems development projects which
will be Year 2000 compliant. The costs for Year 2000 modifications are not
expected to have a material impact on the Company's results of operations or
financial position.
<PAGE>
PART II
-------
OTHER INFORMATION
- -----------------
ITEM 2. CHANGES IN SECURITIES
---------------------
a) Not Applicable
b) Not Applicable
c) The Company issued and sold the following unregistered securities during the
three months ended December 31, 1997.
1. On October 1, 1997, the Company granted to an employee options to purchase
an aggregate of 3,000 shares of Common Stock at an exercise price per share
of $40.3125 pursuant to a stock option agreement under the Company's 1996
Stock Option Plan. Pursuant to the terms of such option agreement, one third
of such options vest and become exercisable on October 1, 1998; one third of
such options vest and become exercisable on October 1, 1999, and one third
of such options vest and become exercisable on October 1, 2000.
2. In October, 1997, the Company issued and sold an aggregate of 43,628 shares
of Common Stock to Daniel L. Knotts in connection with the purchase of all
of the outstanding capital stock of Spectrum Data Systems, Inc.
3. In October, 1997, the Company issued and sold an aggregate of 14,152 shares
of Common Stock to Walter Edward Jones in connection with the purchase of
substantially all of the assets, and the assumption of certain of the
liabilities of Executive Education Management, Inc.
4. In November, 1997, the Company issued and sold an aggregate of 10,920 shares
of Common Stock to Robert R. Koors and Charles Perry, two stockholders of BC
Communications, Inc. (formerly known as Koors Perry Associates, Inc.) (the
"Sellers") in connection with the settlement of any future obligations of
the Company to make contingent payments to the Sellers.
5. In November, 1997, the Company issued and sold an aggregate of 386 shares of
Common Stock to Lois Jacobs, an employee of the Company, in connection with
her employment compensation arrangement with the Company.
6. In December, 1997, the Company issued and sold an aggregate of 22,859 shares
of Common Stock to Access Asia Holdings Limited, Julie Anne French, Amanda
Clark, Stefanie Fischer, Chen Ross and Eunice Ku in connection with the
purchase of
-15-
<PAGE>
substantially all of the assets, and the assumption of certain of the
liabilities of Consumer Access Limited.
7. On December 15, 1997, the Company granted to an employee options to purchase
an aggregate of 2,000 shares of Common Stock at an exercise price per share
of $39.4688 pursuant to a stock option agreement under the Company's 1996
Stock Option Plan. Pursuant to the terms of such option agreement, one third
of such options vest on December 15, 1998; one third of such options vest
and become exercisable on December 15, 1999, and one third of such options
vest and become exercisable on December 15, 2000.
-16-
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(A) EXHIBITS REQUIRED BY ITEM 601 OF REGULATION S-K:
------------------------------------------------
3.1 Restated Certificate of Incorporation of the Company
filed March 15, 1996 with the Secretary of State of
the State of Delaware (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 of the Company
(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).
10.1 Credit Agreement, dated as of October 28, 1997,
among the Company, Caribiner, Inc., the several
lenders named therein and the Chase Manhattan Bank,
as Administrative Agent, and Merrill Lynch Capital
Corporation, as Syndication Agent (schedules
omitted--the Company agrees to furnish a copy of any
schedule to the Commission upon request) (filed as
Exhibit 10.10 to the Company's Annual Report on Form
10-K for the fiscal year ended September 30, 1997
and incorporated herein by reference).
27.1 Financial Data Schedule.
-17-
<PAGE>
<TABLE>
<CAPTION>
(B) REPORTS ON FORM 8-K:
--------------------
The Company filed the following report on Form 8-K during the
three months ended December 31, 1997:
Date of Filing Items Reported Subject of Report
-------------- -------------- -----------------
<S> <C> <C> <C>
December 9, 1997 2, 7 Announcing the Completion of
the Acquisition of Visual
Action Holdings plc
</TABLE>
-18-
<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: February 13, 1998 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)
-19-
<PAGE>
EXHIBIT INDEX
-------------
Page Number
-----------
3.1 Restated Certificate of Incorporation of the Company
filed March 15, 1996 with the Secretary of State of the
State of Delaware (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 of the Company (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).
10.1 Credit Agreement, dated as of October 28, 1997, among the
Company, Caribiner, Inc., the several lenders named
therein and the Chase Manhattan Bank, as Administrative
Agent, and Merrill Lynch Capital Corporation, as
Syndication Agent (schedules omitted--the Company agrees
to furnish a copy of any schedule to the Commission upon
request) (filed as Exhibit 10.10 to the Company's Annual
Report on Form 10-K for the fiscal year ended September
30, 1997 and incorporated herein by reference).
27.1 Financial Data Schedule.
-20-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1997 AND THE
CONSOLIDATED STATEMENT OF INCOME FOR THE THREE MONTHS ENDED DECEMBER 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-30-1998
<PERIOD-END> DEC-31-1997
<CASH> 10,769
<SECURITIES> 0
<RECEIVABLES> 124,428
<ALLOWANCES> 900
<INVENTORY> 0
<CURRENT-ASSETS> 189,156
<PP&E> 86,372
<DEPRECIATION> 3,631
<TOTAL-ASSETS> 696,607
<CURRENT-LIABILITIES> 124,740
<BONDS> 0
0
0
<COMMON> 235
<OTHER-SE> 174,535
<TOTAL-LIABILITY-AND-EQUITY> 696,607
<SALES> 122,449
<TOTAL-REVENUES> 122,449
<CGS> 85,009
<TOTAL-COSTS> 34,993
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,922
<INCOME-PRETAX> 213
<INCOME-TAX> 85
<INCOME-CONTINUING> 128
<DISCONTINUED> 0
<EXTRAORDINARY> 605
<CHANGES> 0
<NET-INCOME> (477)
<EPS-PRIMARY> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
