<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
Commission File Number 00-21315
ON COMMAND CORPORATION
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(Exact name of registrant as specified in its charter)
DELAWARE 77-04535194
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(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
6331 SAN IGNACIO AVE, SAN JOSE, CALIFORNIA 95119
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(Address of principal executive offices) (Zip Code)
(408) 360-4500
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(Registrant's telephone number, including area code)
(not applicable)
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(Former name, former address and former fiscal year, if changed since
last report)
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 number of shares outstanding of the Registrant's Common Stock as of
March 31, 2000 was 30,176,454 shares.
<PAGE> 2
ON COMMAND CORPORATION
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
Page No.
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1- Financial Statements:
Condensed Consolidated Balance Sheets as of March 31, 2000 and December 31,1999. 3
Condensed Consolidated Statements of Operations for the Three Months
Ended March 31, 2000 and 1999. 4
Condensed Consolidated Statements of Cash Flows for the Three Months Ended
March 31, 2000 and 1999. 5
Notes to Condensed Consolidated Financial Statements. 6-7
Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations. 8-11
Item 3 - Quantitative and Qualitative Disclosures About Market Risk. 11
PART II. OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K 12
SIGNATURES 13
</TABLE>
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<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
ON COMMAND CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PAR VALUE AMOUNTS)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
------------- -------------
(Unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 6,032 $ 8,972
Accounts receivable, net 39,667 32,037
Other current assets 1,103 1,211
------------- -------------
Total current assets 46,802 42,220
Video systems, net 267,559 266,947
Property and equipment, net 17,542 17,644
Goodwill, net 72,195 73,297
Other assets, net 2,726 2,809
------------- -------------
Total Assets $ 406,824 $ 402,917
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 32,985 $ 31,435
Accounts payable to stockholder 1,068 1,054
Accrued compensation 5,794 6,431
Other accrued liabilities 9,295 8,750
Current portion of capital lease obligations 1,807 2,533
Taxes payable 6,178 6,809
------------- -------------
Total current liabilities 57,127 57,012
Capital lease obligations 1,591 1,758
Revolving credit facility 188,000 180,000
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Total liabilities 246,718 238,770
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Stockholders' equity:
Common stock, $.01 par value; shares authorized - 50,000 in 2000 and 1999;
shares issued and outstanding, 30,466 in 2000 and 30,176 in 1999; 305 303
Additional paid-in capital 252,781 251,677
Common stock warrants 31,450 31,450
Accumulated other comprehensive loss (1,452) (872)
Accumulated deficit (122,978) (118,411)
------------- -------------
Total stockholders' equity 160,106 164,147
------------- -------------
Total Liabilities and Stockholders Equity $ 406,824 $ 402,917
============= =============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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<PAGE> 4
ON COMMAND CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------------
2000 1999
----------- -----------
<S> <C> <C>
Revenues:
Room revenues $ 62,386 $ 58,522
Video system sales / other 2,578 2,711
----------- -----------
Total revenues 64,964 61,233
----------- -----------
Direct costs:
Room revenues 29,007 25,401
Video system sales / other 1,744 2,059
----------- -----------
Total direct costs 30,751 27,460
----------- -----------
Direct income 34,213 33,773
Operating expenses:
Operations 7,671 7,418
Research and development 2,107 2,062
Selling, general and administrative 5,853 6,075
Depreciation, amortization and stock based compensation 19,749 22,775
----------- -----------
Total operating expenses 35,380 38,330
----------- -----------
Operating loss (1,167) (4,557)
Interest expense (3,469) (2,444)
Interest/other income, net 175 162
----------- -----------
Loss before income taxes (4,461) (6,839)
Income tax expense 106 23
----------- -----------
Net loss $ (4,567) $ (6,862)
