<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, 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 23,696,727 shares of Common Stock (par value $0.01 per share)
outstanding as of February 8, 2000.
<PAGE>
INDEX
PART I. Financial Information
Item 1. Financial Statements (Unaudited)
Review Report of Independent Accountants....................2
Consolidated Balance Sheets as of
December 31, 1999 and September 30, 1999....................3
Consolidated Statements of Operations for
the three months ended December 31, 1999 and 1998...........4
Consolidated Statements of Cash Flows for
the three months ended December 31, 1999 and 1998...........5
Consolidated Statement of Changes in Stockholders'
Equity for the three months ended December 31, 1999
and 1998....................................................6
Notes to Consolidated Financial Statements..................7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations...............9
PART II. Other Information
Item 1. Legal Proceedings..........................................12
Item 6. Exhibits and Reports on Form 8-K...........................13
SIGNATURES...................................................................14
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<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, 1999, and the related consolidated
statements of operations for the three months ended December 31, 1999 and 1998,
the consolidated statement of changes in stockholders' equity for the three
months ended December 31, 1999 and 1998 and the consolidated statements of cash
flows for the three months ended December 31, 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 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, 1999, 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 28, 1999, 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, 1999, 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 9, 2000
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<PAGE>
Caribiner International, Inc.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31, September 30,
ASSETS 1999 1999
(unaudited) (Note 1)
----------- --------
(amounts in thousands)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ -- $ 1,675
Trade accounts receivable - net of allowance for doubtful
accounts of $4,385 and $4,693 at December 31, 1999 and
September 30, 1999, respectively 100,744 100,446
Deferred charges 11,714 8,301
Prepaid expenses and other current assets 17,920 20,173
------ ------
Total Current Assets 130,378 130,595
Property and equipment - net 105,299 100,438
Goodwill - net 404,753 409,204
Taxes receivable 5,545 4,548
Other assets 14,302 14,684
------ ------
TOTAL ASSETS $660,277 $659,469
======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $1,238 $1,299
Trade accounts payable 27,049 22,527
Accrued expenses and other current liabilities 35,052 40,436
Accrued production costs 15,052 20,259
Deferred income 20,632 11,617
------ ------
Total Current Liabilities 99,023 96,138
Long-term debt 433,757 425,840
Deferred income 9,517 4,975
Deferred Tax Liability 7,892 7,892
Other liabilities 1,517 2,144
----- -----
TOTAL LIABILITIES 551,706 536,989
Stockholders' Equity:
Preferred stock, $0.01 par value:
2,000 shares authorized, none issued and outstanding at
December 31, 1999 and September 30, 1999, respectively -- --
Common stock, $0.01 par value:
40,000 voting shares authorized 23,697 shares
issued and outstanding at December 31, 1999 and September
30, 1999 236 236
Additional paid-in capital 167,677 167,677
Accumulated other comprehensive loss (4,562) (4,785)
Accumulated Deficits (54,780) (40,648)
-------- --------
TOTAL STOCKHOLDERS' EQUITY 108,571 122,480
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $660,277 $659,469
======= ========
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
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<PAGE>
Caribiner International, Inc.
Consolidated Statements of Operations
For the Three Months Ended
(unaudited)
<TABLE>
<CAPTION>
December 31,
1999 1998
---- ----
(amounts in thousands)
<S> <C> <C>
Service revenue $ 48,041 $ 53,205
Rental revenue 112,251 111,715
Intercompany eliminations (4,084) (4,937)
---------- ------------
Total revenue 156,208 159,983
Cost of service revenue 33,546 35,443
Cost of rental revenue 91,579 88,760
Intercompany eliminations (4,084) (4,937)
---------- ------------
Total cost of revenue 121,041 119,266
---------- -----------
Gross profit 35,167 40,717
Operating expenses:
Selling, general and administrative expenses 32,508 36,093
Depreciation and amortization 6,166 7,156
---------- -----------
Total operating expenses 38,674 43,249
---------- -----------
Operating loss (3,507) (2,532)
Interest expense, net 10,625 7,527
---------- -----------
Loss before taxes (14,132) (10,059)
Provision (benefit) for taxes -- (4,024)
---------- ------------
Net loss $(14,132) $(6,035)
========== ============
Basic and diluted loss per common share:
Net loss per common share $(0.60) $(0.25)
========== ===========
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
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<PAGE>
Caribiner International, Inc.
