<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 JUNE 30, 1999
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 23,696,732 shares of Common Stock (par value $0.01 per share)
outstanding as of August 9, 1999.
<PAGE>
INDEX
<TABLE>
<S> <C> <C> <C>
PART I. Financial Information
Item 1. Financial Statements (Unaudited)
Review Report of Independent Accountants.................................... 2
Consolidated Balance Sheets as of
June 30, 1999 and September 30, 1998........................................ 3
Consolidated Statements of Operations for
the nine months ended June 30, 1999 and 1998................................ 4
Consolidated Statements of Operations for
the three months ended June 30, 1999 and 1998............................... 5
Consolidated Statements of Cash Flows for
the nine months ended June 30, 1999 and 1998................................ 6
Consolidated Statement of Changes in Stockholders' Equity for the
nine months ended June 30, 1999 and 1998.................................... 7
Notes to Consolidated Financial Statements.................................. 8
Item 2. Management's Discussion and Analysis of
Financial Condition and
Results of Operations....................................................... 10
PART II. Other Information
Item 1. Legal Proceedings........................................................... 14
Item 2. Changes in Securities....................................................... 14
Item 6. Exhibits and Reports on Form 8-K............................................ 14
SIGNATURES..................................................................................... 15
</TABLE>
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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 June 30, 1999, and the related consolidated statements
of operations for the three and nine months ended June 30, 1999 and 1998, the
consolidated statement of changes in stockholders' equity for the nine months
ended June 30, 1999 and 1998 and the consolidated statements of cash flows for
the nine months ended June 30, 1999 and 1998. 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 referred to above
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, 1998, 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 18, 1998, 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, 1998, 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
August 11, 1999
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Caribiner International, Inc.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30, September 30,
1999 1998
ASSETS (unaudited) (audited)
----------- -------------
(amounts in thousands)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 14,421 $ 15,117
Trade accounts receivable - net of allowance for doubtful
accounts of $3,484 and $2,150 at June 30, 1999 and
September 30, 1998, respectively 113,527 124,936
Deferred charges 14,400 12,923
Prepaid expenses and other current assets 14,038 11,610
Assets held for sale 4,900 --
---------- -----------
Total Current Assets 161,286 164,586
Property and equipment - net 108,781 98,070
Goodwill - net 410,090 419,581
Taxes receivable 13,283 4,479
Other assets 15,772 11,233
---------- -----------
TOTAL ASSETS $ 709,212 $ 697,949
========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 179 $ 1,000
Trade accounts payable 22,368 23,739
Accrued expenses and other current liabilities 32,399 42,294
Accrued production costs 16,231 25,331
Deferred income 20,609 18,093
---------- -----------
Total Current Liabilities 91,786 110,457
Long-term debt 437,192 396,240
Deferred income 8,624 8,409
Other liabilities 12,067 7,068
---------- -----------
TOTAL LIABILITIES 549,669 522,174
Stockholders' Equity:
Preferred stock, $0.01 par value:
2,000 shares authorized, none issued and outstanding at
June 30, 1999 and September 30, 1998, respectively -- --
Common stock, $0.01 par value:
40,000 voting shares authorized, 23,697 and 23,689 shares
issued and outstanding at June 30, 1999 and September 30,
1998, respectively 236 236
Additional paid-in capital 167,676 167,608
Accumulated other comprehensive income (5,808) (3,714)
Retained (deficit) earnings (2,561) 11,645
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 159,543 175,775
---------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 709,212 $ 697,949
========== ===========
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
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Caribiner International, Inc.
Consolidated Statements of Operations
For the Nine Months Ended
(unaudited)
<TABLE>
<CAPTION>
June 30,
1999 1998
---------- -----------
(amounts in thousands)
<S> <C> <C>
Service revenue $ 218,688 $ 204,853
Rental revenue 357,928 316,232
Intercompany eliminations (20,576) (8,360)
---------- -----------
Total revenue 556,040 512,725
Cost of service revenue 150,945 138,600
Cost of rental revenue 277,439 231,585
Intercompany eliminations (20,576) (8,360)
---------- -----------
Total cost of revenue 407,808 361,825
---------- -----------
Gross profit 148,232 150,900
Operating expenses:
Selling, general and administrative expenses 107,216 99,445
Loss on disposal of assets 16,500 --
Restructuring charge -- 3,828
Depreciation and amortization 20,616 15,123
---------- -----------
Total operating expenses 144,332 118,396
Equity in income of affiliated company -- 688
---------- -----------
Operating income 3,900 33,192
Interest expense, net 25,103 16,963
---------- -----------
(Loss) income before taxes and extraordinary charge (21,203) 16,229
Benefit (provision) for taxes 6,997 (6,501)
---------- -----------
(Loss) income before extraordinary charge (14,206) 9,728
Extraordinary charge on early extinguishment of
debt (net of income taxes of $403) -- 605
---------- -----------
Net (loss) income $ (14,206) $ 9,123
========== ===========
Basic and diluted (loss) earnings per common share:
(Loss) income before extraordinary charge $ (0.60) $ 0.41
Extraordinary charge -- (0.02)
---------- -----------
Net (loss) income per common share $ (0.60) $ 0.39
========== ===========
</TABLE>
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>
June 30,
1999 1998
---------- -----------
(amounts in thousands)
<S> <C> <C>
Service revenue $ 79,109 $ 85,734
Rental revenue 119,808 120,823
Intercompany eliminations (6,556) (3,659)
----------- -----------
Total revenue 192,361 202,898
Cost of service revenue 56,087 58,985
Cost of rental revenue 92,098 89,241
Intercompany eliminations (6,556) (3,659)
---------- ------------
Total cost of revenue 141,629 144,567
---------- ------------
Gross profit 50,732 58,331
Operating expenses:
Selling, general and administrative expenses 35,899 35,454
Loss on disposal of assets 16,500 --
Depreciation and amortization 6,628 6,075
---------- -----------
Total operating expenses 59,027 41,529
---------- -----------
Operating (loss) income (8,295) 16,802
Interest expense, net 8,995 7,059
---------- -----------
(Loss) income before taxes (17,290) 9,743
Benefit (provision) for taxes 5,431 (3,907)
---------- ------------
Net (loss) income $ (11,859) $ 5,836
=========== ===========
Basic and diluted (loss) earnings per common share: $ (0.50) $ 0.25
========== ===========
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
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Caribiner International, Inc.