=========== ===========
Basic and diluted net loss per share $ (0.15) $ (0.23)
=========== ===========
Shares used in basic and diluted per share computations 30,371 30,174
=========== ===========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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<PAGE> 5
ON COMMAND CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------------
2000 1999
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (4,567) $ (6,862)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation, amortization and stock based compensation 19,749 22,775
Loss on disposal of fixed assets (15) 2
Changes in assets and liabilities:
Accounts receivable, net (7,642) (1,911)
Other assets 82 1,036
Accounts payable 1,527 (1,582)
Accounts payable to stockholder 13 (20)
Accrued compensation (624) (1,394)
Taxes payable (622) 262
Other accrued liabilities 548 (314)
----------- -----------
Net cash provided by operating activities 8,449 11,992
Cash flows from investing activities:
Capital expenditures (19,631) (20,209)
----------- -----------
Net cash used in investing activities (19,631) (20,209)
----------- -----------
Cash flows from financing activities:
Proceeds from revolving credit facility 8,000 8,000
Payments on capital lease obligations (891) -
Proceeds from issuance of common stock 1,298 40
----------- -----------
Net cash provided by financing activities 8,407 8,040
----------- -----------
Effect of exchange rate changes on cash (165) 30
----------- -----------
Net decrease in cash and cash equivalents (2,940) (147)
Cash and cash equivalents, beginning of period 8,972 7,235
----------- -----------
Cash and cash equivalents, end of period $ 6,032 $ 7,088
=========== ===========
Supplemental information:
Cash paid for interest $ 1,934 $ 2,482
=========== ===========
Cash paid for income taxes $ -- $ --
=========== ===========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
-5-
<PAGE> 6
ON COMMAND CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
1. BASIS OF PRESENTATION
On Command Corporation (the "Company" or "OCC") is a Delaware
corporation formed by Ascent Entertainment Group, Inc. ("Ascent") for
the purpose of effecting (i) the merger (the "Merger") of On Command
Video Corporation ("OCV"), a majority-owned subsidiary of Ascent, with a
wholly-owned subsidiary of OCC, after which OCV became a wholly owned
subsidiary of OCC, and (ii) the acquisition of SpectraDyne, Inc., a
wholly owned subsidiary of SpectraVision, Inc. Following the Acquisition
in 1996, SpectraDyne, Inc. changed its name to SpectraVision, Inc.
("SpectraVision"). Ascent was a majority-owned subsidiary of COMSAT
Corporation ("COMSAT") until June 27, 1997, COMSAT consummated the
distribution of its 80.67% ownership interest in Ascent to the COMSAT
shareholders on a pro-rata basis in a transaction that was tax-free for
federal income tax purposes.
On March 28, 2000, Liberty Media Corporation ("Liberty") obtained
control of Ascent pursuant to the closing of a tender offer (the
"Offer") in which Liberty offered Ascent stockholders $15.25 in cash for
each share of Ascent common stock. Liberty commenced the offer on
February 29, 2000 and under its terms and conditions, the Offer expired
on March 27, 2000. As of March 31, 2000, Liberty had purchased
approximately 85% of the outstanding stock of Ascent. Under the terms of
the Agreement and Plan of Merger (the "Merger Agreement") among Ascent,
Liberty and Liberty AEG Acquisition, Inc. ("Merger Sub") an indirect
wholly-owned subsidiary of Liberty, Merger Sub will be merged with and
into Ascent (the "Merger") and all shares not purchased in the Offer
(other than Shares held by Liberty, Merger Sub or Ascent, or shares held
by dissenting stockholders) will be converted into the right to receive
$15.25 per share in cash.
The accompanying unaudited condensed consolidated financial
statements have been prepared by the Company pursuant to the rules and
regulations of the Securities and Exchange Commission ("SEC"). While the
quarterly financial information contained in this filing is unaudited,
the financial statements presented reflect all adjustments (consisting
only of normal recurring adjustments) which the Company considers
necessary for a fair presentation of the financial position at March 31,
2000 and December 31, 1999, and the results of operations and cash flows
for the three months ended March 31, 2000 and 1999. The results for
interim periods are not necessarily indicative of the results to be
expected for the entire year.
