<PAGE>
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM 10-Q
(MARK ONE)
[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
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
----------------- -----------------
Commission file number: 001-12391
--------------------------
PANAVISION INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 13-3593063
- ---------------------------------------- -----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6219 DE SOTO AVENUE
WOODLAND HILLS, CALIFORNIA 91367
- ---------------------------------------- -----------------------------
(Address of principal executive offices) (Zip code)
(818) 316-1000
Registrant's telephone number including area code
--------------------------
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 [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES
OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE.
As of May 10, 2000, there were 8,055,619 shares of Panavision Inc.
Common Stock outstanding.
================================================================================
<PAGE>
PANAVISION INC.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2000
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Operations.......................3
Condensed Consolidated Balance Sheets.................................4
Condensed Consolidated Statements of Cash Flows.......................5
Notes to Condensed Consolidated Financial Statements..................6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.............................................8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings....................................................11
Item 2. Changes in Securities................................................11
Item 3. Defaults Upon Senior Securities......................................11
Item 4. Submission of Matters to a Vote of Security Holders..................11
Item 5. Other Information....................................................11
Item 6. Exhibits and Reports on Form 8-K.....................................11
SIGNATURES....................................................................12
2
<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS
The financial information herein and management's discussion thereof,
include consolidated data for Panavision Inc. ("Registrant" or "Panavision") and
its subsidiaries. Registrant and its subsidiaries are sometimes herein referred
to collectively as the "Company".
PANAVISION INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FIRST QUARTER ENDED
MARCH 31,
-----------------------
2000 1999
-------- --------
<S> <C> <C>
Camera rental ........................................ $ 31,663 $ 31,113
Lighting rental....................................... 7,920 7,148
Sales and other....................................... 8,623 8,756
-------- --------
Total rental revenue and sales........................ 48,206 47,017
Cost of camera rental................................. 15,657 15,575
Cost of lighting rental............................... 6,387 6,173
Cost of sales and other............................... 4,998 5,003
-------- --------
Gross margin.......................................... 21,164 20,266
Selling, general and administrative expenses.......... 15,110 14,139
Research and development expenses..................... 1,785 1,357
-------- --------
Operating income...................................... 4,269 4,770
Interest income....................................... 78 91
Interest expense...................................... (11,627) (10,202)
Foreign exchange loss................................. (537) (736)
Other, net............................................ 269 205
-------- --------
Loss before income taxes.............................. (7,548) (5,872)
Income tax provision ................................. (557) (201)
-------- --------
Net loss.............................................. $ (8,105) $ (6,073)
======== ========
Loss per share - Basic and Diluted.................... $ (1.01) $ (0.75)
======== ========
Shares used in computation - Basic and Diluted........ 8,056 8,056
</TABLE>
See accompanying notes.
3
<PAGE>
PANAVISION INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PAR VALUE DATA)
<TABLE>
<CAPTION>
MARCH 31, 2000 DECEMBER 31, 1999
-------------- -----------------
(UNAUDITED)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents............................... $ 3,323 $ 5,417
Accounts receivable (net of allowance of $2,381 and 28,918 30,683
$2,368)..............................................
Inventories............................................. 10,330 10,366
Prepaid expenses........................................ 2,806 2,854
Other current assets.................................... 884 983
--------- ---------
Total current assets....................................... 46,261 50,303
Property, plant and equipment, net......................... 210,402 212,748
Other...................................................... 28,227 28,507
--------- ---------
Total assets............................................... $ 284,890 $ 291,558
========= =========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Accounts payable........................................ $ 7,996 $ 7,991
Accrued liabilities..................................... 19,228 23,504
Current maturities of long-term debt.................... 11,887 9,750
--------- ---------
Total current liabilities.................................. 39,111 41,245
Long-term debt............................................. 478,957 473,429
Deferred tax liabilities................................... 4,848 4,878
Other liabilities.......................................... 3,179 3,246
Commitments and Contingencies
Stockholders' deficiency:
Preferred stock, $0.01 par value; 2,000 shares
authorized; no shares issued and outstanding.......... - -
Common stock, $0.01 par value; 50,000 shares
authorized; 8,056 shares issued and outstanding
at March 31, 2000 and December 31, 1999............... 81 81
Additional paid-in capital.............................. 168,032 168,032
Accumulated deficit..................................... (403,407) (395,302)
Accumulated other comprehensive loss.................... (5,911) (4,051)
--------- ---------
Total stockholders' deficiency........................ (241,205) (231,240)
--------- ---------
Total liabilities and stockholders' deficiency............. $ 284,890 $ 291,558
========= =========
</TABLE>
See accompanying notes.
