<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) October 19, 1995
NATIONAL MEDIA CORPORATION
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(Exact name of registrant as specified in charter)
Delaware I-6715 13-2658741
- ------------------------ ----------------------- ---------------------
(State or other juris- (Commission File Number) (IRS Employer Identi-
diction of incorporation) fication No.)
1700 Walnut Street, Philadelphia, PA 19103
- --------------------------------------- ----------
(Address of principle executive offices) (Zip Code)
Registrant's telephone number, including area code 215-772-5000
------------
N/A
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(Former name or former address, if changed since last report.)
------------------------------------
<PAGE>
On October 25, 1995, the registrant acquired (the
"Acquisition") all of the outstanding capital stock of DirectAmerica Corporation
and California Production Group, Inc. (collectively, "DirectAmerica"), two
corporations which were under common ownership and management. The registrant
reported the Acquisition on its Current Report on Form 8-K dated October 19,
1995 (the "Form 8-K"). Item 7 of the Form 8-K is hereby revised and
supplemented to include certain financial statements of DirectAmerica, certain
pro forma financial information with respect to the Acquisition and the exhibit
contained herein.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibit
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(a) Financial Statements of Businesses Acquired.
--------------------------------------------
DirectAmerica Corporation and
California Production Group, Inc.
Combined Financial Statements
Nine months ended September 30, 1995
Contents
Report of Independent Auditors...............................................1
Audited Combined Financial Statements
Combined Balance Sheet.......................................................2
Combined Statement of Operations.............................................3
Combined Statement of Shareholders' Equity...................................4
Combined Statement of Cash Flows.............................................5
Notes to Combined Financial Statements.......................................6
<PAGE>
Report of Independent Auditors
Shareholder of
DirectAmerica Corporation
We have audited the accompanying combined balance sheet of DirectAmerica
Corporation and California Production Group, Inc. as of September 30, 1995, and
the related combined statement of operations, shareholders' equity and cash
flows, for the nine months ended September 30, 1995. These financial statements
are the responsibility of the Companies' management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of
DirectAmerica Corporation and California Production Group, Inc. at September 30,
1995, and the combined results of their operations and their cash flows for the
nine months ended September 30, 1995, in conformity with generally accepted
accounting principles.
Ernst & Young LLP
Philadelphia, Pennsylvania
December 12, 1995
<PAGE>
DirectAmerica Corporation and
California Production Group, Inc.
Combined Balance Sheet
September 30, 1995
Assets
Current assets:
Cash and cash equivalents $ 79,454
Accounts receivable, net 520,944
Prepaid expenses 55,069
---------
Total current assets 655,467
Property and equipment, net 103,381
Deposits 10,150
---------
Total assets $ 768,998
=========
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $ 64,013
Accrued expenses 408,962
Deferred revenue 132,470
Income taxes payable 11,000
---------
Total current liabilities 616,445
Shareholders' equity:
Common stock, no par value; authorized 505,000 shares;
issued 109,875 shares 3,000
Retained earnings 170,353
---------
173,353
Treasury stock, 2,625 shares, at cost (20,800)
---------
Total shareholders' equity 152,553
---------
Total liabilities and shareholders' equity $ 768,998
=========
See accompanying notes.
<PAGE>
DirectAmerica Corporation and
California Production Group, Inc.
Combined Statement of Operations
Nine-month period ended September 30, 1995
Revenues:
Royalty income $ 1,933,470
Production income 849,430
Other revenues 11,000
-----------
Net revenues 2,793,900
Operating costs and expenses:
Direct costs 1,481,766
General and administrative costs 1,269,748
-----------
Total operating costs and expenses 2,751,514
-----------
Income before income taxes 42,386
Income taxes (11,000)
-----------
Net income $ 31,386
===========
See accompanying notes.
<PAGE>
DirectAmerica Corporation and
California Production Group, Inc.
Combined Statement of Shareholders' Equity
Nine-month period ended September 30, 1995
<TABLE>
<CAPTION>
Common Retained Treasury
Stock Earnings Stock Total
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at December 31, 1994 $ 3,000 $ 138,967 $ (4,800) $ 137,167
Net income -- 31,386 -- 31,386
Purchases of treasury shares -- -- (16,000) (16,000)
----------------------------------------------------------------
Balance at September 30, 1995 $ 3,000 $ 170,353 $ (20,800) $ 152,553
================================================================
</TABLE>
See accompanying notes.
