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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K/A
AMENDMENT NO. 2
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) NOVEMBER 17, 1998
VDI MEDIA
(Exact Name of Registrant as Specified in its Charter)
CALIFORNIA 0-21917 95-4272619
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
6920 SUNSET BOULEVARD
HOLLYWOOD, CALIFORNIA 90028
(Address of Principal Executive Offices) (Zip Code)
(323) 957-5500
Registrant's telephone number, including area code
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The undersigned registrant (the "Registrant") hereby amends the following
items of its Current Report on Form 8-K dated November 17, 1998 (the "Report")
as follows:
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
The Registrant amends the information set forth in Item 7(b) of the
Report and restates such item in its entirety as set forth below.
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Item 7(b) Pro Forma Financial Information
The following unaudited pro forma financial statements give effect to the
acquisition of DUBS Incorporated (Dubs). The unaudited pro forma combined
balance sheet presents the combined financial position of VDI Media and Dubs at
September 30, 1998 as if VDI Media had acquired Dubs on that date. Such pro
forma information is based upon the unaudited historical balance sheet data of
VDI Media and the audited balance sheet data of Dubs on September 30, 1998. The
unaudited pro forma combined statements of operations for the nine months ended
September 30, 1998 and for the year ended December 31, 1997, reflect adjustments
as if the transaction had occurred on January 1, 1997. The acquisition is being
accounted for as a purchase.
The unaudited pro forma combined financial statements reflect VDI Media's
allocation of the purchase price of approximately $6.9 million (plus the
assumption of trade payables and long-term debt) to the assets and remaining
liabilities assumed. The final allocation of purchase price may vary as
additional information is obtained, and differ from that used in the unaudited
pro forma combined financial statements.
The unaudited pro forma combined financial statements should be read in
conjunction with the separate historical financial information and related notes
of Dubs, appearing in Item 7 (a) of this current report on Form 8-K and the
historical financial statements, related notes and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" of the Company for
the year ended December 31, 1997, and the nine months ended September 30, 1998,
previously filed with the Securities and Exchange Commission (SEC). The pro
forma information is not necessarily indicative of the results that would have
been reported had the acquisition actually occurred on the dates specified, nor
is it necessarily indicative of the future results of the combined companies.
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PRO FORMA COMBINED BALANCE SHEET
The following unaudited pro forma combined balance sheet presents the combined
financial position of VDI Media and Dubs as of September 30, 1998. Such
unaudited pro forma information is based on the combined historical balance
sheets of VDI Media and Dubs as of September 30, 1998, giving effect to the pro
forma adjustments described in the accompanying Notes to the Pro Forma Combined
Financial Statements.
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<CAPTION>
SEPTEMBER 30, 1998
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DUBS COMBINED
VDI MEDIA INCORPORATED ADJUSTMENTS PRO FORMA
----------------- ----------------- -------------- -------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,261,000 $ 101,000 $ - $ 2,362,000
Accounts receivable, net 14,871,000 2,603,000 17,474,000
Inventories 558,000 362,000 920,000
Deferred income taxes 508,000 508,000
Prepaid expenses and other current assets 429,000 237,000 666,000
---------------- --------------- ------------- -------------
Total current assets 18,627,000 3,303,000 - 21,930,000
Property and equipment, net 14,211,000 2,263,000 16,474,000
Other assets 339,000 339,000
Goodwill and other intangibles, net 18,480,000 140,000 6,824,000 (A) 25,444,000
---------------- --------------- ------------- -------------
$51,657,000 $ 5,706,000 $ 6,824,000 $64,187,000
---------------- --------------- ------------- -------------
---------------- --------------- ------------- -------------
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 3,629,000 $ 1,265,000 $ - $ 4,894,000
Accrued expenses 1,461,000 804,000 2,265,000
Borrowings under revolving credit agreement 17,964,000 1,180,000 (1,180,000) (B) 17,964,000
Current portion of notes payable 25,000 1,040,000 (1,040,000) (B) 25,000
Current portion of capitalized lease obligations 678,000 24,000 702,000
---------------- --------------- ------------- -------------
Total current liabilities 23,757,000 4,313,000 (2,220,000) 25,850,000
---------------- --------------- ------------- -------------
Deferred income taxes 103,000 - 103,000
Notes payable, less current portion - 1,867,000 8,570,000 (A),(B) 10,437,000
Capital lease obligations, less current portion 279,000 - 279,000
Shareholders' equity (deficit):
Preferred stock -
Common stock 20,608,000 - - 20,608,000
Additional paid-in capital - 750,000 (750,000) (A) -
Retained earnings (deficit) 6,910,000 (1,224,000) 1,224,000 (A) 6,910,000
---------------- --------------- ------------- -------------
Total shareholders' equity (deficit) 27,518,000 (474,000) 474,000 27,518,000
---------------- --------------- ------------- -------------
$51,657,000 $ 5,706,000 $ 6,824,000 $64,187,000
---------------- --------------- ------------- -------------
---------------- --------------- ------------- -------------
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See accompanying Notes to Pro Forma Combined Financial Statements
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PRO FORMA COMBINED STATEMENT OF OPERATIONS
The following unaudited pro forma combined statement of operations presents the
combined results of operations of VDI Media and Dubs for the year ended December
31, 1997 by combining the historical statements of operations for VDI Media and
Dubs for the period, giving effect to the pro forma adjustments described in the
accompanying Notes to the Pro Forma Combined Financial Statements.