4
<PAGE>
PANAVISION INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
2000 1999
---- ----
OPERATING ACTIVITIES
<S> <C> <C>
Net loss...................................................... $ (8,105) $ (6,073)
Adjustments to derive net cash provided by operating
activities:
Depreciation and amortization............................ 9,318 8,808
Gain on sale of property and equipment................... (196) (537)
Amortization of discount on subordinated notes........... 4,278 3,894
Changes in operating assets and liabilities:
Accounts receivable.................................... 1,765 (561)
Inventories............................................ 36 (289)
Prepaid expenses and other current assets.............. 147 (577)
Accounts payable....................................... 5 1,558
Accrued liabilities.................................... (4,276) (2,803)
Other, net............................................... 108 559
-------- --------
Net cash provided by operating activities..................... 3,080 3,979
INVESTING ACTIVITIES
Capital expenditures.......................................... (7,772) (9,938)
Proceeds from dispositions of fixed assets.................... 195 735
-------- --------
Net cash used in investing activities......................... (7,577) (9,203)
FINANCING ACTIVITIES
Borrowings under notes payable and credit agreement........... 5,000 3,000
Repayments of notes payable and credit agreement.............. (2,500) (3,314)
-------- --------
Net cash provided by (used in) financing activities.......... 2,500 (314)
Effect of exchange rate changes on cash....................... (97) (41)
-------- --------
Net decrease in cash and cash equivalents..................... (2,094) (5,579)
Cash and cash equivalents at beginning of period.............. 5,417 9,772
-------- --------
Cash and cash equivalents at end of period.................... $ 3,323 $ 4,193
======== ========
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid during the period............................... $ 7,277 $ 6,109
Income taxes paid during the period........................... $ 472 $ 597
</TABLE>
See accompanying notes.
5
<PAGE>
PANAVISION INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PREPARATION
The accompanying condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions for Form 10-Q and Rule 10-01 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, all adjustments (consisting
of normal recurring adjustments) considered necessary for a fair presentation
have been included. The results of operations for interim periods are not
necessarily indicative of the results that may be expected for the fiscal year.
The condensed consolidated financial statements should be read in conjunction
with the consolidated financial statements and accompanying notes included in
the Company's Annual Report on Form 10-K for the year ended December 31, 1999.
All terms used but not defined elsewhere herein have the meaning ascribed to
them in the Company's 1999 Annual Report on Form 10-K.
The condensed consolidated financial statements include the accounts of
Panavision and its majority-owned subsidiaries. All significant intercompany
amounts and transactions have been eliminated.
Certain amounts in previously issued financial statements have been
reclassified to conform to the 2000 presentation.
2. INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
MARCH 31, 2000 DECEMBER 31, 1999
-------------- -----------------
<S> <C> <C>
Finished goods................. $ 5,899 $ 4,405
Work-in-process................ 237 202
Component parts................ 2,009 1,924
Supplies....................... 2,185 3,835
---------- ----------
$ 10,330 $ 10,366
========== ==========
</TABLE>
3. USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from such estimates.
6
<PAGE>
PANAVISION INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
(UNAUDITED)
4. GEOGRAPHICAL AND BUSINESS SEGMENT INFORMATION
The following table presents revenue and other financial information by
business segment (in thousands):
<TABLE>
<CAPTION>
------------------------------------------------------------------
THREE MONTHS ENDED NORTH ASIA
MARCH 31, 2000 AMERICA EUROPE PACIFIC CORPORATE TOTAL
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenue from
external customers........... $25,241 $16,342 $6,623 $ - $48,206
Intersegment revenue........... 3,015 1,262 - - 4,277
Operating income (loss)........ 5,507 (2,664) 1,030 396 4,269
<CAPTION>
------------------------------------------------------------------
THREE MONTHS ENDED NORTH ASIA
MARCH 31, 1999 AMERICA EUROPE PACIFIC CORPORATE TOTAL
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenue from
external customers........... $24,036 $18,324 $4,657 $ - $47,017
Intersegment revenue........... 2,595 1,194 - - 3,789
Operating income (loss)........ 5,532 (1,117) 476 (121) 4,770
</TABLE>
5. COMPREHENSIVE LOSS
For the quarter ended March 31, 2000 and 1999, comprehensive loss amounted
to $(9,965,000) and $(7,519,000), respectively. The difference between net loss
and comprehensive loss relates to the change in foreign currency translation
adjustments.
7
<PAGE>
PANAVISION INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
QUARTER ENDED MARCH 31, 2000 COMPARED TO QUARTER ENDED MARCH 31, 1999
CAMERA RENTAL OPERATIONS
Camera rental revenue for the first quarter of 2000 was $31.7 million.
Revenue increased $0.6 million, or 1.9%, compared to the first quarter of 1999.