<PAGE>
DirectAmerica Corporation and
California Production Group, Inc.
Combined Statement of Cash Flows
Nine-month period ended September 30, 1995
Cash flows from operating activities
Net income $ 31,386
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization of property
and equipment 34,082
Increase in:
Accounts receivable (101,864)
Prepaid expenses (41,671)
Decrease in:
Accounts payable and accrued expenses (2,077)
Deferred revenue (67,530)
Income taxes payable (168,559)
Other (10,467)
---------
Net cash used in operating activities (326,700)
Cash flows from investing activities
Additions to property and equipment (90,713)
Proceeds from sale of marketable securities 216,000
---------
Net cash provided by investing activities 125,287
Cash flows from financing activities
Purchases of treasury shares (16,000)
---------
Net cash used in financing activities (16,000)
---------
Net decrease in cash and cash equivalents (217,413)
Cash and cash equivalents at December 31, 1994 296,867
---------
Cash and cash equivalents at September 30, 1995 $ 79,454
=========
Supplemental disclosure of cash flow information
Cash paid during the period for income taxes $ 184,722
=========
See accompanying notes.
<PAGE>
DirectAmerica Corporation and
California Production Group, Inc.
Notes to Combined Financial Statements
September 30, 1995
1. Description of Business and Summary of Significant Accounting Policies
Description of Business
DirectAmerica Corporation and California Production Group, Inc. (together, the
"Company") are engaged in the production of infomercials (television shows
featuring various consumer products designed to motivate television viewers to
place telephone orders for such products), and generate royalties based upon
products sold.
Summary of Significant Accounting Policies
Basis of Presentation
The combined financial statements include the accounts of DirectAmerica
Corporation ("DA") and California Production Group, Inc. ("CPG"). All
significant intercompany accounts and transactions have been eliminated. DA and
CPG are under common ownership and management.
Revenue Recognition
Substantially all of the Company's revenues (and consequently most of its
accounts receivable) are the result of production agreements with National Media
(see Note 7) and Guthy-Renker Corporation. Under the agreements, the Company is
reimbursed for all approved production expenses; in addition, the Company
receives royalties based on products sold, as provided for under the terms of
the production agreements. These amounts are shown as "production income" and
"royalty income," respectively, in the accompanying combined statement of
income.
The Company generally defers production income and related production expenses
until the contract is completed. When the completed infomercial production is
delivered to the customer, the production income and expense are recognized. If
estimated total production costs on an infomercial production at any time exceed
the related estimated total production billings, the entire amount of the
estimated loss is recognized immediately.
<PAGE>
DirectAmerica Corporation and
California Production Group, Inc.
Notes to Combined Financial Statements (continued)
1. Description of Business and Summary of Significant Accounting Policies
(continued)
Deferred Revenue
Deferred revenue, as shown in the accompanying combined balance sheet, comprises
the excess of production billings over related production costs incurred (net of
recognized estimated losses).
Cash and Cash Equivalents
For purposes of the combined statement of cash flows, the Company considers all
highly liquid investments with a maturity of three months or less to be cash
equivalents.
Property and Equipment
Property and equipment are stated at cost. Depreciation and amortization are
provided using the straight-line method based on the estimated useful lives of
the assets or lease terms.
Income Taxes
The Company uses the liability method of accounting for income taxes. Under the
liability method, deferred tax assets and liabilities are determined based on
the differences between financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse.
Equity
The shares of common stock attributable to each of the individual companies
included in the combined financial statements are as follows:
DAC CAPG
--- ----
Authorized 500,000 5,000
Issued 105,000 4,875
In Treasury -- 2,625
2. Accrued Expenses
Accrued expenses include the following at September 30, 1995:
Accrual for royalties $ 86,559
Accrual for severance 44,333
Accrual for professional fees 180,000
<PAGE>
DirectAmerica Corporation and
California Production Group, Inc.
Notes to Combined Financial Statements (continued)
3. Property and Equipment
Property and equipment consist of the following at September 30, 1995:
Production and office equipment $ 124,233
Furniture and fixtures 38,818
Leasehold improvements 9,765
---------
172,816
Less accumulated depreciation and amortization (69,435)
=========
Total $ 103,381
=========
4. Income Taxes
The components of income tax expense for the nine month period ended September
30, 1995 are as follows:
Federal State Total
---------------------------------------------------
Current $7,500 $3,500 $11,000
Deferred - - -
---------------------------------------------------
Total $7,500 $3,500 $11,000
===================================================
There are no significant differences between the Company's financial reporting
and tax bases of assets and liabilities. As such, no portion of income tax
expense has been classified as deferred.