Consolidated Statements of Cash Flows
For the Nine Months Ended
(unaudited)
<TABLE>
<CAPTION>
June 30,
1999 1998
---------- -----------
(amounts in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income $ (14,206) $ 9,123
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Depreciation and amortization 32,299 26,886
Loss on disposition of assets 16,500 --
Extraordinary charge (net of tax) for refinancing debt -- 605
Restructuring charge, net of cash payments -- 1,435
Change in assets and liabilities, net of amounts acquired:
Decrease (increase) in trade accounts receivable 5,092 (22,307)
Increase in deferred charges (3,552) (6,358)
Increase in prepaid expenses and
other current assets (5,160) (2,027)
Increase in other assets (3,440) (3,613)
Decrease in trade accounts payable (215) (7,145)
Increase in deferred income 3,137 7,422
(Decrease) increase in accrued expenses and
other liabilities (17,635) 6,103
Decrease in taxes payable (9,149) --
---------- -----------
Net cash provided by operating activities 3,671 10,124
---------- -----------
Cash flow used in investing activities:
Purchase of property and equipment (35,568) (39,960)
Net proceeds from disposition of business -- 25,637
Acquisition of intangibles and businesses, net of
cash acquired (8,128) (298,909)
---------- -----------
Net cash used in investing activities (43,696) (313,232)
---------- -----------
Cash flow provided by financing activities:
Proceeds from exercise of stock options -- 667
Repayments of long-term debt (112,828) (408,728)
Proceeds from long-term debt 153,350 725,300
Payment of debt issuance fees (1,231) (4,022)
---------- -----------
Net cash provided by financing activities 39,291 313,217
---------- -----------
Translation effect on cash and cash equivalents 38 85
Net (decrease) increase in cash (696) 10,194
Cash and cash equivalents, beginning of period 15,117 10,253
---------- -----------
Cash and cash equivalents, end of period $ 14,421 $ 20,447
========== ===========
Supplemental disclosure of cash flow information:
Interest paid $23,539 $ 14,430
========== ===========
Income taxes paid $ 1,226 $ 4,967
========== ===========
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
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Caribiner International, Inc.
Consolidated Statement of Changes in Stockholders' Equity
For the Nine Months Ended June 30, 1999 and 1998
(unaudited)
(amounts in thousands)
<TABLE>
<CAPTION>
Accumulated
Common Stock Additional Retained Other Total
----------------- Paid-in Earnings Comprehensive Stockholders'
Shares Amount Capital (Deficit) Income Equity
------ ------ ---------- --------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
For the nine months ended June 30, 1999:
Balance at September 30, 1998 23,689 $ 236 $ 167,608 $ 11,645 $(3,714) $175,775
Net loss -- -- -- (14,206) -- (14,206)
Foreign currency translation adjustment -- -- -- -- (2,094) (2,094)
--------
Other comprehensive (loss) -- -- -- -- -- (16,300)
Issuance of common stock 8 * 68 -- -- 68
------ ----- ---------- -------- ------- --------
Balance at June 30, 1999 23,697 $ 236 $ 167,676 $ (2,561) $(5,808) $159,543
====== ===== ========== ========= ======= ========
For the nine months ended June 30, 1998:
Balance at September 30, 1997 23,417 $ 234 $ 159,874 $ 11,315 $ 11 $171,434
Net income -- -- -- 9,123 -- 9,123
Foreign currency translation adjustment -- -- -- -- (507) (507)
--------
Other comprehensive income -- -- -- -- -- 8,616
Issuance of common stock 218 2 7,134 -- -- 7,136
------ ----- ---------- -------- ------- --------
Balance at June 30, 1998 23,635 $ 236 $ 167,008 $ 20,438 $ (496) $187,186
====== ===== ========== ======== ======= ========
</TABLE>
*Amount less than $1 thousand
See accompanying notes to the unaudited consolidated financial statements.
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<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 and nine months ended June 30, 1999 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,
1999.
The balance sheet at September 30, 1998 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.
As of October 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" ("Statement 130").
Statement 130 establishes new rules for the reporting and display of
comprehensive income and its components; however, the adoption of Statement
130 had no impact on the Company's net income or stockholders' equity.
Statement 130 requires foreign currency translation adjustments, which prior
to the adoption of the new accounting rule were reported separately in
stockholders' equity, to be included in other comprehensive income. Prior
year financial statements have been reclassified to conform to the
requirements of Statement 130.
Certain reclassifications have been made to the consolidated statement of
operations for the three and nine months ended June 30, 1998 and the balance
sheet at September 30, 1998 to conform to the current period's presentation.
2. Business Acquisitions/Dispositions
In fiscal 1996 and 1997, the Company acquired several companies engaged in
providing audio-visual equipment rentals, sales and related staging services
such as Total Audio Visual Services, Video Supply Company, Inc. d/b/a
Projexions Video Supply, Blumberg Communications Inc., D&D Enterprises, Inc.
d/b/a Show Solutions and Bauer Audio Visual, Inc. These acquisitions were
accounted for using the purchase method of accounting. During the fiscal
quarter ended March 31, 1999, in connection with the Company's consolidation
of hotel audio visual outsourcing operations in Chicago, and as part of the
Company's periodic review of the purchase accounting accruals, approximately
$1.7 million of liabilities established in connection with the above
acquisitions were identified as excess and reversed. Additionally,
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<PAGE>
during the fiscal quarter ended March 31, 1999, the Company recorded
additional charges approximating $1.7 million, including an increase in the
allowance for doubtful accounts, associated with consolidating the hotel
audio visual operations in Chicago.
In August, 1999, the Company will dispose of the net assets of its design
and installation business. The anticipated loss from the pending
disposition of such net assets is approximately $16.5 million. Net cash
proceeds of approximately $2.0-$3.0 million are expected upon disposition.
This transaction has been reflected in the accompanying financial
statements as of June 30, 1999.
3. Debt
On July 30, 1999, the Company obtained an amendment to the Credit
Agreement which, among other things, waived compliance with certain
financial covenants contained therein through March 30, 2000.
The Company believes it necessary to take actions to reduce its
indebtedness under the Credit Agreement by up to $100 million which, if
achieved would, based upon current forecasts, allow it to remain in
compliance with its financial covenants through the period ended June 30,
2000. In connection therewith, the Company's financial advisor, Salomon
Smith Barney, is actively assisting in assessing strategic alternatives.
Management believes that it will be able to complete such actions before
March 30, 2000; however, there can be no assurances that such actions will
be completed in such time or, if completed, provide the funds required. In
such case, the Company would seek additional amendments or waivers to
ensure compliance with the terms and conditions of the Credit Agreement.
However, there can be no assurances that such amendments or waivers would be
entered into or granted. Amounts payable under the terms of the Credit
Agreement are classified as long-term in the accompanying balance sheet.
4. Stock Option Re-Pricing
In December, 1998, the Company adopted a stock option re-pricing program
pursuant to which the Company offered all employees, excluding executive
management, the opportunity to re-price all outstanding options granted
prior thereto under the Company's 1996 Stock Option Plan, as amended. The
vesting schedule for all so re-priced stock options was restarted, with all
other terms and conditions of such stock options remaining the same. The
re-priced stock options have an exercise price equal to the average of the
high and low sales price of the common stock as of the re-pricing date.
5. Earnings Per Common Share
A reconciliation of the number of shares used for the calculation of basic
and diluted earnings per common share is as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended June 30, Nine Months Ended June 30,
1999 1998 1999 1998
------ ------ ------ ------
<S> <C> <C> <C> <C>
Weighted average number of common
shares outstanding 23,697 23,610 23,695 23,542
Effect of stock options -- 86 -- 152
------ ------ ------ ------
Weighted average number of common
shares outstanding, including
effect of dilutive securities 23,697 23,696 23,695 23,694
====== ====== ====== ======
</TABLE>
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Caribiner International, Inc.