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<CAPTION>
YEAR ENDED DECEMBER 31, 1997
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DUBS COMBINED
VDI MEDIA INCORPORATED ADJUSTMENT PRO FORMA
------------ -------------- ------------ -------------
<S> <C> <C> <C> <C>
Revenues $40,772,000 $ 17,094,000 $ - $57,866,000
Cost of goods sold 24,898,000 13,535,000 - 38,433,000
----------- ------------ --------- -----------
Gross Profit 15,874,000 3,559,000 - 19,433,000
Selling, general, and administrative expense 9,253,000 4,198,000 296,000 (C) 13,747,000
----------- ------------ --------- -----------
Operating income (loss) 6,621,000 (639,000) (296,000) 5,686,000
Interest expense 294,000 497,000 280,000 (D) 1,071,000
Interest income 226,000 30,000 256,000
----------- ------------ --------- -----------
Income (loss) before income taxes 6,553,000 (1,106,000) (576,000) 4,871,000
Provision (benefit) for income taxes 2,572,000 3,000 (624,000) (E) 1,951,000
----------- ------------ --------- -----------
Net income (loss) $ 3,981,000 $ (1,109,000) $ 48,000 $ 2,920,000
----------- ------------ --------- -----------
----------- ------------ --------- -----------
Earnings per share:
Basic:
Net income per share $ 0.44 $ 0.32
Weighted average number of shares 9,122,575 9,122,575
Diluted:
Net income per share $ 0.43 $ 0.32
Weighted average number of shares including
the dilutive effect of stock options 9,207,940 9,207,940
</TABLE>
See accompanying Notes to Pro Forma Combined Financial Statements
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PRO FORMA COMBINED STATEMENT OF OPERATIONS
The following unaudited pro forma combined statement of operations presents the
combined results of operations of VDI Media and Dubs for the nine months ended
September 30, 1998 by combining the historical statements of operations for VDI
Media and Dubs for the period, giving effect to the pro forma adjustments
described in the accompanying Notes to the Pro Forma Combined Financial
Statements.
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1998
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DUBS COMBINED
VDI MEDIA INCORPORATED ADJUSTMENT PRO FORMA
-------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Revenues $ 42,312,000 $ 12,070,000 $ - $ 54,382,000
Cost of goods sold 25,578,000 8,957,000 - 34,535,000
-------------- --------------- ------------ ---------------
Gross Profit 16,734,000 3,113,000 - 19,847,000
Selling, general, and administrative expense 8,953,000 2,841,000 222,000 (C) 12,016,000
-------------- --------------- ------------ ---------------
Operating income 7,781,000 272,000 (222,000) 7,831,000
Interest expense 583,000 336,000 210,000 (D) 1,129,000
Interest income 19,000 - 19,000
-------------- --------------- ------------ ---------------
Income (loss) before income taxes 7,217,000 (64,000) (432,000) 6,721,000
Provision (benefit) for income taxes 2,959,000 1,000 (271,000) (E) 2,689,000
-------------- --------------- ------------ ---------------
Net income (loss) $ 4,258,000 $ (65,000) $(161,000) $ 4,032,000
-------------- --------------- ------------ ---------------
-------------- --------------- ------------ ---------------
Earnings per share:
Basic:
Net income per share $ 0.44 $ 0.41
Weighted average number of shares 9,725,144 9,725,144
Diluted:
Net income per share $ 0.43 $ 0.41
Weighted average number of shares including
the dilutive effect of stock options 9,827,240 9,827,240
</TABLE>
See accompanying Notes to Pro Forma Combined Financial Statements
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NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
The following significant adjustments were made to the historical balance sheets
of VDI Media and Dubs at September 30, 1998 or historical statements of
operations of VDI Media and Dubs, as applicable, to arrive at the pro forma
combined balance sheets and pro forma combined statements of operations:
(A) Pro forma adjustments have been made to (i) record estimated
goodwill of $6,824,000 equal to the excess of the initial
consideration over the fair market value assigned to specific
assets and liabilities assumed, (ii) eliminate the shareholder
deficit of Dubs and (iii) reflect the use of borrowings under the
Company's term loan agreement to purchase Dubs.
(B) A pro forma adjustment has been made to reflect the repayment of
Dubs's long-term debt and line of credit at closing in accordance with
the purchase agreement.
(C) A pro forma adjustment has been made to selling, general and
administrative expense to reflect the amortization over 20 years of
the goodwill related to the acquisition of Dubs.
(D) A pro forma adjustment has been made to interest expense to reflect
the increase in debt related to the use of borrowings under VDI
Media's term loan agreement to finance the purchase net of the
decrease in interest expense due to the repayment of Dubs's long-term
debt and line of credit.
(E) A pro forma adjustment has been made to reflect the effective tax
rate of the combined company.
VDI Media estimates that it will save approximately $804,000 per year in
rent, utilities and other facilities costs by combining its Hollywood
facilities with the Dubs facility. VDI Media also estimates an annual
savings of approximately $1,418,000 related to the salaries of DUBS employees
terminated immediately prior to the acquisition. The related severance costs
were paid by the sole shareholder of DUBS. In accordance with SEC rules,
these estimated cost savings have not been reflected in the pro forma
combined statements of operations presented above.
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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.
VDI MEDIA
Date: February 5, 1999 /s/ Donald R. Stine
-------------------------------
Donald R. Stine
Chief Financial Officer and Treasurer
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Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement on Form S-3 (No. 333-57549) of
VDI Media of our report dated January 6, 1999 relating to the financial
statements of DUBS, Incorporated, which appears in the Current Report on Form
8-K/A of VDI Media dated February 1, 1999.
PricewaterhouseCoopers LLP
Costa Mesa, California
February 1, 1999
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Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 333-46923) of VDI Media of our report dated January
6, 1999 relating to the financial statements of DUBS, Incorporated, which
appears in the Current Report on Form 8-K/A of VDI Media dated February 1, 1999.
PricewaterhouseCoopers LLP
Costa Mesa, California
February 1, 1999