The increase was primarily due to modest increases in rentals associated with
feature film productions throughout most regions of the world, partially offset
by lower feature film rental revenue in the U.K.
Cost of camera rental for the current quarter was $15.7 million, an
increase of $0.1 million, or 0.6%, from the first quarter of 1999.
LIGHTING RENTAL OPERATIONS
Lighting rental revenue for the first quarter was $7.9 million, an increase
of $0.8 million, or 11.3%, compared to the first quarter of 1999. The increase
reflects additional lighting rentals generated on the lighting equipment
acquired in Australia in the second quarter of 1999, offset by lower feature
film revenue at Lee Lighting in the U.K.
Cost of lighting rental for the current quarter was $6.4 million, an
increase of $0.2 million, or 3.2%, from the first quarter of 1999. The increase
was primarily due to the increase in costs associated with the expansion of the
Australian lighting operation, offset by a reduction in labor costs associated
with the lower revenue at Lee Lighting.
OPERATING COSTS
Selling, general and administrative expenses for the first quarter of 2000
were $15.1 million, an increase of $1.0 million, or 7.1%, from the first quarter
of 1999. The increase was the result of additional operating costs associated
with the expansion of the Australian lighting operation and higher corporate
costs and legal expenses.
Research and development expenses for the current quarter were $1.8
million, an increase of $0.4 million, or 28.6%, from the first quarter of 1999.
The increase was primarily due to increased costs related to the development of
products for digital application.
INTEREST, TAXES AND OTHER
Net interest expense for the first quarter of 2000 was $11.6 million, an
increase of $1.5 million, or 14.9%, from the first quarter of 1999. The increase
primarily reflects higher interest rates as compared to the first quarter of
1999.
8
<PAGE>
PANAVISION INC.
The effective tax rates for the quarters ended March 31, 2000 and March 31,
1999 were 7.4% and 3.4%, respectively. As of February 1, 1999, the Company and
certain of its subsidiaries and Mafco entered into a tax sharing agreement (the
"Tax Sharing Agreement"), pursuant to which Mafco has agreed to indemnify the
Company against federal, state or local income tax liabilities of the
consolidated or combined group of which Mafco (or a subsidiary of Mafco other
than the Company or its subsidiaries) is the common parent for taxable periods
beginning on or after February 1, 1999 during which the Company or a subsidiary
of the Company is a member of such group. See Note 6 of the 1999 Form 10-K for a
discussion of the Tax Sharing Agreement.
LIQUIDITY AND CAPITAL RESOURCES
The following table sets forth certain information from the Company's
Condensed Consolidated Statements of Cash Flows for the periods indicated (in
thousands):
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
------------------------
2000 1999
------- -------
<S> <C> <C>
Net cash provided by (used in):
Operating activities.................................. $ 3,080 $ 3,979
Investing activities.................................. (7,577) (9,203)
Financing activities.................................. 2,500 (314)
</TABLE>
Cash provided by operating activities, for the three months ended March 31,
2000, totaled $3.1 million comprised of the net loss of $8.1 million, adjusted
for depreciation and amortization of $9.3 million and the amortization of the
discount on the Notes of $4.3 million, offset by the net change in working
capital (excluding cash) and other miscellaneous items totaling $2.6 million.
Total investing activities of $7.6 million included $7.8 million of capital
expenditures, offset by $0.2 million in proceeds received from the disposition
of fixed assets. The majority of the capital expenditures were used to
manufacture camera rental systems and accessories. Cash provided by financing
activities was $2.5 million, primarily reflecting an increase in net borrowings
under the Credit Agreement for the year.
Cash provided by operating activities, for the quarter ended March 31,
1999, was $4.0 million comprised of the net loss of $6.1 million, adjusted for
depreciation and amortization of $8.8 million and the amortization of the
discount on the Notes of $3.9 million, offset by the net change in working
capital (excluding cash) and other miscellaneous items totaling $2.6 million.
Total investing activities of $9.2 million were comprised of capital
expenditures of $9.9 million, offset by $0.7 million of proceeds received from
the disposition of fixed assets. The majority of the capital expenditures were
used to manufacture camera rental systems and accessories. Cash used in
financing activities of $0.3 million was used as a reduction of outstanding
borrowings.
The Company intends to use the cash provided by operating activities to
make additional capital expenditures to manufacture camera systems and
accessories and purchase other rental equipment. Although there can be no
assurance, the Company believes that its existing working capital together with
borrowings under the Credit Agreement and anticipated cash flow from operating
activities will be sufficient to meet its expected operating and capital
spending requirements for the foreseeable future. The Company will not be
required to pay interest on the Notes until August 1, 2002, which management
believes will assist the Company in implementing its strategy.