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Certain statements contained herein may be deemed to be forward-looking
statements as defined in the Safe Harbor Provisions of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements involve known and
unknown risks and uncertainties which may cause the Company's actual results in
future periods, or plans for future periods, to differ materially from what is
currently anticipated. Those risks include, among others, general competitive
factors, the Company's ability to successfully integrate its acquisitions and to
implement operational improvements in its acquired businesses, the seasonality
and episodic nature of the Company's business and other risks and uncertainties
detailed from time to time in the Company's filings with the Securities and
Exchange Commission. Other factors and assumptions not identified above were
also involved in the derivation of these forward-looking statements, and the
failure of such other assumptions to be realized, as well as other factors, may
also cause actual results to differ materially from those projected. The Company
assumes no obligation to update these forward-looking statements to reflect
actual results, changes in assumptions or changes in other factors affecting
such forward-looking statements.
Results of Operations
Nine Months Ended June 30, 1999 Compared to Nine Months Ended June 30, 1998
Revenue. Revenue increased $43.3 million, or 8.4%, from $512.7 million in the
nine months ended June 30, 1998 to $556.0 million in the nine months ended June
30, 1999. Rental revenue increased $41.7 million, or 13.2%, (before intercompany
eliminations) primarily due to the Company's acquisition of Visual Action
Holdings, Ltd. ("Visual Action") in December, 1997. Strong organic growth in the
Company's hotel audio visual services division, increased local market
penetration from the rental services division and consistent solid results from
the staging and meeting services division contributed to the overall revenue
growth. Service revenue increased $13.8 million, or 6.8%, in the nine months
ended June 30, 1999 from $204.9 million in the nine months ended June 30, 1998
due to increased business activity in the United States and United Kingdom.
Gross profit. Total gross profit decreased $2.7 million, or 1.8%, from $150.9
million in the nine months ended June 30, 1998 to $148.2 million in the
comparable period of 1999. As a percentage of service revenue, the gross profit
margin decreased from 32.3% in the nine months ended June 30, 1998 to 31.0% in
the nine months ended June 30, 1999. The decreased gross profit margin was due
to the specific production requirements of the contracts completed during the
period, as well as to the impact of lower margins achieved on the increased
sales volume in 1999 from the United Kingdom market. Gross profit as a
percentage of rental revenue decreased to 22.5% in the nine months ended June
30, 1999 from 26.8% in the prior year's comparable period due to commission
rate increases, as well as increased costs relating to the rental of audio
visual equipment used in operations. Gross profit on rental revenue for the nine
months ended June 30, 1998 and 1999 was reduced by $11.8 million and $11.7
million, respectively, of depreciation expense related to rental equipment used
in the audio visual services businesses. Such depreciation expense is included
in cost of rental revenue.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $7.8 million, or 7.8%, from $99.4 million in
the nine months ended June 30, 1998 to $107.2 million in the nine months ended
June 30, 1999. The increase was due primarily to the Company's growth from
acquisitions, as well as to normal inflationary increases and expenses relating
to the restructuring of the audio visual services businesses. During the fiscal
quarter ended March 31, 1999, the Company recorded additional charges
approximating $1.7 million, including an increase in the allowance for doubtful
accounts, associated with the Company's consolidation of the hotel audio visual
outsourcing operations in Chicago. In addition, in connection with such
consolidation, and as part of the Company's periodic review of the purchase
accounting accruals, approximately $1.7 million of aggregate liabilities
established in connection with certain acquisitions completed in fiscal 1996 and
1997 were identified as excess and reversed. Selling, general and administrative
expenses, as a percentage of total revenue, was approximately 19.0% during the
nine months ended June 30, 1999 and 1998.
Loss on disposition of assets. The Company recorded a provision of $16.5 million
to reflect an anticipated loss from the pending disposition of its design and
installation business headquartered in Atlanta. Net cash proceeds of
approximately $2.0-$3.0 million are expected upon disposition. This transaction
has been reflected in the accompanying financial statements as of June 30, 1999.
Restructuring Charge. During the nine months ended June 30, 1998, the Company
recorded a pre-tax restructuring charge of
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$3.8 million in connection with the integration of various acquisitions,
primarily in the audio visual services businesses. The charge included $2.8
million related to employee termination and severance costs associated with a
reduction in the workforce, and $1.0 million related to lease termination costs
and the write off of leasehold improvements of vacated facilities.
Depreciation and amortization. Depreciation and amortization expense for the
nine months ended June 30, 1999 was $20.6 million, an increase of $5.5 million
from 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 $3.8 million. Amortization expense
increased $1.7 million resulting primarily from increased goodwill.
Equity in Income of Affiliated Company. In November, 1997, the Company acquired
a minority interest in Visual Action through open market purchases resulting in
the equity in income reflected for the nine months ended June 30, 1998. The
Company began consolidating the financial results of Visual Action as of
December 1, 1997.
Interest expense, net. Interest expense, net increased by $8.1 million due to
higher average outstanding indebtedness as well as higher borrowing costs.
Provision for taxes. Taxes reflect an allocation based on the full year
anticipated effective tax rate. The provision for taxes as a percentage of
income before taxes was 33.0% and 40.0% for the nine months ended June 30, 1999
and 1998, respectively. Excluding the effect of the loss on the disposition of
assets described above, the effective tax rate would have been 40.0% for the
nine months ended June 30, 1999.
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 nine months ended June 30, 1998, 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 (loss) income. The Company realized a net loss of $14.2 million in the nine
months ended June 30, 1999 compared to net income of $9.1 million in the nine
months ended June 30, 1998. The basic and diluted loss per common share for the
nine months ended June 30, 1999 was $0.60 as compared with earnings per common
share of $0.39 for the comparable period in fiscal 1998. The net loss for the
nine months ended June 30, 1999 excluding the effect of the loss on the
disposition of assets would have been $2.8 million, or a net loss per share of
$0.12. Included in the loss from operations is a net loss of $1.7 million
($0.07 loss per share) for the nine months ended June 30, 1999 from the
Company's design and installation business. Earnings per common share before
the extraordinary charge would have been 0.41 for the nine months ended
June 30, 1998.
Three Months Ended June 30, 1999 Compared to Three Months Ended June 30, 1998
Revenue. Revenue decreased $10.5 million, or 5.2%, from $202.9 million in the
three months ended June 30, 1998 to $192.4 million in the three months ended
June 30, 1999. Service revenue from the Company's communications division
decreased approximately $6.6 million (before intercompany eliminations), or
7.7%, principally in the United Kingdom. Rental revenue of $119.8 million for
the three months ended June 30, 1999 was $1.0 million (before intercompany
eliminations) less than the rental revenue reported for the three months ended
June 30, 1998.
Gross profit. Total gross profit decreased from $58.3 million in the three
months ended June 30, 1998 to $50.7 million in the three months ended June 30,
1999. As a percentage of service revenue, the gross profit margin decreased from
31.2% in the three months ended June 30, 1998 to 29.1% in the three months ended
June 30, 1999, due to the specific production requirements of the contracts
completed during the period. Gross profit as a percentage of rental revenue
decreased to 23.1% for the three months ended June 30, 1999 from 26.1% reported
for the prior year's comparable quarter. The decrease in the gross margin of the
audio visual services group is attributable to commission rate increases.