Consolidated Statements of Cash Flows
For the Three Months Ended
(unaudited)
<TABLE>
<CAPTION>
December 31,
1999 1998
---- ----
(amounts in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net loss $(14,132) $ (6,035)
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization 11,802 10,781
Change in assets and liabilities, net of amounts acquired:
Decrease (increase) in trade accounts receivable (298) 10,166
Increase in deferred charges (3,413) (4,019)
Decrease (Increase) in prepaid expenses and
other current assets 2,252 (4,164)
Decrease in other assets 382 1,020
Increase (Decrease) in trade accounts payable 4,522 (5,213)
Increase in deferred income 13,557 16,765
Decrease in accrued expenses and
other liabilities (11,216) (16,939)
Decrease in taxes payable (996) (3,547)
---------- -------
Net cash provided by (used in) operating activities 2,460 (1,185)
----- -------
Cash flow used in investing activities:
Purchase of property and equipment (12,994) (6,537)
Acquisition of intangibles and businesses, net of
cash acquired -- (3,455)
--------- -------
Net cash used in investing activities (12,994) (9,992)
-------- -------
Cash flow provided by financing activities:
Repayments of long-term debt (29,919) (29,929)
Proceeds from long-term debt 37,775 39,550
Payment of debt issuance fees -- (931)
-------- -----
Net cash provided by financing activities 7,856 8,690
----- -----
Translation effect on cash and cash equivalents 1,003 (92)
Net decrease in cash (1,675) (2,579)
Cash, beginning of period 1,675 15,117
----- ------
Cash, end of period -- 12,538
======= ======
Supplemental disclosure of cash flow information:
Interest paid $ 12,286 $ 8,149
====== =====
Income taxes paid $ 180 $ 179
=== ===
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
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<PAGE>
Caribiner International, Inc.
Consolidated Statement of Changes in Stockholders' Equity
For the Three Months Ended December 31, 1999 and 1998
(unaudited)
(amounts in thousands)
<TABLE>
<CAPTION>
Common Stock Accumulated
------------ Additional Retained Other Total
Paid-in Earnings Comprehensive Stockholders'
Shares Amount Capital (Deficit) Loss Equity
------ ------ ------- -------- ---- ------
<S> <C> <C> <C> <C> <C> <C>
For the three months ended December 31, 1999:
Balance at September 30, 1999 23,697 $236 $167,677 $(40,648) $(4,785) $122,480
Net loss - - - (14,132) - (14,132)
Foreign currency translation adjustment - - - - 223 223
--------
Other comprehensive loss - - - - - (13,909)
------ ---- -------- --------- -------- --------
Balance at December 31, 1999 23,697 $236 $167,677 $(54,780) $(4,562) $108,571
====== ==== ======== ========= ======== ========
For the three months ended December 31, 1998:
Balance at September 30, 1998 23,689 $236 $167,608 $11,645 $(3,714) $175,775
Net loss - - - (6,035) - (6,035)
Foreign currency translation adjustment - - - - (2,780) (2,780)
-------
Other comprehensive loss - - - - - (8,815)
Issuance of common stock 4 * 44 - - 44
------ ---- -------- --------- -------- --------
Balance at December 31, 1998 23,693 $236 $167,652 $5,610 $(6,494) $167,004
====== ==== ======== ====== ======== ========
*Amount less than $1 thousand
</TABLE>
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 months ended December 31, 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, 2000.
The balance sheet at September 30, 1999 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.
2. Segment Information
In accordance with Financial Accounting Standards Board Statement No.
131, Disclosures about Segments of an Enterprise and Related
Information, set forth below is selected financial information about
the Company's reportable operating segments.
Description of Segments
The Company has five reportable segments: the Communications Division,
Hotel Services, Staging and Meeting Services, Rental Services and
Melville Exhibition Services, Ltd. ("MES"). The Communications Division
produces meetings, events and training programs that enable businesses
to inform, sell to and train their sales forces, dealers, stockholders
and employees. Hotel Services provides audiovisual equipment rental
services to hotels via an on-site presence of both equipment and
technical support staff. The Staging and Meeting Services Division is a
provider of audiovisual equipment, technical labor and related staging
services to production companies and other corporations for use during
meetings, trade shows, conventions and presentations. Rental Services
is a remote full service provider on an as-needed basis to local and
national corporations, convention centers and smaller hotels. MES
provides exhibition services in the United Kingdom, offering fully
integrated services to exhibition organizers, hall owners, exhibitors
and other exhibition contractors.
