FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the Quarterly Period Ended March 31, 1995
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 NO. 0-7843
LEISURE CONCEPTS, INC.
(Exact name of registrant as specified in its Charter)
NEW YORK
(State of Incorporation)
13-2691380
(I.R.S. Employer Identification Number)
1414 Avenue of the Americas, New York, New York
(Address of Principal Executive Offices)
10019
(Zip Code)
(212) 758-7666
(Registrant's Telephone Number, Including Area Code)
NOT APPLICABLE
(Former Name, Former Address and Former Fiscal Year if changed since last
report)
Indicate by a check mark whether the registrant: (1) has filed all annual,
quarterly and other reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or 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 _______
Indicate the number of shares outstanding of each of the Registrant's classes of
common stock, as of the close of the latest practicable date.
Class Outstanding at May 11, 1995
Common Stock, $.01 Par Value 2,944,831
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LEISURE CONCEPTS, INC.
AND SUBSIDIARIES
INDEX
PAGE NUMBER
PART I: FINANCIAL INFORMATION
Item 1: Financial Statements
Consolidated Balance Sheets
March 31, 1995 (Unaudited) and
December 31, 1994. 1
Consolidated Statements of Operations 2
Three Months Ended
March 31, 1995 and 1994 (Unaudited)
Consolidated Statements of Cash Flows 3
Three Months Ended
March 31, 1995 and 1994 (Unaudited)
Notes to Consolidated Financial 4
Statements (Unaudited)
Item 2: Management's Discussion and Analysis 6
of Financial Condition and Results of Operations
PART II: OTHER INFORMATION 9
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LEISURE CONCEPTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
1995 1994
---- ----
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $10,200,731 $7,371,311
Accounts receivable, net 3,385,919 14,908,245
Film inventory-net 1,403,645 764,259
Prepaid refundable income taxes 900,817 565,493
Prepaid expenses and other current assets 309,357 416,142
---------- ----------
Total current assets 16,200,469 24,025,450
FURNITURE FIXTURES AND COMPUTERS-net 392,940 392,481
FILM INVENTORY-Noncurrent 1,448,307 1,448,307
ACCOUNTS RECEIVABLE-Noncurrent, net 2,898,764 3,055,035
SECURITY DEPOSITS AND OTHER ASSETS 190,035 455,123
----------- -----------
TOTAL ASSETS $21,130,515 $29,376,396
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Due to licensors $2,850,181 $1,800,036
Media payable 4,394,148 13,107,185
Accounts payable and accrued expenses 535,633 632,751
Current deferred tax liability 326,350 326,350
--------- -----------
Total current liabilities 8,106,312 15,866,322
NONCURRENT DEFERRED TAX LIABILITY 933,316 933,316
--------- -----------
Total liabilities 9,039,628 16,799,638
---------- -----------
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value-authorized,
3,000,000 shares;none issued
Common stock, $.01 par value-authorized
10,000,000 shares; issued 2,944,831 shares 29,448 29,448
Additional paid-in capital 4,429,906 4,429,906
Retained earnings 7,631,533 8,117,404
------------ -----------
Total stockholders equity 12,090,887 12,576,758
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY $21,130,515 $29,376,396
============ ============
See notes to consolidated financial statements
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LEISURE CONCEPTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED
March 31, March 31,
1995 1994
---- ----
REVENUES:
Net revenues $933,542 $1,606,952
COSTS AND EXPENSES:
Selling, general and administrative 1,883,805 1,826,552
Amortization of capitalized film cost 13,632 242,919
-------- ---------
Total costs and expenses 1,897,437 2,069,471
(963,895) (462,519)
INTEREST INCOME 112,024 67,371
-------- --------
LOSS BEFORE INCOME TAX (BENEFIT) (851,871) (395,148)
INCOME TAX (BENEFIT) (366,000) (170,000)
--------- ----------
NET LOSS ($485,871) ($225,148)
PER SHARE AMOUNTS:
Loss per common and dilutive
common equivalent share ($.16) ($.07)
========= =========
Loss per common share-
assuming full dilution ($.16) ($.07)
========= =========
Weighted average number of common
and common equivalent shares outstanding 2,985,572 3,281,533
========= ==========
See accompanying notes to consolidated financial statements
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LEISURE CONCEPTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED
March 31, March 31,
1995 1994
---- ----
OPERATING ACTIVITIES:
Net loss ($485,871) ($225,148)
Adjustments to reconcile net loss
to net cash provided by operating
activities:
Depreciation and amortization 52,562 45,213
Amortization of capitalized film cost 13,632 242,919
Changes in operating assets and liabilities
(using) providing cash:
Accounts receivable 11,678,597 1,304,319