2. NET LOSS PER SHARE
Basic and diluted net loss per share are computed by dividing net
loss (numerator) by the weighted-average number of common equivalent
shares outstanding (denominator) for the period. Common equivalent
shares include common stock options and warrants, except that at March
31, 2000 and 1999 approximately 9.7 million and 9.3 million equivalent
dilutive securities, respectively, have been excluded in
weighted-average number of common equivalent shares outstanding for the
diluted net loss per share computation as common stock equivalents
because their effect is antidilutive.
3. COMPREHENSIVE LOSS
Total comprehensive loss of $5.2 million for the three months
ended March 31, 2000 is comprised of $4.6 million of net loss and $0.6
million of negative net change in the cumulative translation account. At
March 31, 1999, total net comprehensive loss of $6.3 million is
comprised of $6.9 million of net loss and $0.6 million of positive net
change in the cumulative translation account.
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<PAGE> 7
4. DEBT
On November 24, 1997, the Company refinanced its former credit
facility and entered into an amended and restated agreement with its
lenders (the "Credit Facility"). Under the amended Credit Facility, the
amount available to the Company was increased from $150 million to $200
million, and certain other terms were amended. The Credit Facility
matures in November 2002 and, subject to certain conditions, can be
renewed for two additional years. At March 31, 2000, the Company had
$188.0 million outstanding under its Credit Facility and had access to
an additional $12.0 million of long-term financing. The Company
anticipates capital expenditures in connection with the continued
installation and conversion of hotel rooms will be approximately $70 to
$90 million during the remainder of 2000. In order to meet its business
plan for the remainder of 2000, the Company will need to raise
additional financing and re-negotiate the financial covenants in its
current Credit Facility. The Company is currently pursuing refinancing
and an increase of its Credit Facility. If the Company is unable to
raise additional financing, the Company would need to reduce its capital
spending well below the levels stated above for the year 2000 which
would have an adverse impact on OCC.
5. LITIGATION
In September 1998, OCV filed suit against Maginet, alleging
breach by Maginet of a license agreement between OCV and Maginet, and
terminating the license agreement. OCV has also demanded the payment of
license fees from Maginet, which OCC believes were due and payable under
the License Agreement and have not been paid by Maginet. Maginet has
counter-claimed against OCV, alleging that OCV breached the license
agreement, and alleging various torts by OCV in its relationship with
Maginet.
The Company is a defendant, and may be a potential defendant, in
lawsuits and claims arising in the ordinary course of its business.
While the outcomes of such claims, lawsuits, or other proceedings cannot
be predicted with certainty, management expects that such liability, to
the extent not provided for by insurance or otherwise, will not have a
material adverse effect on the financial condition of the Company.
6. NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting
for Derivative Instruments and Hedging Activities", which defines
derivatives, requires that all derivatives be carried at fair value, and
provides for hedge accounting when certain conditions are met. SFAS No.
133, as amended by SFAS 137, is effective for all fiscal quarters of
fiscal years beginning after June 15, 2000. The Company does not believe
that the adoption of this statement will have a material impact on the
Company's financial position, results of operations or cash flows.
-7-
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This Form 10-Q contains forward looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, which reflect OCC's current
expectations and assumptions on those issues. Because such statements apply to
future events, they are subject to risks and uncertainties that could cause the
actual results to differ materially. The following should be read in conjunction
with the Condensed Consolidated Financial Statements (unaudited) included
elsewhere herein, and with the Consolidated Financial Statements, notes thereto,
and Management's Discussion and Analysis of Financial Condition and Results of
Operations contained in the Company's 1999 Annual Report on Form 10-K, as filed
with the Securities and Exchange Commission.