Measurement of Segment Profit or Loss
The Company evaluates performance based upon revenues, gross profit and
profit or loss from operations before interest, income taxes,
depreciation and amortization ("EBITDA"). Interdivision sales are
recorded at the Company's costs; there is no intercompany profit or
loss on interdivision sales.
Three Months Ended December 31, 1999 (Amounts in Thousands)
<TABLE>
<CAPTION>
Staging & Total
Hotel Meeting Rentals Audio Communi-
Services Services Services Visual MES cations Other(a) Total
-------- -------- -------- ------ --- ------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue $74,474 $19,392 $6,535 $100,401 $11,850 $45,706 $1,052 $159,009
Gross profit 14,336 935 1,477 16,748 3,924 14,387 108 35,167
EBITDA 10,297 1,913 813 13,023 848 (3,366) (32) 10,473
</TABLE>
(a) Primarily represents the results of the Company's travel and
logistical services business.
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<PAGE>
2. Segment Information (Continued)
Three Months Ended December 31, 1998 (Amounts in Thousands)
<TABLE>
<CAPTION>
Staging & Total
Hotel Meeting Rentals Audio Communi-
Services Services Services Other (a) Visual MES cations Other(b) Total
-------- -------- -------- --------- ------ --- ------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue $62,796 $20,487 $5,583 $8,389 $97,255 $14,274 $51,801 $1,318 $164,648
Gross profit 12,828 1,116 1,241 2,928 18,113 4,706 17,467 295 40,581
EBITDA 8,348 1,806 1,097 (426) 10,825 1,788 1,331 -- 13,944
</TABLE>
(a) Represents the results of operations of the Company's design and
installation business which was disposed in June, 1999.
(b) Represents the results of the Company's travel and logistical
services business.
Reconciliations to Consolidated Statement of Operations
(Amounts in Thousands)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
1999 1998
---- ----
<S> <C> <C>
Total external revenue for reportable segments $ 156,208 $ 159,983
Interdivision revenue for reportable segments 2,801 4,851
Intradivision revenue for reportable segments 1,283 86
Elimination of interdivision revenue (4,084) (4,937)
----------- -----------
Total consolidated revenue $ 156,208 $ 159,983
=========== ===========
Total "EBITDA" for reportable segments $ 10,473 $ 13,944
Costs related to the former Atlanta-based audiovisual headquarters -- (2,753)
Corporate expenses (2,178) (2,942)
----------- -----------
Total consolidated operating income before depreciation and
amortization expense 8,295 8,249
Depreciation and amortization expenses, including depreciation in
cost of revenue (11,802) (10,781)
----------- -----------
Total consolidated operating loss $ (3,507) $ (2,532)
=========== ===========
</TABLE>
3. Restructuring Charge
In order to continue to streamline the organizational structure and improve
operational efficiencies, the Company effectuated the Restructuring and recorded
a pre-tax restructuring charge of $10.8 million in the fiscal quarter ended
September 30, 1999. The charge included $1.5 million of employee termination and
severance costs associated with a further reduction in the workforce of
approximately 60 people, $4.0 million related to lease termination and other
facility shut-down costs and $5.3 million of computer software and equipment no
longer used as a result of the reorganization. The remaining liability as of
December 31, 1999 was $1.1 million.
-8-
<PAGE>
Caribiner International, Inc.
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
Three months Ended December 31, 1999 Compared to Three months Ended December
31, 1998
Revenue. Revenue decreased $3.8 million, (after intercompany eliminations), or
2.4% from $160.0 million in the three months ended December 31, 1998 to $156.2
million in the three months ended December 31, 1999. Rental revenue from the
Company's combined audiovisual services businesses increased slightly to $112.3
million in the three months ended December 30, 1999 from $103.3 million in the
prior year's comparable three month period, after adjusting for $8.4 million of
1999 first quarter revenue relating to the Company's former audiovisual design
and installation business, Presentation Technologies, which was disposed June
30, 1999. The increase is primarily attributable to increased revenue of $11.5
million from the Company's Hotel Services division, offset by decreases in
revenue from the Melville Exhibition Services ("MES") segment. Revenue from the
Company's Communications Division (before inradivision eliminations) decreased
$5.2 million, or 9.7%, to $48.0 million in the first quarter of fiscal 2000 from
$53.2 million in the comparable period of fiscal 1999 primarily due to projects
completed in the first quarter of fiscal 1999 which did not recur in the first
quarter of fiscal 2000.