Panavision currently anticipates that in order to pay the principal amount
at maturity of the Notes or upon the occurrence of an Event of Default (as
defined in the Notes), to redeem the Notes or to repurchase the Notes upon the
occurrence of a Change of Control (as defined in the Notes), Panavision will be
required to adopt one or more alternatives, such as seeking capital
contributions or loans from its affiliates, refinancing its indebtedness or
selling its equity securities. None of the affiliates of the Company will be
9
<PAGE>
PANAVISION INC.
required to make any capital contributions or other payments to the Company with
respect to the Company's obligations on the Notes, and the obligations of the
Company with respect to the Notes will not be guaranteed by any affiliate of the
Company or any other person. There can be no assurance that any of the foregoing
actions could be effected on satisfactory terms, that they would be sufficient
to enable the Company to make any payments in respect of the Notes when required
or that any of such actions would be permitted by the terms of the Indenture or
the debt instruments of Panavision then in effect.
Panavision is a holding company whose only material asset is the ownership
interest in its subsidiaries. Panavision's principal business operations are
conducted by its subsidiaries, and Panavision has no operations of its own.
Accordingly, Panavision's only source of cash to pay its obligations is expected
to be distributions with respect to its ownership interests in its subsidiaries.
There can be no assurance that Panavision's subsidiaries will generate
sufficient cash flow to pay dividends or distribute funds to Panavision or that
applicable state law and contractual restrictions, including negative covenants
contained in the debt instruments of such subsidiaries, will permit such
dividends or distributions.
FORWARD-LOOKING STATEMENTS
This quarterly report on Form 10-Q for the period ended March 31, 2000, as
well as certain of the Company's other public documents and statements and oral
statements contain forward-looking statements that reflect management's current
assumptions and estimates of future performance and economic conditions. Such
statements are made in reliance upon safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. The Company cautions investors that
any forward-looking statements are subject to risks and uncertainties that may
cause actual results and future trends to differ materially from those
projected, stated, or implied by the forward-looking statements.
In addition to factors described in the Company's Securities and Exchange
Commission filings and others, the following factors could cause the Company's
actual results to differ materially from those expressed in any forward-looking
statements made by the Company: (a) a significant reduction in the number of
feature film, commercial and series television productions; (b) competitive
pressures arising from changes in technology, customer requirements and industry
standards; (c) an increase in expenses related to new product initiatives and
product development efforts; (d) unfavorable foreign currency fluctuations; and
(e) significant increases in interest rates. The Company assumes no
responsibility to update the forward-looking statements contained in this
filing.
Panavision is a leading designer and manufacturer of high-precision camera
systems, comprising cameras, lenses and accessories for the motion picture and
television industries. Panavision systems are rented through its domestic and
international owned-and-operated facilities and agent network.
10
<PAGE>
PART II
ITEM 1. LEGAL PROCEEDINGS
No material legal proceedings are pending.
ITEM 2. CHANGES IN SECURITIES
There were no modifications made to the rights of stockholders of any
class of securities during the quarter ended March 31, 2000.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
There were no events of default upon senior securities during the
quarter ended March 31, 2000.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during
the first quarter of 2000.
ITEM 5. OTHER INFORMATION
No additional information need be presented.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27. Financial Data Schedule.
(b) There were no Current Reports on Form 8-K filed in the first quarter
of 2000.
11
<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.
PANAVISION INC.
Date: May 11, 2000 By: /S/ JOHN S. FARRAND
------------------------- -------------------------------------
John S. Farrand
President and Chief Executive Officer
and Director
Date: May 11, 2000 By: /S/ JOSEPH P. PAGE
------------------------- -------------------------------------
Joseph P. Page
Vice Chairman, Director and
Chief Administrative Officer
Date: May 11, 2000 By: /S/ SCOTT L. SEYBOLD
------------------------- -------------------------------------
Scott L. Seybold
Executive Vice President and
Chief Financial Officer
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<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> 3,323
<SECURITIES> 0
<RECEIVABLES> 31,299
<ALLOWANCES> 2,381
<INVENTORY> 10,330
<CURRENT-ASSETS> 46,261
<PP&E> 468,253
<DEPRECIATION> 257,851
<TOTAL-ASSETS> 284,890
<CURRENT-LIABILITIES> 39,111
<BONDS> 0
0
0
<COMMON> 81
<OTHER-SE> (241,286)
<TOTAL-LIABILITY-AND-EQUITY> 284,890
<SALES> 8,623
<TOTAL-REVENUES> 48,206
<CGS> 4,998
<TOTAL-COSTS> 27,042
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (60)
<INTEREST-EXPENSE> (11,627)
<INCOME-PRETAX> (7,548)
<INCOME-TAX> (557)
<INCOME-CONTINUING> (8,105)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,105)
<EPS-BASIC> (1.01)
<EPS-DILUTED> (1.01)
</TABLE>