Increases in audio visual equipment rental costs also impacted the gross margin.
Gross profit on rental revenue for the three months ended June 30, 1998 and 1999
was reduced by $3.9 million and $4.3 million, respectively, of depreciation
expense related to rental equipment used in the audio visual services
businesses. Such depreciation expense is included in cost of rental revenue.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $0.4 million, or 1.3%, from $35.5 million in
the three months ended June 30, 1998 to $35.9 million in the three months ended
June 30, 1999. The increase was due primarily to normal inflationary increases
and expenses relating to the restructuring of the audio visual businesses.
Selling, general and administrative expenses, as a percentage of total revenue,
increased from 17.5% during the three months ended June 30, 1998 to 18.7% in the
three months ended June 30, 1999.
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<PAGE>
Depreciation and amortization. Depreciation and amortization expense for the
three months ended June 30, 1999 was $6.6 million, an increase of $0.6 million
from the corresponding period in the prior year. The impact of owning property
and equipment acquired through acquisitions for the whole period and the
continued investment in information technology resulted in increased
depreciation expense of $0.5 million. Amortization expense increased $0.1
million resulting primarily from increased goodwill.
Interest expense, net. Interest expense, net increased by $1.9 million due to
higher average outstanding indebtedness as well as higher borrowing costs.
Provision for taxes. Taxes reflect an allocation based on the full year
anticipated effective tax rate. The provision for taxes as a percentage of
income before taxes was 31.4% and 40.0% for the three months ended June 30, 1999
and 1998, respectively. Excluding the effect of the loss on the disposition of
assets described above, the effective tax rate would have been 40.0% for the
three months ended June 30, 1999.
Net (loss) income. The Company incurred a net loss of $11.9 million, or a $0.50
loss per share, in the three months ended June 30, 1999 compared to net income
of $5.8 million in the three months ended June 30, 1998, or $0.25 income per
share. The Company realized a net loss from operations of $0.5 million, equal to
a loss of $0.02 per share. Included in the loss from operations is a net loss
for the quarter of $540,000 ($0.02 loss per share) from the Company's design and
installation business. The disposition of the Company's design and installation
business increased the total reported net loss for the quarter by $11.4 million
(equal to $0.48 loss per share) to $11.9 million (equal to $0.50 loss per
share.)
Liquidity and Capital Resources
On October 28, 1997, the Company entered into a 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 (the "Revolving Facility") to be utilized in
connection with future acquisitions and for working capital and general
corporate purposes and a $250 million permanently reducing six year term loan
(the "Term Facility" and together with the Revolving Facility, the "Credit
Agreement") which was fully utilized in connection with the acquisition of
Visual Action. The Company recognized an extraordinary loss of $0.6 million, net
of taxes of $0.4 million, in the quarter ended December 31, 1997 resulting from
the write-off of the unamortized debt issuance fees relating to the Company's
former bank facilities.
In May, 1998, the Company repaid approximately $26 million under the Term
Facility thereby permanently reducing availability thereunder by such amount. In
December, 1998, the terms of the Revolving Facility were amended to reduce the
aggregate availability thereunder from $300 million to $250 million, to amend
certain financial covenants contained therein and to increase the interest rate
on amounts outstanding under the Credit Agreement. As of August 10, 1999, the
Company had approximately $430.3 million outstanding under the Credit
Agreement, of which $223.1 million is outstanding under the Revolving Facility.
Cash on hand as of such date was $6.7 million.
On July 30, 1999, the Company obtained an amendment to the Credit Agreement
which, among other things, waived compliance with certain financial covenants
contained therein through March 30, 2000.
The Company believes it necessary to take actions to reduce its indebtedness
under the Credit Agreement by up to $100 million which, if achieved would,
based upon current forecasts, allow it to remain in compliance with its
financial covenants through the period ended June 30, 2000. In connection
therewith, the Company's financial advisor, Salomon Smith Barney, is actively
assisting in assessing strategic alternatives. Management believes that it will
be able to complete such actions before March 30, 2000; however, there can be
no assurances that such actions will be completed in such time or, if
completed, provide the funds required. In such case, the Company would seek
additional amendments or waivers to ensure compliance with the terms and
conditions of the Credit Agreement. However, there can be no assurances that
such amendments or waivers would be entered into or granted. Amounts payable
under the terms of the Credit Agreement are classified as long-term in the
accompanying balance sheet.
The maturity date of each of the Term Facility and the Revolving Facility is
September 30, 2003. Interest on outstanding amounts under the Credit Agreement
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 Credit Agreement is presently LIBOR plus 3.25%.
Principal on the Term Facility is payable in quarterly installments beginning on
December 31, 1998 with the final scheduled payment due on September 30, 2003.
Subject to reductions in such quarterly installments for prepayments made under
the Term Facility, at present, the Company will be required to repay an
aggregate of: (i) $22.4 million in fiscal 1999 (of which approximately $16.8
million has been repaid through June 30, 1999), (ii) $33.6 million in fiscal
2000, (iii) $44.8 million in fiscal 2001, (iv) $56 million in fiscal 2002 and
(v) $67.8 million in fiscal 2003. The Company is permitted and intends to draw
on the Revolving Facility to make certain of the above payments.
The Credit Agreement is secured by substantially all of the assets of the
Company and its subsidiaries, and the Company and its subsidiaries have pledged
the stock of their respective subsidiaries for the ratable benefit of its
lending banks. The Credit Agreement contains certain financial and other
covenants and restrictions, including without limitation restrictions on the
ability of the Company to pay dividends.
-12-
<PAGE>
The following table sets forth certain information from the Company's
Consolidated Statement of Cash Flows for the nine months ended June 30, 1999 and
1998 (amounts in thousands):
Nine months Ended June 30,
--------------------------
1999 1998
-------- ---------
Net cash provided by (used in):
Operating activities $ 3,671 $ 10,124
Investing activities (43,696) (313,232)
Financing activities 39,291 313,217
For the nine months ended June 30, 1999, $3.7 million was provided by operating
activities. The net loss adjusted for depreciation and amortization and the loss
on disposition of assets provided $34.6 million. The net change in working
capital used $30.9 million, with decreases in accrued expenses and other
liabilities and increases in deferred charges, prepaid expenses and other
assets, offset by decreases in accounts receivable and increases in deferred
income. Cash used in investing activities was $43.7 million due to property and
equipment purchases and acquisition-related expenditures. Financing activities
provided $39.3 million, of which $112.8 million was drawn under the Company's
Credit Agreement, offset by debt repayments of $153.4 million. In addition, debt
issuance fees of $1.2 million were paid in connection with the amendments made
to the Credit Agreement in December, 1998.