Gross profit. Total gross profit decreased $5.5 million, or 13.6%, from $40.7
million in the three months ended December 31, 1998 to $35.2 million in the
comparable period of 1999. The Company's design and installation business, which
was diposed of effective June 30, 1999, accounted for $2.9 million of gross
profit in the quarter ended December 31, 1998. Gross profit as a percentage of
rental revenue was 18.2% for the three months ended December 31, 1999 compared
to 20.2% in the prior year's comparable quarter. Profits from the Company's
combined audiovisual services businesses were slightly impacted by an increase
in commission rates in addition to increased costs related to the rental of
audio visual equipment used in operations, particularly in the Hotel Services
outsourcing operations. In addition, gross profit on rental revenue for the
three months ended December 31, 1998 and 1999 was also impacted by $4.0 million
and $5.7 million, respectively, of depreciation expense related to rental
equipment used in the audiovisual services businesses. Such depreciation
expense is included in cost of rental revenue. As a percentage of service
revenue, gross profit margin decreased from 33.4% in the three months ended
December 31, 1998 to 30.2% in the three months ended December 31, 1999. The
decreased gross profit margin is due to increased margin pressures as well
as the specific production requirements of the contracts completed during the
period.
Selling, general and administrative expenses. Selling, general and
administrative expenses decreased $3.6 million, or 9.9%, from $36.1 million in
the three months ended December 31, 1998 to $32.5 million in the three months
ended December 31, 1999. During the quarter ended December 31, 1998, the Company
incurred $2.8 million of costs related to the former Atlanta based audiovisual
headquarters. In addition, selling, general and administrative expenses of the
Hotels Services division decreased by $1.0 million from the same period in the
prior year due the cost savings achieved by centralizing its operations in one
location. The Communications Division accounts for a $1.0 increase in operating
expenses from December 31, 1998 to December 31, 1999 largely due to costs
related to obtaining business and bad debt expense. Selling, general and
administrative expenses, as a percentage of total revenue, decreased from 22.6%
during the three months ended December 31, 1998 to 20.8% in the three months
ended December 31, 1999.
Depreciation and amortization. Depreciation and amortization expense for the
three months ended December 31, 1999 was $6.2 million, a decrease of $1.0
million from the corresponding period in the prior year. The decrease is
primarily attributable to the write off of fixed assets related to the former
Atlanta-based audio visual headquarters, which occurred in the fourth quarter of
fiscal 1999.
Interest expense, net. Interest expense, net increased by $3.1 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 40% for the three months ended December 31, 1998. No
income tax benefit was recorded for the three months ended December 31, 1999.
Net loss. The Company realized a net loss of $14.1 million in the three months
ended December 31, 1999 compared to a net loss of $6.0 million in the three
months ended December 31, 1998. The loss per common share for the three months
ended December 31, 1999 was $0.60 as compared with a loss per common share of
$0.25 for the comparable period in fiscal 1998. The significant increase in the
reported net loss in the three months ended December 31, 1999 results from the
effect of the results of operations described above as well as to the fact that
no income tax benefit has been recorded in the three months ended December 31,
1999.
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<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 (the "Revolving Facility") to be
utilized in connection with future acquisitions and for working capital and
general corporate purposes and a $250 million 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.
Amounts outstanding under the Company's former credit facility were repaid with
the proceeds from the Credit Agreement. 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 credit facility. Approximately $4.8 million in
debt issuance fees were incurred in connection with the Credit Agreement. Such
fees are being amortized over the term of the Credit Agreement.
In May, 1998, the Company repaid approximately $26 million under the Term
Facility thereby permanently reducing availability thereunder by such amount. In
December, 1998 and July, 1999, the terms of the Revolving Facility were amended
to, among other things, reduce the aggregate availability thereunder from $300
million to $250 million, amend certain financial covenants contained therein and
increase the interest rate on amounts outstanding under the Credit Agreement.