OVERVIEW
OCC is the leading provider (by number of hotel rooms served) of in-room,
on-demand video entertainment and information services to the domestic lodging
industry. OCC has experienced rapid growth in the past seven years, increasing
its base of installed rooms from approximately 37,000 rooms at the end of 1992
to approximately 958,000 rooms at March 31, 2000, of which approximately 893,000
rooms are served by on-demand systems.
OCC provides in-room video entertainment and information services on three
technology platforms: the recently developed OCX video system, the On Command
Video (OCV) System and the SpectraVision Systems. The OCX video system provides
enhanced multimedia applications, including an improved graphical interface for
movies and games, TV-based Internet with a wireless keyboard, and other guest
services. At March 31, 2000, OCC had installed the OCX systems in approximately
60,000 hotel rooms, of which there are approximately 52,000 rooms with Internet
capability. The OCV video system is a patented video selection and distribution
technology platform that allows hotel guests to select at any time, movies and
games through the television sets in their hotel rooms. At March 31, 2000, OCC
has approximately 737,000 rooms installed with the OCV platform. There are
variations of the SpectraVision video systems still installed in hotels
including tape based scheduled and on demand systems. The SpectraVision video
system generally offers fewer movie choices than the OCV or OCX systems. At
March 31, 2000, OCC had 161,000 rooms installed with SpectraVision equipment.
In addition to movies, OCC's platforms provide for in-room viewing of
programming of select cable channels (such as HBO, Showtime, ESPN, CNN and
Disney Channel) and other interactive and information services, which includes
high speed Internet access through the OCX platform. OCC primarily provides its
services under long-term contracts to hotel chains, hotel management companies,
and individually owned and franchised hotel properties, predominantly in the
deluxe, luxury, and upscale hotel category serving business travelers, such as
Marriott, Hilton, Hyatt, Wyndham, Starwood, Doubletree, Fairmont, Embassy
Suites, Four Seasons, and other select hotels.
At March 31, 2000, approximately 86% of OCC's 958,000 installed rooms were
located in the United States, with the balance located primarily in Canada, the
Caribbean, Australia, Europe, Latin America, and the Asia-Pacific region. In
addition to installing systems in hotels served by OCC, OCC sells its systems to
certain other providers of in-room entertainment, including Hospitality Network,
Inc., which is licensed to use OCC's systems to provide on-demand, in-room
entertainment and information services to certain gaming-based, hotel properties
and ALLIN Communications, Inc., which is licensed to install OCC's systems in
cruise ships and hospitals.
ANALYSIS OF OPERATIONS
Following is selected financial information for the three months ended
March 31, 2000 compared to the same period for 1999.
-8-
<PAGE> 9
SELECTED FINANCIAL INFORMATION
(In thousands, except hotel and room amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------------------------------
% OF % OF
MARCH 31, TOTAL MARCH 31, TOTAL
2000 REVENUE 1999 REVENUE
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues:
Room Revenues $ 62,386 96.0% $ 58,522 95.6%
Video Systems/Other 2,578 4.0% 2,711 4.4%
--------- --------- --------- ---------
Total Revenues 64,964 100.0% 61,233 100.0%
Direct Costs:
Room Revenues 29,007 44.7% 25,401 41.5%
Video Systems/Other 1,744 2.7% 2,059 3.4%
--------- --------- --------- ---------
Total Direct Costs 30,751 47.3% 27,460 44.8%
--------- --------- --------- ---------
Direct Income 34,213 52.7% 33,773 55.2%
Operations 7,671 11.8% 7,418 12.1%
Research & Development 2,107 3.2% 2,062 3.4%
Selling, General & Administrative 5,853 9.0% 6,075 9.9%
--------- --------- --------- ---------
15,631 24.1% 15,555 25.4%
--------- --------- --------- ---------
EBITDA(1) 18,582 28.6% 18,218 29.8%
Depreciation, amortization and stock based 19,749 30.4% 22,775 37.2%
compensation
Interest/other exp, net 3,294 5.1% 2,282 3.7%
Taxes 106 0.2% 23 0.0%
--------- --------- --------- ---------
23,149 35.6% 25,080 41.0%