Film inventory (653,018) (386,216)
Prepaid/refundable taxes (335,324) (178,005)
Prepaid expenses and other current assets 106,785 (347,138)
Security deposits and other assets 250,088 44,309
Due to licensors 1,050,145 67,351
Media payable (8,713,037) -
Accounts payable and accrued expenses (97,118) 106,138
------------ ----------
Net cash provided by operating activities 2,867,441 673,742
------------ ----------
INVESTING ACTIVITIES:
Purchase of furniture, fixtures and equipment (38,021) (14,159)
------------ ----------
Net cash used in investing activities (38,021) (14,159)
------------ ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS 2,829,420 659,583
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 7,371,311 6,275,146
------------ ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $10,200,731 $6,934,729
============ ============
See notes to consolidated financial statements
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LEISURE CONCEPTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
March 31, 1995
Note 1
The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes as
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting only of
normal recurring adjustments) considered necessary for a fair presentation of
the interim financial information have been included. Operating results for
three months ending March 31, 1995 are not necessarily indicative of the results
that may be expected for the year ended December 31, 1995. For further
information, refer to the consolidated financial statements and footnotes
thereto included in Leisure Concepts, Inc.'s ("LCI" or the "Company") Form 10-K
for the year ended December 31, 1994.
Note 2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: For a summary of significant
accounting policies reference is made to the Company's report on Form 10-K
previously filed for the year ended December 31, 1994.
Note 3
PER SHARE AMOUNTS: Earnings per common and dilutive common equivalent share
are based on the weighted average number of shares and common equivalent
shares outstanding during the period. Common shares issuable upon the
exercise of options are included as common equivalent shares when their
inclusion is dilutive using the treasury stock method.
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Note 4
STOCK OPTIONS:
In accordance with the provisions of the 1994 stock option plan, on January 1,
1995 options to purchase 100,000 shares of the Company's common stock were
granted to the Chairman and Chief Executive Officer of the Company and options
to purchase 50,000 shares were granted to each of the two outside directors. All
such options were at an exercise price of $3.625 the market price of the
Company's common stock at that time. In addition, options to purchase 130,000
shares of the Company's common stock were granted to employees other than
directors under the Company's 1993 and 1986 Plans. Such options were at an
exercise price of $2.625, the market price of the Company's common stock at that
time.
Note 5
RECLASSIFICATIONS: Certain reclassifications have been made to the
1994 financial statements to conform with the 1995 presentation.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS:
The Company typically derives a substantial portion of its revenues from a small
number of properties, which properties usually generate revenues only for a
limited period of time. Because the Company's revenues are highly subject to
changing fashion in the toy and entertainment business, its licensing revenues
from year to year from particular sources are subject to dramatic increases and
decreases. It is not possible to precisely anticipate the length of time a
project will be commercially successful, if at all. Popularity of properties can
vary from months to years. As a result, the Company's revenues and net income
may fluctuate significantly between comparable periods. The Company's revenues
have historically been primarily derived from the license of toy and game
concepts. Thus a substantial portion of the Company's revenues and net income
are subject to the seasonal variations of the toy and game industry. Typically,
a majority of toy orders are shipped in the third and fourth calendar quarters.
In addition the Company's media buying subsidiary concentrates its activities on
the youth oriented market. As a result, most of its revenue is earned in the
third and fourth quarters when the majority of toy and video game advertising
occurs. As a result, in the Company's usual experience, its net income during
the second half of the year will generally be greater than during the first half
of the year. Furthermore, the Company has little control over the timing of
guarantee and minimum payments, some of which are made upon the execution and
delivery of license agreements.