At June 30, 1999, the Company did not achieve certain of the financial covenants
specified in the Credit Agreement. In connection with the amendments made to the
Credit Agreement in July 1999 (the "July 1999 Amendment"), the lenders waived
through March 30, 2000, all defaults that have arisen or may arise from the
failure to satisfy the specified financial covenants for June 30, 1999,
September 30, 1999 and December 31, 1999. As part of such amendment, the Company
agreed, among other things, to revised covenants regarding minimum consolidated
earnings before interest, taxes, depreciation and amortization ("EBITDA") as
defined in the Credit Agreement, for the twelve month periods ending June 30,
September 30 and December 31, 1999, and to restrictions on the amount of
permitted capital expenditures (as described in the Credit Agreement) for the
three month periods ending September 30 and December 31, 1999.
At September 30, 1999, the Company was not in compliance with the covenants set
forth in the July 1999 Amendment. On December 23, 1999, the Company obtained a
further amendment (the "December 1999 Amendment") to the Credit Agreement that,
among other things, extended the waivers under the July 1999 Amendment until
October 1, 2000, and waived through October 1, 2000 all defaults arising from
the failure at September 30, 1999 to satisfy the financial covenants specified
in the July 1999 Amendment. As part of the December 1999 Amendment, the Company
agreed to a minimum consolidated adjusted EBITDA covenant that is based on
post-September 30, 1999 consolidated EBITDA (as defined in the Credit
Agreement), and to restrictions on the amount of capital expenditures that may
be made by the Company during the fiscal year ending September 30, 2000. The
minimum required consolidated adjusted EBITDA, as defined, for fiscal 2000
exceeds levels achieved in fiscal 1999.
In addition to the waivers and revised financial covenants described above, the
December 1999 Amendment provides for the deferral through October 1, 2000 of the
principal payments due under the Term Facility on December 31, 1999 and March
31, 2000. The December 1999 Amendment also includes a consent by the lenders
that will allow the Company to pursue the possible sale of its audiovisual
businesses, provided that certain timing requirements are met and minimum net
proceeds exceed a specified amount. If such a transaction is consummated, the
Company would be obligated to use the net proceeds, subject to certain
adjustments, to pay down amounts outstanding under the Credit Agreement, and
would be subject to revised financial covenants. There can be no assurance that
any such transaction will be entered into or consummated, or that it will meet
the parameters required by the December 1999 Amendment.
Fees of approximately $1.2 million, $1.4 million and $1.0 million were incurred
in connection with the amendments made to the Credit Agreement in December 1998,
July, 1999, and December 1999, respectively. Such fees will be amortized over
the remaining term of the Credit Agreement.
The maturity date of each of the Term Facility and the Revolving Facility is
October, 2001. 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 applicable
margins are subject to change based on the occurrence of certain events. The
interest rate on the Credit Agreement is presently LIBOR plus 3.25%. The
applicable interest margin is subject to upward adjustment of 0.75% on March 1,
2000 if the Company has not entered into a definitive agreement to sell its
audiovisual businesses by such date and an additional 0.75% on June 1, 2000 if
such transaction has not been consummated by such date.
Principal on the Term Facility is payable in quarterly installments, subject to
the deferrals described above, with the final scheduled payment due on October
1, 2001. Subject to reductions in such quarterly installments for any
prepayments made under the Term Facility, at present, the Company will be
required to repay an aggregate of: (i) $17.8 million in fiscal 2000, (ii) $50.4
million in fiscal
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<PAGE>
2001 and (iii) $132.4 million in fiscal 2002. The Company is permitted and
intends (to the extent available) 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 material subsidiaries, and the Company and its subsidiaries have
pledged the stock of their respective subsidiaries for the ratable benefit of
its lending banks. In addition to the financial covenants described above, the
Credit Agreement contains certain other covenants and restrictions customary for
credit facilities of a similar nature, including, without limitation,
restrictions on the ability of the Company to pay dividends.
The aggregate scheduled payments of all long-term debt outstanding at September
30, 1999 (including amounts outstanding under the Term Facility), for the next
three fiscal years, are as follows: 2000--$19.1 million; 2001--$75.9 million;
2002--$332.1 million; totaling $427.1 million.