For the nine months ended June 30, 1998, $10.1 million was provided by operating
activities. The net income adjusted for depreciation and amortization and the
extraordinary and restructuring charges provided $38.0 million. The net change
in working capital used $27.9 million, with an increase in deferred income and
accrued expenses and other liabilities, which was more than offset by increases
in accounts receivable, deferred charges, prepaid expenses and other assets, and
a decrease in trade accounts payable. Investing activities required $313.2
million due to acquisition-related expenditures and property and equipment
additions, partially offset by the net proceeds of the disposition of the
broadcast video services business of Visual Action. Financing activities
provided $313.2 million in the nine months ended June 30, 1998, of which $721.3
million was provided by drawings, net of deferred financing fees, under the
Company's existing credit facilities, offset by repayments of $408.7 million. In
addition, the Company received $0.7 million from the exercise of employee stock
options.
Capital expenditures were $35.6 million and $40.0 million during the nine months
ended June 30, 1999 and 1998, respectively. During the nine months ended June
30, 1998, the majority of the capital expenditures related to the purchase of
audio visual equipment needed to support the Company's expanded audio visual
businesses, as well as the continued investment in information technology.
During the nine months ended June 30, 1999, the purchase of audio visual
equipment used in operations comprised the major portion of capital
expenditures.
YEAR 2000 COMPLIANCE
The Year 2000 Issue is the result of computer software and hardware, as well as
chips and processors embedded in various products ("Computer Applications"),
using two digits rather than four digits to define the applicable year.
Consequently, these Computer Applications may not be able to properly recognize
dates beginning with the year 2000 which could result in miscalculations or
system failures.
The Company's Computer Applications consist of both internal systems and systems
provided by third parties. The Company is in the process of examining and
testing its Computer Applications. Based on internal assessments completed to
date and upon third party representations, the Company believes that its
exposure to Year 2000 problems is not significant.
The Company has identified non-compliant systems in certain business units.
However, notwithstanding the Year 2000 Issue, the Company had planned to replace
those systems. The Company plans to achieve Year 2000 compliance across all
business lines by September 30, 1999 and is in the process of developing a
contingency plan in the event that it is not able to convert the non-compliant
systems in a timely manner. Such plan includes processing the affected
businesses temporarily on other existing Year 2000 compliant systems.
Although the Company believes that it will be able to resolve the Year 2000
Issue, there can be no assurance that the Company will identify all susceptible
systems or that systems provided by third parties will be Year 2000 compliant or
that any resulting Year 2000 Issues would not have an adverse effect on the
results of operations of the Company.
The Company has not incurred any significant costs to date that are specifically
attributable to resolving the Year 2000 Issue and does not estimate the future
costs related to the resolution of this matter to be material.
-13-
<PAGE>
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On March 25, 1999, a purported shareholder class action lawsuit was filed in the
United States District Court for the Southern District of New York against the
Company and certain of its current and former officers and one of its directors.
The Complaint claims that defendants misrepresented the Company's ability to
integrate various companies it was acquiring and alleges violations of Sections
10(b) and 20(a) of the Securities Exchange Act of 1934 and various rules
promulgated thereunder. Plaintiffs seek unspecified money damages, plus costs
and expenses, including attorneys' fees and expert fees. The Company believes it
has meritorious defenses to this action and intends to defend the lawsuit
vigorously.
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 June 30, 1999:
1. In April, 1999, the Company issued to Bryan D. Langton, a Director of the
Company, 1,515 shares of Common Stock at a price per share of $7.40625
pursuant to the Company's Non-Employee Directors' Stock Plan (the "Plan").
Pursuant to the Plan, the number of shares of Common Stock issued was
determined by dividing $12,500 by $8.25 (the average of the high and low
sales price per share of the Common Stock on the anniversary date of Mr.
Langton's appointment to the Board of Directors (April 11, 1996)).
2. In May, 1999, the Company granted to two employees options to purchase
an aggregate of 85,000 shares of Common Stock at an exercise price per
share of $6.65625 pursuant to stock option agreements under the
Company's 1996 Stock Option Plan, as amended. Pursuant to the terms of
such option agreements, one third of such options vest and become
exercisable on May 3, 2000, one third of such options vest and become
exercisable on May 3, 2001; and one third of such options vest and
become exercisable on May 3, 2002.
There were no underwriters employed in connection with the transactions set
forth above.
The transactions described above were effected in reliance upon an
exemption from the registration requirements of the Securities Act of
1933, as amended, on the basis that such transactions did not involve any
public offering. The recipients of securities in such transactions
represented their intention to acquire the securities for investment only
and not with a view to sell or offer for sale the securities in connection
with any distribution thereof and appropriate legends were affixed to the
securities issued in such transactions.
(d) Not applicable.
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 Certificate of Amendment to the Restated Certificate of
Incorporation of the Company, filed March 30, 1998, with the
Secretary of State of the State of Delaware (filed as Exhibit 3.2
to the Company's Quarterly Report on Form 10-Q for the three
months ended March 31, 1998 and incorporated herein by
reference).
3.3 Third Amended and Restated By-Laws of the Company, (filed as
Exhibit 3.3 to the Company's Quarterly
-14-
<PAGE>
Report on Form 10-Q for the three months ended December 31, 1998
and incorporated herein by reference).
10.1 Third Amendment and Waiver, dated as of July 30, 1999, to the
Credit Agreement among the Company, Caribiner, Inc., the several
lenders named therein, The Chase Manhattan Bank, as
Administrative Agent, and Merrill Lynch Capital Corporation, as
Syndication Agent.
27.1 Financial Data Schedule.
(b) Reports on Form 8-K:
None.
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: August 12, 1999
By: /s/ Robert F. Burlinson
---------------------------------------
Robert F. Burlinson
Duly authorized officer of the Registrant
and Executive Vice President and Chief
Financial Officer (Principal Financial
and Accounting Officer)
-15-
<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 Certificate of Amendment to the Restated
Certificate of Incorporation of the Company, filed
March 30, 1998, with the Secretary of State of the
State of Delaware (filed as Exhibit 3.2 to the
Company's Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 1998 and
incorporated herein by reference).
3.3 Third Amended and Restated By-Laws of the Company,
(filed as Exhibit 3.3 to the Company's Quarterly
Report on Form 10-Q for the three months ended
December 31, 1998 and incorporated herein by
reference).
10.1 Third Amendment and Waiver, dated as of July 30,
1999, to the Credit Agreement among the Company,
Caribiner, Inc., the several lenders named
therein, The Chase Manhattan Bank, as
Administrative Agent, and Merrill Lynch Capital
Corporation, as Syndication Agent.
27.1 Financial Data Schedule.
-16-
<PAGE>
THIRD AMENDMENT AND WAIVER, dated as of July 30, 1999 (this "Amendment") to
the Credit Agreement dated as of October 28, 1997 (as heretofore amended,
supplemented or otherwise modified, the "Credit Agreement"), among CARIBINER
INTERNATIONAL, INC., a Delaware corporation (the "Parent"), CARIBINER, INC., a
New York corporation (the "Company"; together with the Parent, the "Borrowers"),
the several banks and other financial institutions from time to time parties
thereto (the "Lenders"), THE CHASE MANHATTAN BANK, as Administrative Agent for
the Lenders (in such capacity, the "Administrative Agent") and MERRILL LYNCH
CAPITAL CORPORATION, as Syndication Agent (in such capacity, the "Syndication
Agent"; collectively with the Administrative Agent, the "Agents").