The effective tax rate of 26% reflects the graduated Federal corporate income
tax rates plus the California statutory rate.
5. Commitments
The Company rents office space, furniture, and certain other space under various
operating leases, all of which were on a month-to-month basis at September 30,
1995. Rent expense for the nine-month period ended September 30, 1995 was
approximately $56,100.
<PAGE>
DirectAmerica Corporation and
California Production Group, Inc.
Notes to Combined Financial Statements (continued)
6. Litigation
The Company, in the normal course of its business, has been party to litigation
relating to trademark and copyright infringement. It is the Company's policy to
vigorously defend such claims and enforce its rights in these areas. The Company
does not believe that any ongoing actions either individually, or in the
aggregate, will have a material adverse effect on the Company's results of
operations or financial condition.
7. Related Party Transactions
As more fully discussed in Note 8, the Company was acquired by National Media on
October 25, 1995. The Company has and will continue to derive a significant
portion of its revenues, incur significant costs of production, and maintain
significant accounts receivable balances from infomercials produced for National
Media.
As of September 30, 1995 the Company's balance in accounts receivable due from
National Media is $222,566. In addition, the Company received $1,578,775 royalty
income and $386,825 production income from National Media for the nine months
ended September 30, 1995.
8. Subsequent Event
On October 25, 1995, all of the outstanding capital stock of DA and CPG were
acquired by National Media through a tax-free merger of the entities with and
into DA Acquisition Corp., a wholly owned subsidiary of National Media. Upon the
consummation of the merger, the separate corporate existence of each of DA and
CPG ceased, and the name of DA Acquisition Corp. was changed to DirectAmerica
Corporation. In connection with the merger, National Media issued to the
shareholders of DA and CPG an aggregate of 554,456 shares of National Media
common stock valued at approximately $7.0 million as of the date the parties
reached agreement on the transaction. National Media may be required to issue
additional shares of common stock to the shareholders of DA and CPG if royalties
received by the Company from sales of products for which DA and CPG have
produced infomercials exceed $5 million for the twelve-month period ending
January 31, 1997.
<PAGE>
(b) Pro Forma Financial Information.
--------------------------------
UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
OF NATIONAL MEDIA CORPORATION
The following unaudited pro forma condensed consolidated financial statements of
the registrant ("NMC") have been prepared to reflect the acquisition of all of
the capital stock of DirectAmerica Corporation and California Production Group,
Inc. (collectively, "DirectAmerica") through a tax-free merger of such entities
with and into a wholly owned subsidiary of NMC ("Merger Sub"). For a more
complete description of the Acquisition, see Item 2 of the Form 8-K.
The following unaudited pro forma condensed consolidated balance sheet as of
September 30, 1995, gives effect to the Acquisition as if it had occurred on
such date and was prepared based upon the unaudited condensed consolidated
balance sheet of NMC and combined balance sheet of DirectAmerica as of September
30, 1995.
The following unaudited pro forma condensed consolidated statements of
operations for the six months ended September 30, 1995 and for the year ended
March 31, 1995 give effect to the Acquisition as if it had occurred at the
beginning of each period presented. The unaudited pro forma condensed
consolidated statement of operations for the six months ended September 30, 1995
was prepared based upon the unaudited condensed consolidated statement of
operations of NMC for the six months ended September 30, 1995 and a pro-rata
portion (two-thirds) of the combined statement of operations of DirectAmerica
for the nine months ended September 30, 1995.
The unaudited pro forma condensed consolidated statement of operations for the
year ended March 31, 1995 was prepared based upon the consolidated statement of
operations for NMC for the year ended March 31, 1995 and the unaudited combined
statement of operations of DirectAmerica for the year ended December 31, 1994.
The unaudited pro forma condensed consolidated financial statements do not
purport to represent what NMC's results of operations or financial position
would actually have been had the Acquisition in fact occurred at the beginning
of each period presented or on the date indicated, or to project any future
NMC's results of operations or financial position. The pro forma adjustments are
based upon available information and upon certain assumptions that management
believes are reasonable under the circumstances. These adjustments are directly
attributable to the Acquisition and are expected to have a continuing impact on
the financial position and results of operations of NMC.