The Company believes it will be able to satisfy the financial and other
covenants included in the Credit Agreement, as amended by the December 1999
Amendment. Further, the Company continues to believe it necessary to take
actions to reduce its indebtedness under the Credit Agreement, including the
possible sale of one or more of its operations. In connection therewith, the
Company's financial advisor, Salomon Smith Barney, is assisting the Company in
assessing strategic and financial alternatives. There can be no assurance that
the Company will be able to take such actions or that it will be able to remain
in compliance with the financial covenants specified in the Credit Agreement
during the twelve months ending September 30, 2000. Unless further amendments or
waivers were to be obtained from the lenders, the failure to satisfy the
specified financial covenants or the occurrence of any other event of default
under the Credit Agreement, as amended, would entitle the lenders to, among
other things, accelerate the maturity of the outstanding borrowings under the
Credit Agreement, and exercise all or any of their other rights or remedies. Any
such acceleration or other exercise of rights and remedies would likely have a
material adverse effect on the Company.
As of February 10, 2000, the Company had approximately $445.5 million
outstanding under the Credit Agreement, of which $245.9 million was outstanding
under the Revolving Facility. The Company believes that cash flow from
operations and available credit under the Revolving Facility will be sufficient
to meet operating needs through the end of fiscal 2000.
The following table sets forth certain information from the Company's
Consolidated Statement of Cash Flows for the three months ended December 31,
1999 and 1998:
Three months Ended December 31,
1999 1998
---- ----
Net cash provided by (used in):
Operating activities $2,460 $(1,185)
Investing activities (12,994) (9,992)
Financing activities 7,856 8,690
For the three months ended December 31, 1999, $2.5 million was provided by
operating activities. The net loss adjusted for depreciation and amortization
required $2.3 million. The net change in working capital provided $4.8 million,
with decreases in prepaid expenses and other current assets, other assets and
increases in accounts payable and deferred income, which were more than offset
by increases in accounts receivable and deferred charges, and decreases in
accrued expenses and other liabilities and taxes payable. Investing activities
required $13.0 million due to property and equipment additions. Financing
activities provided $7.9 million in the three months ended December 31, 1999, of
which $37.8 million was provided by drawings under the Company's Credit
Agreement, offset by repayments of $29.9 million.
For the three months ended December 31, 1998, $1.2 million was used in operating
activities. The net loss adjusted for depreciation and amortization provided
$4.7 million. The net change in working capital used $5.9 million, with
decreases in accrued expenses and other liabilities and accounts payable and an
increase in prepaid expenses, other current assets and deferred charges, offset
by decreases in accounts receivable and other assets and an increase in deferred
income. Cash used in investing activities was $10.0 million due to property and
equipment purchases and acquisition-related expenditures. Financing activities
provided $8.7 million, of which was $40.0 million was drawn under the Company's
Credit Agreement, offset by debt repayments of $30.0 million. In addition, debt
issuance fees of $0.9 million were paid in connection with the amendments made
to the Credit Agreement in December, 1998.
-11-
<PAGE>
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
On March 25, 1999, a purported shareholder class action was filed in the United
States District Court for the Southern District of New York (the "Southern
District") against the Company and certain of its current and former officers
and one of its directors. On May 7, 1999, a purported shareholder class action
substantially identical to the March 25th action was filed in the Southern
District against the Company and the same individuals named in the March 25th
action. Both lawsuits allege, among other things, 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. The lawsuits 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. In November, 1999, the court issued an
order consolidating the lawsuits into a single action and appointing lead
plaintiffs and lead counsel. The plaintiffs filed an amended consolidated
complaint in January 2000, to which the Company is presently preparing a
response, which it expects to file in February, 2000.
In addition to the litigation described above, from time to time the Company is
a party to various legal proceedings incidental to its business. Although the
ultimate disposition of these proceedings is not determinable, in the opinion of
the Company, none of such proceedings has had or is likely to have a material
adverse effect on the Company's results of operations, financial condition or
liquidity.
-12-
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits Required by Item 601 of Regulation S-K:
Exhibit
Number Description of Document
------ -----------------------
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 quarterly period 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 quarterly period ended December 31, 1998 and incorporated
herein by reference).
10.1 Credit Agreement, dated as of October 28, 1997 (the "Credit
Agreement"), 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 and exhibits omitted -- the
Company agrees to furnish a copy of any schedule or exhibit 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).