W I T N E S S E T H :
WHEREAS, the Borrowers, the Lenders and the Agents are parties to the
Credit Agreement, pursuant to which the Lenders have agreed to make, and have
made, certain loans and other extensions of credit to the Borrowers on the terms
and subject to the conditions thereof; and
WHEREAS, the Borrowers have requested that certain provisions of the Credit
Agreement be amended and waived; and
WHEREAS, the Lenders are willing to agree to such requested amendments and
waivers on the terms and conditions provided for in this Amendment.
NOW THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the
Borrowers, the Lenders and the Administrative Agent hereby agree as follows:
SECTION 1. DEFINITIONS.
Capitalized terms used herein and not otherwise defined shall have their
respective meanings set forth in the Credit Agreement.
SECTION 2. AMENDMENTS.
2.1 Amendment to Section 1.01 of the Credit Agreement. (a) Section 1.01 of
the Credit Agreement is hereby amended by deleting the proviso to the definition
of the term "Applicable Margin".
<PAGE>
(b) Section 1.01 of the Credit Agreement is hereby further amended by
adding the following new definitions in their proper alphabetical order:
"`Consolidated Unadjusted EBITDA': means, for any period, the sum of (a)
Consolidated Net Income for such period (excluding, to the extent included
in such Consolidated Net Income, (i) any non-cash income or expense other
than the items covered in (b), (c) or (d) below and (ii) any gains or
losses from sales, exchange and other dispositions of property not in the
ordinary course of business), plus to the extent deducted in determining
such Consolidated Net Income (b) income taxes accrued during such period,
(c) depreciation and amortization for such period, (d) interest accrued in
such period, as computed on the accrual method in accordance with GAAP and
(e) any other non-cash charges."
"`Financial Consultant': means a nationally recognized firm or individual
specializing in providing financial consulting and advisory services to
overleveraged and/or underperforming corporations that is reasonably
satisfactory to the Administrative Agent."
2.2 Amendments to Section 2.06. (a) Section 2.06 of the Credit Agreement is
hereby amended by deleting paragraph (h) of said Section in its entirety and
substituting therefor the following new paragraph (h):
"(h) If any Indebtedness (other than Indebtedness permitted by paragraphs
(a) through (h) of Section 7.02) shall be incurred by the Parent or any of
its Subsidiaries, an amount equal to 100% of the Net Cash Proceeds thereof
shall be applied on the date of such issuance or incurrence, first, to the
prepayment of the Term Loans and, second, to reduce permanently the
Revolving Credit Commitments, in each case as provided in Sections
2.06(l)."
(b) Section 2.06 of the Credit Agreement is hereby further amended by
deleting paragraph (i) of said Section in its entirety and substituting therefor
the following new paragraph (i):
"(i) If on any date the Parent or any of its Subsidiaries receives Net Cash
Proceeds from any Asset Sale, other Disposition or Recovery Event, then the
Borrowers shall on such date apply an amount equal to 100% of such Net Cash
Proceeds first, to the prepayment of the Term Loans and, second, to reduce
permanently the Revolving Credit Commitments, in each case as provided in
Section 2.06(l)."
(c) Section 2.06 of the Credit Agreement is hereby further amended by
deleting paragraph (l) of said Section in its entirety and substituting therefor
the following new paragraph (l):
2
<PAGE>
"(l) Prepayments of the Term Loans shall be applied to the installments
thereof in inverse order of maturity. Any reduction of the Revolving Credit
Commitments pursuant to Sections 2.06(h) or (i) shall be accompanied by
prepayment of the Revolving Credit Loans and/or Swing Line Loans to the
extent, if any, that the aggregate Revolving Credit Exposure of all Lenders
exceeds the aggregate Revolving Credit Commitments of all Lenders as so
reduced, provided that if the aggregate principal amount of Revolving
Credit Loans and Swing Line Loans then outstanding is less than the amount
of such excess (because L/C Obligations constitute a portion thereof), the
Borrower shall, to the extent of the balance of such excess, apply such
balance first, to the payment of L/C Obligations that are comprised of
unreimbursed drawings under Letters of Credit and second, to the cash
collateralization of L/C Obligations comprised of outstanding and undrawn
Letters of Credit by depositing an amount in cash equal to the face amount
of such outstanding and undrawn Letters of Credit in a cash collateral
account established with the Administrative Agent for the benefit of the
Issuing Bank and the Lenders on terms and conditions satisfactory to the
Administrative Agent.".
2.3 Amendments to Section 6.01 of the Credit Agreement. (a) Section 6.01 of
the Credit Agreement is hereby amended by deleting the phrase "within 120" from
paragraph (a) of said Section and substituting therefor the following:
"no later than the earlier to occur of (i) 5 Business Days after Ernst &
Young LLP or another independent public accountant of recognized national
standing gives its approval of Parent's audited consolidated balance sheet
and related statements of operations, stockholders' equity and cash flows
for the fiscal year of the Parent and (ii) 90".
(b) Section 6.01 of the Credit Agreement is hereby further amended by
deleting the number "50" from paragraph (b) of said Section and substituting
therefor the number "45".
(c) Section 6.01 of the Credit Agreement is hereby further amended by (i)
renumbering paragraphs "(c)" through "(h)" of said Section as paragraphs "(d)"
through "(i)" and (ii) adding the following new paragraph (c) after paragraph
(b) of said Section:
"(c) as soon as available, but in any event within 40 days after the end of
each month, commencing with June, 1999, the unaudited, consolidated
summaries of operations and cash flows of the Company and its consolidated
Subsidiaries for such month and the then elapsed portion of the fiscal
year, in form and substance satisfactory to the Administrative Agent,
certified by the Chief Financial Officer of the Company as presenting
fairly the consolidated summaries of operations and cash flow of the
Company and its consolidated Subsidiaries for such
3
<PAGE>
month in accordance with the Company's normal internal management reporting
practices, subject to quarter-end and year-end adjustment;".
(d) Section 6.01 of the Credit Agreement is hereby further amended by (i)
deleting the reference to "Sections 7.01(a) and (b)" contained in (renumbered)
paragraph (e) of said Section and substituting therefor a reference to "Sections
7.01(a), (b), (c) and (d)" and (ii) inserting the phrase "and Consolidated
Unadjusted EBITDA" after the words "EBITDA" in said paragraph (e).
(e) Section 6.01 of the Credit Agreement is hereby further amended by (i)
deleting the word "and" at the end of (renumbered) paragraph (h) of said
Section, (ii) deleting the period at the end of (renumbered) paragraph (i) of
said Section and substituting therefor"; and", and (iii) adding the following
new paragraph (j) to the end of said Section:
"(j) within 10 days following the end of each month beginning with month
ended July 30, 1999, a report of the Borrowers' investment banker setting
forth the status of the Asset Sale program of the Parent and its
Subsidiaries (as described to the Lenders at the July 8, 1999 Lender
meeting) as at the end of such month and comparing the then current
timetable for such program with the timetable described at the July 8, 1999
Lender meeting (it being understood that such report shall be subject to
the confidentiality provisions of Section 10.16 of the Credit Agreement)."