The following unaudited pro forma condensed consolidated financial statements
should be read in conjunction with NMC's audited consolidated financial
statements and unaudited interim condensed consolidated financial statements,
including notes thereto and the audited combined financial statements of
DirectAmerica for the nine months ended September 30, 1995, including notes
thereto, included in NMC's periodic reports filed with the Securities and
Exchange Commission and herein, respectively.
<PAGE>
NATIONAL MEDIA CORPORATION
Unaudited Pro Forma Condensed Consolidated
Balance Sheet as of September 30, 1995
(in thousands)
<TABLE>
<CAPTION>
Historical
-------------------------------------
National Media DirectAmerica Pro Forma
Corporation Corporation(1) Adjustments Pro Forma
----------------- ----------------- ------------------- -----------------
<S> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents........... $ 16,157 $ 79 $ $ 16,236
Accounts receivable (net)........... 19,280 521 [223](2) 19,578
Inventories......................... 17,918 17,918
Prepaid expenses and other assets... 9,965 55 [60](3)
[50](5) 9,910
--------------- ---------- ----------------- -----------------
Total current assets............. 63,320 655 [333] 63,642
Property and equipment (net)............ 5,015 103 5,118
Excess of cost over net assets of
acquired businesses and other
intangible assets (net)................ 4,488 6,847(4,12)
300(5) 11,635
Other assets............................ 940 11 951
--------------- ---------- ----------------- -----------------
Total assets..................... $ 73,763 $ 769 $ 6,814 $ 81,346
=============== ========== ================= =================
Current liabilities:
Accounts payable........................ $ 9,503 $ 64 $ $ 9,567
Accrued expenses........................ 24,136 552 [223](2)
[60](3)
250(5) 24,655
Current portion of long-term debt....... 148 148
--------------- ---------- ----------------- -----------------
Total current liabilities........ 33,787 616 [33] 34,370
Long-term debt.......................... 3,740 3,740
Other liabilities....................... 1,900 1,900
Shareholders' equity.................... 34,336 153 6,847(4,12) 41,336
--------------- ---------- ----------------- -----------------
Total liabilities and
shareholders' equity.......... $ 73,763 $ 769 $ 6,814 $ 81,346
=============== ========== ================= =================
</TABLE>
<PAGE>
NATIONAL MEDIA CORPORATION
Unaudited Pro Forma Condensed Consolidated Statements of
Operations for the Six Months Ended September 30, 1995 (in thousands, except
number of shares and per share amounts)
<TABLE>
<CAPTION>
Historical
--------------------------------
National Media DirectAmerica Pro Forma
Corporation Corporation(1) Adjustments Pro Forma
-------------- -------------- --------------- --------------
<S> <C> <C> <C> <C>
Revenues:
Product sales............................ $ 119,971 $ -0- $ $ 119,971
Royalties................................ 2,358 1,289 [1,070](6) 2,577
Production income........................ 566 [255](7) 311
Sales commissions and other revenues..... 324 7 331
------------ ------------ --------------- --------------
Net revenues........................... 122,653 1,862 [1,325] 123,190
Operating costs and expenses:
Media purchases.......................... 37,955 -0- 37,955
Direct costs............................. 63,647 988 [1,070](6)
[255](7) 63,310
Selling, general and administrative...... 13,724 846 179(8)
[100](10) 14,649
Interest expense......................... 473 -0- 473
------------ ------------ --------------- --------------
Total operating costs and expenses.... 115,799 1,834 [1,246] 116,387
------------ ------------ --------------- --------------
Income (loss) before income taxes........ 6,854 28 [79] 6,803
Income taxes............................. 1,107 7 1,114
------------ ------------ --------------- --------------
Net income (loss)............................ $ 5,747 $ 21 $ [79] $ 5,689
============ ============ =============== ==============
Earnings per share:
Primary................................. $ 0.28 $ 0.27
============ ==============
Fully-diluted........................... $ 0.27 $ 0.26
============ ==============
Weighted average number of common and common
equivalent shares outstanding:
Primary................................. 22,272,000 554,456 22,826,456(11,12)
============ =============== ==============
Fully-diluted........................... 22,297,000 554,456 22,851,456(11,12)
============ =============== ==============
</TABLE>
<PAGE>
NATIONAL MEDIA CORPORATION
Unaudited Pro Forma Condensed Consolidated Statements of
Operations for the Year Ended March 31, 1995 (in thousands, except number of
shares and per share amounts)
<TABLE>
<CAPTION>