--------- --------- --------- ---------
Net Loss $ (4,567) (7.0%) $ (6,862) (11.2%)
========= ========= ========= =========
CAPITAL EXPENDITURES $ 19,631 $ 20,209
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------
AS OF % OF AS OF % OF
MARCH 31, TOTAL MARCH 31, TOTAL
2000 ROOMS 1999 ROOMS
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
TOTAL HOTELS 3,416 3,249
TOTAL ROOMS 958,000 934,000
ROOM COMPOSITION:
Geographic
Domestic 827,000 86.3% 814,000 87.2%
International 131,000 13.7% 120,000 12.8%
System Type
Scheduled Only 65,000 6.8% 92,000 9.9%
On-Demand 893,000 93.2% 842,000 90.1%
</TABLE>
- -----------
(1) EBITDA represents earnings before interest, income taxes, depreciation,
amortization and stock based compensation. The most significant
difference between EBITDA and cash provided from operations is changes
in working capital and interest expense. EBITDA is presented because it
is a widely accepted financial indicator used by certain investors and
analysts to analyze and compare companies on the basis of operating
performance. In addition, management believes EBITDA provides an
important additional perspective on the Company's operating results and
the Company's ability to service its long-term debt and fund the
Company's continuing growth. EBITDA is not intended to represent cash
flows for the period, or to depict funds available for dividends,
reinvestment or other discretionary uses. EBITDA has not been presented
as an alternative to operating income or as an indicator of operating
performance and should not be considered in isolation or as a substitute
for measures of performance prepared in accordance with generally
accepted accounting principles, which are presented in the financial
statements in Item 1 and discussed in Item 2 under Liquidity and Capital
Resources.
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<PAGE> 10
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED MARCH 31, 1999
Total revenues for the first quarter of 2000 increased $3.8 million or 6.2%
to $65.0 million, as compared to $61.2 million for the comparable period of
1999. Room revenues increased $3.9 million or 6.7% in the first quarter of 2000
to $62.4 million, as compared to $58.5 million in the first quarter of 1999. The
increase was primarily due to higher total rooms being served during the period,
a higher percentage of total rooms being served by higher revenue producing
on-demand equipment, and higher net revenues per equipped room (RER). RER
increased to $21.72 per month in the first quarter of 2000 compared to $20.96
for the first quarter of 1999. The increase in RER was due to strong buy rates
for feature movies in the quarter, reduced movie denial rates, as well as
increasing Internet, game, and free-to-guest revenues in the installed room
base. Video system sales and other revenues decreased $0.1 million or 3.7% to
$2.6 million in the first quarter of 2000, as compared to the first quarter of
1999.
Total direct costs of revenues for the first quarter of 2000 increased $3.3
million or 12.0% to $30.8 million, as compared to $27.5 million for the first
quarter of 1999. Direct costs associated with room revenue in the first quarter
of 2000 increased $3.6 million or 14.2% to $29.0 million, versus the same period
of 1999, and, as a percentage of room revenue, increased to 46.5% for the
quarter ended March 31, 2000 from 43.4% for the quarter ended March 31, 1999.
Both increases are primarily due to increases in movie royalties paid on feature
movies, hotel commissions and free-to-guest expenses overall and in relation to
the increase in room revenue. The increase in movie royalties is primarily due
to a higher percentage of feature movies in the revenue mix for the quarter
ended March 31, 2000 compared to the year earlier period. Direct costs from
video system sales and other revenues decreased $0.4 million or 19.0% to $1.7
million in the first quarter of 2000, as compared to $2.1 million in the same
period of 1999, primarily due to the decrease in video system sales. Direct
costs associated with video systems sales and other revenue as a percentage of
video system sales and other revenues decreased to 67.6% for the first quarter
of 2000 from 75.9% for the same period of 1999 due to higher margins on certain
hardware sales.