2.5 Amendments to Article VI of the Credit Agreement. Article VI of the
Credit Agreement is hereby amended by adding the following new Section 6.15 to
said Article:
"SECTION 6.15. Financial Consultant. Unless the Borrowers shall have
obtained by December 31, 1999, the consent of the Majority Lenders,
pursuant to Section 7.06 of the Credit Agreement, to one or more Asset
Sales that are the subject of definitive agreements executed by the parties
thereto, which Asset Sale is (or Asset Sales are) reasonably estimated by
the Borrowers' investment banker to result in aggregate Net Cash Proceeds
of not less than $200,000,000, the Borrower shall retain a Financial
Consultant by January 14, 2000."
2.6 Amendments to Section 7.01 of the Credit Agreement. Section 7.01 of the
Credit Agreement is hereby amended by adding after paragraph (b) of said Section
the following new paragraphs (c) and (d):
"(c) Consolidated Unadjusted EBITDA. Permit Consolidated Unadjusted EBITDA
for any period of four consecutive fiscal quarters ending on any date set
forth below to be less than the amount set forth opposite such date:
4
<PAGE>
Period End Date Amount
--------------- -----------
6/30/99 $50,000,000
9/30/99 $60,000,000
12/31/99 $60,000,000"
(d) Capital Expenditures. Permit Capital Expenditures for any period set
forth below to exceed the amount set forth opposite such period:
Period Amount
---------------- -----------
7/1/99-9/30/99 $10,000,000
10/1/99-12/31/99 $10,000,000"
2.7 Amendments to Section 8 of the Credit Agreement. Section 8 of the
Credit Agreement is hereby amended by (i) inserting "6.15," after the reference
to "6.14," in paragraph (c) of said Section and (ii) adding the following phrase
to the end of paragraph (c) of said Section: "the Borrowers shall default in the
observance or performance of any agreement contained in Section 6.01 of this
Agreement and such default shall continue unremedied for a period of five (5)
Business Days; or".
2.7 Amendments to Section 8 of the Credit Agreement. Annex A to the Credit
Agreement is hereby amended by deleting said Annex A in its entirety and
substituting therefor the "Annex A" attached hereto as Exhibit 1.
SECTION 4. WAIVER.
The Lenders hereby waive until March 30, 2000, any Default or Event of
Default under Section 8(c) of the Credit Agreement resulting from the Borrowers'
failure to maintain the Consolidated Leverage Ratio required by Section 7.01(a)
of the Credit Agreement or the ratio of Consolidated EBITDA less Capital
Expenditures to Consolidated Cash Interest Expense required by Section 7.01(b)
of the Credit Agreement, in each case for the periods of four fiscal quarters
ending June 30, 1999, September 30, 1999 and December 31, 1999.
SECTION 5. MISCELLANEOUS.
5.1. Representations and Warranties; No Default. After giving effect to
this Amendment, the Borrowers hereby represent and warrant that all
representations and warranties contained in the Credit Agreement are true and
correct in all material respects as of the date hereof (unless stated to relate
to a specific earlier date, in which case, such representations and warranties
shall be true and correct in all material respects as of such
5
<PAGE>
earlier date) and that no Default or Event of Default shall have occurred and be
continuing or would result from the execution and delivery of this Amendment.
5.2. Conditions to Effectiveness of this Amendment. This Amendment shall be
effective as of the date first set forth above upon the satisfaction of the
following conditions:
(a) receipt by the Administrative Agent of counterparts hereof duly
executed and delivered by the Borrowers and Majority Lenders and consented to by
the Loan Parties (other than the Borrowers);
(b) the payment by the Borrowers to the Administrative Agent, for the
benefit of each Lender delivering its duly executed counterpart hereof on or
prior to July 28, 1999, of a fee equal to .25% of the aggregate principal amount
of the Revolving Credit Commitment and outstanding Term Loans of such Lender;
and
(c) the payment by the Borrowers of the costs and expenses of the
Administrative Agent owing under Section 10.05 of the Credit Agreement and for
which invoices have been submitted.
5.3. Limited Effect. Except as expressly amended by this Amendment, the
Credit Agreement is and shall continue to be in full force and effect in
accordance with its terms, and this Amendment shall not constitute the Lenders'
consent or indicate their willingness to consent to any other amendment,
modification or waiver of the Credit Agreement or the other Loan Documents.
5.4 Counterparts. This Amendment may be executed by the parties hereto on
one or more counterparts, and all of such counterparts shall be deemed to
constitute one and the same instrument. This Amendment may be delivered by
facsimile transmission of the relevant signature pages hereof.
5.5 GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
[remainder of page intentionally left blank]
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed and delivered by their respective duly authorized officers as of the
date first above written.
CARIBINER INTERNATIONAL, INC.
By: /s/ Robert F. Burlinson
-------------------------------------
Name: Robert F. Burlinson
Title: Executive Vice President and
Chief Financial Officer
CARIBINER, INC.
By: /s/ Robert F. Burlinson
-------------------------------------
Name: Robert F. Burlinson
Title: Executive Vice President and
Chief Financial Officer
7
<PAGE>
THE CHASE MANHATTAN BANK, individually
and as Administrative Agent
By: /s/ Wendy Weinsier
-------------------------------------
Name: Wendy Weinsier
Title: Vice President
MERRILL LYNCH CAPITAL CORPORATION,
individually and as Syndication Agent
By: /s/ Christopher Birosak
-------------------------------------
Name: Christopher Birosak
Title:
BANKBOSTON, N.A.
By: /s/ Peter Haley
-------------------------------------
Name: Peter Haley
Title: Vice President
BANKERS TRUST COMPANY
By: /s/ G. Andrew Keith
-------------------------------------
Name: G. Andrew Keith
Title: Vice President
8
<PAGE>
BANK OF AMERICA ILLINOIS
By:
-------------------------------------
Name:
Title:
BANK OF AMERICA, N.A.
By: /s/ Heidi-Anne Sandquist
-------------------------------------
Name: Heidi-Anne Sandquist
Title: Vice President
BANK OF HAWAII
By: /s/ Donna Parker
-------------------------------------
Name: Donna Parker
Title: Vice President
THE BANK OF NEW YORK
By: /s/ John R. Ciulla
-------------------------------------
Name: John R. Ciulla
Title: Vice President
THE BANK OF NOVA SCOTIA
By: /s/ Stephen Lockhart
-------------------------------------
Name: Stephen Lockhart
Title: Senior Relationship Manager
9
<PAGE>
BANK POLSKA KASA OPIEKI S.A.
PEKAO S.A. GROUP, NEW YORK BRANCH
By: /s/ Barry W. Henry
-------------------------------------
Name: Barry W. Henry
Title: Vice President
CREDIT AGRICOLE INDOSUEZ
By: /s/ Rene LeBlanc /s/ Sarah McClintock
-------------------------------------
Name: Rene LeBlanc Sarah McClintock
Title: Vice President Vice President
CWC DEBT INVESTORS, LLC
By: Farallon Capital Management, L.L.C.,
its manager
By:
-------------------------------------
Name:
Title:
FERNWOOD ASSOCIATES, L.P.