10.2 First Amendment and Agreement, dated as of March 31, 1998, to
the Credit Agreement (schedules and exhibits omitted -- the
Company agrees to furnish a copy of any schedule or exhibit to
the Commission upon request) (filed as Exhibit 10.13 to the
Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1998 and incorporated herein by reference).
10.3 Second Amendment and Waiver, dated as of December 18, 1998, to
the Credit Agreement (schedules and exhibits omitted -- the
Company agrees to furnish a copy of any schedule or exhibit to
the Commission upon request) (filed as Exhibit 10.14 to the
Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1998 and incorporated herein by reference).
10.4 Third Amendment and Waiver, dated as of July 30, 1999, to the
Credit Agreement (schedules and exhibits omitted -- the
Company agrees to furnish a copy of any schedule or exhibit to
the Commission upon request) (filed as Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 1999 and incorporated herein by
reference).
10.5 Fourth Amendment, Consent and Waiver, dated as of December 23,
1999, to the Credit Agreement (schedules and exhibits omitted
-- the Company agrees to furnish a copy of any schedule or
exhibit to the Commission upon request) (filed as Exhibit
10.17 to the Company's Annual Report on Form 10-K for the
fiscal year ended September 30, 1999 and incorporated herein
by reference).
27 Financial Data Schedule
(b) Reports on Form 8-K: None.
-13-
<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 11, 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)
-14-
<PAGE>
EXHIBIT INDEX
Exhibit Page
Number Description of Document 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 quarterly period 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 quarterly period ended
December 31, 1998 and incorporated herein by
reference).
10.1 Credit Agreement, dated as of October 28, 1997 (the
"Credit Agreement"), 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 and exhibits omitted -- the Company
agrees to furnish a copy of any schedule or exhibit
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).
10.2 First Amendment and Agreement, dated as of March 31,
1998, to the Credit Agreement (schedules and
exhibits omitted -- the Company agrees to furnish a
copy of any schedule or exhibit to the Commission
upon request) (filed as Exhibit 10.13 to the
Company's Annual Report on Form 10-K for the fiscal
year ended September 30, 1998 and incorporated
herein by reference).
10.3 Second Amendment and Waiver, dated as of December
18, 1998, to the Credit Agreement (schedules and
exhibits omitted -- the Company agrees to furnish a
copy of any schedule or exhibit to the Commission
upon request) (filed as Exhibit 10.14 to the
Company's Annual Report on Form 10-K for the fiscal
year ended September 30, 1998 and incorporated
herein by reference).
10.4 Third Amendment and Waiver, dated as of July 30,
1999, to the Credit Agreement (schedules and
exhibits omitted -- the Company agrees to furnish a
copy of any schedule or exhibit to the Commission
upon request) (filed as Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 1999 and
incorporated herein by reference).
10.5 Fourth Amendment, Consent and Waiver, dated as of
December 23, 1999, to the Credit Agreement
(schedules and exhibits omitted -- the Company
agrees to furnish a copy of any schedule or exhibit
to the Commission upon request) (filed as Exhibit
10.17 to the Company's Annual Report on Form 10-K
for the fiscal year ended September 30, 1999 and
incorporated herein by reference).
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1999 AND THE
CONSOLIDATED STATEMENT OF INCOME FOR THE THREE MONTHS ENDED DECEMBER 31, 1999 OF
CARIBINER INTERNATIONAL, INC. AS SET FORTH 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> 3-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-END> DEC-31-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 105,129
<ALLOWANCES> 4,385
<INVENTORY> 0
<CURRENT-ASSETS> 130,378
<PP&E> 204,538
<DEPRECIATION> (99,239)
<TOTAL-ASSETS> 660,277
<CURRENT-LIABILITIES> 99,023
<BONDS> 0
0
0
<COMMON> 236
<OTHER-SE> 108,315
<TOTAL-LIABILITY-AND-EQUITY> 660,277
<SALES> 156,208
<TOTAL-REVENUES> 156,208
<CGS> 121,041
<TOTAL-COSTS> 121,041
<OTHER-EXPENSES> 32,508
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,625
<INCOME-PRETAX> (14,132)
<INCOME-TAX> 0
<INCOME-CONTINUING> (14,132)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> (14,132)
<EPS-BASIC> (0.60)
<EPS-DILUTED> (0.60)
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