Operations expenses, which consist primarily of technical field support
costs for the hotels, for the first quarter of 2000 increased $0.3 million or
4.1% to $7.7 million, as compared to $7.4 million in the first quarter of 1999,
and as a percentage of room revenue decreased to 12.3% from 12.7% for the same
period of 1999.
Research and development expenses for the first quarter of 2000 of $2.1
million remained consistent with the $2.1 million expended in the same period of
1999, and decreased as a percentage of total revenue from 3.4% in the 1999
period to 3.2% in the 2000 period.
Selling, general and administrative expenses for the first quarter of 2000
decreased $0.2 million or 3.3% to $5.9 million, as compared to $6.1 million in
the first quarter of 1999 and as a percentage of total revenue decreased from
9.9% in the 1999 period to 9.0% in the 2000 period. The decrease is principally
due to higher than normal expenses incurred in the first quarter of 1999 related
to product management and marketing to support new products and initiatives.
EBITDA for the first quarter of 2000 increased $0.4 million or 2.2% to $18.6
million as compared to $18.2 million in the first quarter of 1999. EBITDA as a
percentage of total revenue decreased to 28.6% in the first quarter of 2000 from
29.8% in the same period of 1999. The decreased EBITDA percentage is primarily
attributable to the increase in direct costs associated with room revenue in the
first quarter of 2000 as compared to the same period of 1999.
Depreciation and amortization expenses for the first quarter of 2000
decreased $3.1 million or 13.6% to $19.7 million, as compared to $22.8 million
for the first quarter of 1999, and as a percentage of total revenue decreased to
30.4% for the quarter ended March 31, 2000 from 37.2% for the quarter ended
March 31, 1999. This decrease occurred primarily due to certain video systems
assets acquired during the 1996 acquisition of Spectravision by OCC, which were
fully depreciated in October 1999.
Interest / other expense, net for the first quarter of 2000 increased
$1.0 million or 43.5% to $3.3 million as compared to $2.3 million for the first
quarter of 1999. This increase is due to additional borrowings under the
company's revolving credit facility, an increase in interest rates and
additional interest under certain capital lease obligations which were entered
into during the third and fourth quarters of 1999.
-10-
<PAGE> 11
Provision for income taxes for the quarters ended March 31, 2000 and 1999
represents tax on income in certain domestic jurisdictions. Income taxes
increased to $0.1 million in 2000 from a nominal amount for the same period in
1999.
Net loss decreased to $4.6 million for the first quarter of 2000 from $6.9
million for the first quarter of 1999 due to various factors as described above.
SEASONALITY
The Company's business is expected to be seasonal where revenues are
influenced principally by hotel occupancy rates and the "buy rate" or percentage
of occupied rooms at hotels that buy movies or other services at the property.
Higher revenues are generally realized during the summer months and lower
revenues realized during the winter months due to business and vacation travel
patterns which impact the lodging industry's occupancy rates. Buy rates
generally reflect the hotel's guest demographic mix, the popularity of the
motion picture or services available at the hotel and the guests' other
entertainment alternatives.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of cash during the three months ended March
31, 2000 were cash from operations of $8.4 million, and borrowings of $8.0
million from the Company's Credit Facility (see note 4 of Notes to Condensed
Consolidated Financial Statements). Cash was expended primarily for capital
expenditures which totaled $19.6 million for the first three months of the year,
primarily for the conversion of hotels equipped with SpectraVision and OCV
systems to OCC's new OCX systems, the installation of new hotels with OCC's
systems, increased inventory, and internal fixed asset purchases.