Three Months Ended March 31, 1995 Compared to Three Months Ended March 31, 1994
Net revenue decreased 42% ($674,000) for the three month period ended March 31,
1995 as compared to the same period in 1994. Increased revenue was recognized
from the Nintendo property, however substantial decreases occurred in the "Swan
Princess" and "Shadow" properties. Both of these properties were tied to the
success of theatrical motion pictures released during 1994. Such theatrical
releases were not sufficiently successful to provide sustained interest in
associated licensed merchandise. Licensing revenues from the Company's
international subsidiary increased moderately from the comparable period in the
prior year primarily due to the success of the property "Tots TV" a British
preschool program. Revenue from Summit Media was consistent with the comparable
year ago period. Due to the seasonal nature of Summit's business, the majority
of its revenue will be recognized during the second half of the year.
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Selling, general and administrative expenses increased by 3% ($57,000) for the
three month period ended March 31, 1995 when compared to the same period in
1994. The higher level of expenditures in the current year are principally due
to increased costs associated with expanding the operations of Summit Media to
accommodate new business. Summit provides media buying, planning and television
syndication services specializing in the youth oriented market. These increases
were offset for the most part by cost reductions initiated in 1994 in the
Company's licensing business.
At March 31, 1995 there were approximately $2,851,000 of capitalized film
production costs. The increase in such costs from December 31, 1994 relates to a
television series project titled "WMAC Masters". "WMAC Masters" is a weekly
syndicated television program produced by the Company's 4Kids Productions
subsidiary in cooperation with Renaissance Atlantic Films. The Program is
scheduled for launch in the Fall of 1995 and has been cleared for broadcast in
over 80% of the country by the Company's Summit Media subsidiary.
Amortization of capitalized film cost decrease by approximately $230,000 for the
three month period ending March 31, 1995 when compared to the same period in
1994. The 1994 amortization related primarily to the Monster Wars syndicated
television program.
Interest income increased by approximately 66% ($45,000) for the three months
ending March 31, 1995 as compared to the same period last year. The increase in
interest income for the three months is primarily due to higher yields on
invested cash.
LIQUIDITY AND CAPITAL RESOURCES:
At March 31, 1995, the Company had working capital of $8,094,157 as compared to
working capital of $8,159,128 at December 31, 1994. The decrease in working
capital of $64,971 is primarily due to the cost of funding the operating loss of
the Company's activities as well as funding the "WMAC Masters" television show.
Cash and cash equivalents increased by $2,829,420 from December 31, 1994. The
increase in cash and cash equivalents is due primarily to the collection of
receivables from the Company's seasonally higher 4th quarter activities. This
increase was offset by cash expenditures associated with film inventory cost.
-7-
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Accounts receivable, net (current and noncurrent) decreased from $17,963,280 at
December 31, 1994 to $6,284,683 at March 31, 1995. This decrease is primarily
due to the Company's media buying activities. The seasonality of the Company's
business tends to generate higher receivables in the fourth quarter which are
generally collected in the first quarter. As a result higher receivables at year
end are converted to cash during the first quarter. There is a corresponding
decrease in media payable of approximately $ 8,713,037.
Amounts due to licensor, which represents the owner's share of royalties
collected, increased by $1,050,145 to $2,850,181 from December 31, 1994. The
increase is primarily due to a higher amounts of royalties collected during the
quarter which are payable to licensor after the close of the quarter.
In the opinion of management, the Company will be able to satisfy its
foreseeable financial obligations from its current working capital. In addition,
the Company has established a $5,000,000 unsecured credit facility with Chemical
Bank for general working capital purposes. As of May 11, 1995 there have been no
borrowings under this facility.
-8-
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PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
None
b. Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: May 11, 1995
LEISURE CONCEPTS, INC.
By:
Joseph P. Garrity
Executive Vice President
Chief Financial Officer
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