By: /s/ David B. Forer
-------------------------------------
Name: David B. Forer
Title: General Partner
10
<PAGE>
FIRST UNION NATIONAL BANK
By: /s/ Mark B. Folke
-------------------------------------
Name: Mark B. Folke
Title: Senior Vice President
FIR TREE INSTITUTIONAL VALUE FUND
By: /s/ Jeffrey Tannenbaum
-------------------------------------
Name: Jeffrey Tannenbaum
Title: President
FIR TREE VALUE PARTNERS, LLC
By: /s/ Jeffrey Tannenbaum
-------------------------------------
Name: Jeffrey Tannenbaum
Title: President
FIR TREE VALUE FUND
By: /s/ Jeffrey Tannenbaum
-------------------------------------
Name: Jeffrey Tannenbaum
Title: President
FLEET BANK, N.A.
By: /s/ Andrew J. Maidman
-------------------------------------
Name: Andrew J. Maidman
Title: Vice President
11
<PAGE>
PNC BANK, NATIONAL ASSOCIATION
By: /s/ Michael Richards
-------------------------------------
Name: Michael Richards
Title: Vice President
CHASE SECURITIES INC.,
as Agent for The Chase Manhattan Bank
By: /s/ Howard J. Golden
-------------------------------------
Name: Howard J. Golden
Title: Authorized Signatory
SUMMIT BANK
By:
-------------------------------------
Name:
Title:
VAN KAMPEN PRIME RATE INCOME TRUST
By: Van Kampen Investment Advisory Corp.
By: /s/ Lisa M. Mincheski
-------------------------------------
Name: Lisa M. Mincheski
Title: Vice President
12
<PAGE>
VAN KAMPEN SENIOR INCOME TRUST
By: /s/ Lisa M. Mincheski
-------------------------------------
Name: Lisa M. Mincheski
Title: Vice President
13
<PAGE>
Each of the undersigned hereby consents to the foregoing Third Amendment
and Waiver and hereby confirms, reaffirms and restates that its obligations
under or in respect of the Credit Agreement and the documents related thereto to
which it is a party are and shall remain in full force and effect after giving
effect to the foregoing Third Amendment and Waiver.
CARIBINER INTELLECTUAL PROPERTY
MANAGEMENT, INC.
By: /s/ Robert F. Burlinson
-------------------------------------
Name: Robert F. Burlinson
Title: Executive Vice President and
Chief Financial Officer
CARIBINER AUDIO VISUAL SERVICES, INC.
By: /s/ Robert F. Burlinson
-------------------------------------
Name: Robert F. Burlinson
Title: Executive Vice President and
Chief Financial Officer
HRI, V.I., INC.
By: /s/ Robert F. Burlinson
-------------------------------------
Name: Robert F. Burlinson
Title: Executive Vice President and
Chief Financial Officer
14
<PAGE>
VISUAL ACTION HOLDINGS, INC.
By: /s/ Robert F. Burlinson
-------------------------------------
Name: Robert F. Burlinson
Title: Executive Vice President and
Chief Financial Officer
CARIBINER SERVICES LIMITED
By: /s/ John M. Jureller
-------------------------------------
Name: John M. Jureller
Title: Director
CARIBINER EUROPE LIMITED
By: /s/ Brian Shepherd
-------------------------------------
Name: Brian Shepherd
Title: Director
VISUAL ACTION HOLDINGS LIMITED
By: /s/ John M. Jureller
-------------------------------------
Name: John M. Jureller
Title: Director
15
<PAGE>
EXHIBIT 1
<PAGE>
Annex A
Leverage Grid
<TABLE>
<CAPTION>
=================================================================================================================================
If the If the If the If the If the If the
Consolidated Consolidated Consolidated Consolidated Consolidated Consolidated
Leverage Ratio Leverage Leverage Leverage Ratio Leverage Ratio Leverage Ratio
is less than 2.0 Ratio is less Ratio is less is less than 3.5 is less than 4.0 is greater than
to 1.0 than 2.5 to 1.0 than 3.0 to 1.0 to 1.0 but to 1.0 but or equal to 4.0
but greater than but greater than greater than or greater than or to 1.0
or equal to 2.0 or equal to 2.5 equal to 3.0 to equal to
to 1.0 to 1.0 1.0 3.5 to 1.0
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Commitment Fee 50.0 bps 50.0 bps 50.0 bps 50.0 bps 50.0 bps 50.0 bps
- ---------------------------------------------------------------------------------------------------------------------------------
Eurodollar 175.0 bps 200.0 bps 225.0 bps 250.0 bps 300.0 bps 325.0 bps
Applicable
Margin
- ---------------------------------------------------------------------------------------------------------------------------------
ABR 75.0 bps 100.0 bps 125.0 bps 150.0 bps 200.0 bps 225.0 bps
Applicable
Margin
=================================================================================================================================
</TABLE>
On the effective date of the Third Amendment, the Commitment Fee Rate shall be
50.0 bps, the Applicable Margin for Eurodollar Loans shall be 325.0 bps and the
Applicable Margin for ABR Loans shall be 225.0 bps.
Beginning with the fiscal quarter ending December 31, 1998 changes in the
Applicable Margin or in the Commitment Fee Rate resulting from changes in the
Consolidated Leverage Ratio shall become effective on the date (the "Adjustment
Date") on which financial statements are delivered to the Lenders pursuant to
Section 6.01 (but in any event not later than the 45th day after the end of each
of the first three quarterly periods of each fiscal year or the 90th day after
the end of each fiscal year, as the case may be) and shall remain in effect
until the next change to be effected pursuant to this paragraph. If any
financial statements referred to above are not delivered within the time periods
specified above, then, until such financial statements are delivered, the
Consolidated Leverage Ratio as at the end of the fiscal period that would have
been covered thereby shall for the purposes of this definition be deemed to be
greater than 4.0 to 1. Each determination of the Consolidated Leverage Ratio
pursuant to this definition shall be made with respect to the period of four
consecutive fiscal quarters of the Parent and its Subsidiaries ending at the end
of the period covered by the relevant financial statements.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE UNAUDITED CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1999
AND THE CONSOLIDATED STATEMENT OF INCOME FOR THE THREE MONTHS ENDED
JUNE 30, 1999 OF CARIBINER INTERNATIONAL, INC. AS SET FOURTH IN
THIS FORUM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> JUN-30-1999
<CASH> 14,421
<SECURITIES> 0
<RECEIVABLES> 117,011
<ALLOWANCES> 3,484
<INVENTORY> 0
<CURRENT-ASSETS> 33,338
<PP&E> 213,963
<DEPRECIATION> (101,949)
<TOTAL-ASSETS> 709,212
<CURRENT-LIABILITIES> 91,786
<BONDS> 0
0
0
<COMMON> 236
<OTHER-SE> 159,307
<TOTAL-LIABILITY-AND-EQUITY> 709,212
<SALES> 556,040
<TOTAL-REVENUES> 556,040
<CGS> 407,808
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 127,832
<LOSS-PROVISION> 16,500
<INTEREST-EXPENSE> 25,103
<INCOME-PRETAX> (21,203)
<INCOME-TAX> 6,997
<INCOME-CONTINUING> (21,203)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (14,206)
<EPS-BASIC> (0.60)
<EPS-DILUTED> 0.0
</TABLE>