The amount of the Company's Credit Facility is $200 million. At March 31,
2000, the Company had $188.0 million outstanding under its Credit Facility and
had access to an additional $12.0 million of long-term financing. The Company
anticipates capital expenditures in connection with the continued installation
and conversion of hotel rooms will be approximately $70 to $90 million during
the remainder of 2000. In order to meet its business plan for the remainder of
2000, the Company will need to raise additional financing and re-negotiate the
financial covenants in its current Credit Facility. The Company is currently
pursuing refinancing and an increase of its Credit Facility. If the Company is
unable to raise additional financing, the Company would need to reduce its
capital spending well below the levels stated above for the year 2000 which
would have an adverse impact on OCC.
YEAR 2000
The Company had developed a formal plan to identify, evaluate and implement
changes to its computer systems as necessary to address the Year 2000 issue.
Through the date of this report, there have been no adverse effects on the
Company's business, results of operations or financial condition as a result of
Year 2000 problems with its computer systems and operations. In addition, the
Company has not encountered any Year 2000 problems with any of its vendors or
customers. Although the Company has made reasonable efforts to identify and
protect itself with respect to external Year 2000 problems, there can be no
assurance that the Company will not be affected by such problems.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk from changes in interest rates, which
could impact its results of operations and financial condition, particularly,
the Company's interest expense and cash flow. Revolving loans extended under the
Credit Facility generally bear an interest rate that is variable and based on
the London Interbank Offering Rate ("LIBOR") and on certain operating ratios of
the Company. At March 31, 2000, the Company had $188.0 million outstanding on
the Credit Facility and the weighted average interest rate on the Credit
Facility was 6.7%. Assuming no increase or decrease in the amount outstanding a
hypothetical immediate 100 basis point increase (or decrease) in interest rates
at March 31, 2000 would increase (or decrease), the Company's interest expense
and cash outflow by approximately $1.4 million for the remaining nine months of
the year.
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<PAGE> 12
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS:
From time to time the Company has been, or may become, involved in legal
proceedings incidental to the conduct of its business. While the outcome of such
proceedings cannot be predicted with certainty, the Company does not believe any
such proceedings presently pending will have a material adverse effect on the
Company's financial position or its result of operations. (See note 5).
ITEM 2. CHANGES IN SECURITIES:
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES:
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION:
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
EXHIBIT NO. DESCRIPTION
(A) 27.0 Financial Data Schedule
(B)Reports on Form 8-K
(1) The Registrant filed with the Commission on February 24, 2000, a
form describing (i) the election of two new directors and (ii)
the resignation of the Registrant's acting chief executive
officer, who remained as Chairman.
(2) The Registrant filed with the Commission on April 12, 2000 a form
8-K describing a change of control of the Registrant as a result
of the acquisition by Liberty Media Corporation of control of
Ascent Entertainment Group, Inc.
- ---------------
-12-
<PAGE> 13
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, in the City of San
Jose, State of California on May 14, 2000.
On Command Corporation
/s/ PAUL J. MILLEY
-------------------------------------
Paul J. Milley
Senior Vice President, Finance
(Principal Accounting Officer)
-13-
<PAGE> 14
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
----------- -----------
(A) 27.0 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS FOR THE QUARTER ENDED MARCH 31, 2000 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> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 6,032
<SECURITIES> 0
<RECEIVABLES> 39,667
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 46,802
<PP&E> 285,101
<DEPRECIATION> 0
<TOTAL-ASSETS> 406,824
<CURRENT-LIABILITIES> 57,127
<BONDS> 0
0
0
<COMMON> 305
<OTHER-SE> 159,801
<TOTAL-LIABILITY-AND-EQUITY> 406,824
<SALES> 64,964
<TOTAL-REVENUES> 64,964
<CGS> 30,751
<TOTAL-COSTS> 30,751
<OTHER-EXPENSES> 35,380
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,469
<INCOME-PRETAX> (4,461)
<INCOME-TAX> 106
<INCOME-CONTINUING> (4,567)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,567)
<EPS-BASIC> (0.15)
<EPS-DILUTED> (0.15)
</TABLE>