Historical
---------------------------------
National Media DirectAmerica Pro Forma
Corporation Corporation(1) Adjustments Pro Forma
------------- ------------ --------------- -----------
<S> <C> <C> <C> <C>
Revenues:
Product sales............................. $ 168,689 $ -0- $ $ 168,689
Royalties................................. 5,303 2,681 [2,681](6) 5,303
Production income......................... -0- 1,325 [1,157](7) 168
Sales commissions and other revenues...... 2,175 11 2,186
------------- ----------- --------------- -----------
Net revenues............................ 176,167 4,017 [3,838] 176,346
Operating costs and expenses:
Media purchases........................... 51,961 -0- 51,961
Direct costs.............................. 97,605 2,120 [2,681](6)
[1,157](7) 95,887
Selling, general and administrative....... 20,766 1,454 357(8)
[175](10) 22,402
Severance expense for former Chairman and
Chief Executive Officer................. 2,650 -0- 2,650
Unusual charges........................... 2,868 -0- 2,868
Interest expense.......................... 689 -0- 689
------------- ----------- --------------- -----------
Total operating costs and expenses..... 176,539 3,574 [3,656] 176,457
------------- ----------- --------------- -----------
Income (loss) before income taxes............. $ [372] 443 $ [182] $ [111]
Income taxes.................................. 300 125 [75](9) 350
------------- ----------- --------------- -----------
Net (loss) income............................. $ [672] $ 318 $ [107] $ [461]
============= =========== =============== ===========
Loss per share..................... $ [.05] $ [.03]
============= ===========
Weighted average number of common and common
equivalent shares outstanding............. 14,023,800 554,456 14,578,256(11,12)
============= =============== ===========
</TABLE>
<PAGE>
The pro forma adjustments to the unaudited pro forma condensed consolidated
balance sheet as of September 30, 1995 and the pro forma condensed consolidated
statements of operations for the six months ended September 30, 1995 and the
year ended March 31, 1995 are as follows:
1 Represents the combined financial information of DirectAmerica Corporation
and California Production Group, Inc.
2 Elimination of royalties payable to DirectAmerica by NMC.
3 Elimination of DirectAmerica receivable from NMC related to shows in
production.
4 Represents the estimated difference between the excess of the aggregate
purchase consideration over the net tangible book value of the assets
acquired. The aggregate purchase consideration of the 554,456 shares of
common stock issued in the Acquisition was valued at $7.0 million based on a
price per share as reported on the New York Stock Exchange on the date the
parties reached agreement on the Acquisition.
5 Recording of estimated Acquisition expenses.
6 Elimination of royalty revenues generated by DirectAmerica (and the related
expense incurred by NMC) from shows produced by DirectAmerica for NMC.
7 Elimination of production income and related costs incurred by DirectAmerica
on completed shows produced by DirectAmerica for NMC.
8 Represents the amortization over a twenty year period of intangibles
established as a result of the Acquisition.
9 Benefit derived by DirectAmerica through utilization of available NMC
federal net operating tax loss carryforward.
10 To reflect base salary of major DirectAmerica shareholder under new
employment agreement as compared to salary under prior owner/operator
business structure.
11 Earnings per share based upon the weighted average numbers of shares of NMC
common stock and common equivalent shares outstanding for each period
presented, including the shares of NMC common stock assumed to be issued in
connection with the Acquisition, as if they had been issued at the beginning
of each period presented.
12 Does not give effect to any shares of NMC common stock which may be issued to
former shareholders of DirectAmerica in the event DirectAmerica achieves
certain revenue levels. See Item 2 of the Form 8- K for a more complete
description of the circumstances under which such shares may be issued.
(c) Exhibit.
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24 Consent of Ernst & Young LLP
-2-
<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 hereunto duly authorized.
NATIONAL MEDIA CORPORATION
(Registrant)
Date: January 4, 1996 By: /s/ Constantinos I. Costalas
--------------- ---------------------------------
Name: Constantinos I. Costalas
Title: Principal Financial Officer
-3-
<PAGE>
EXHIBIT INDEX
-------------
Exhibit No.
- -----------
24 Consent of Ernst & Young LLP
<PAGE>
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statements of
National Media Corporation on Form S-3 (File Nos. 33-53252, 33-34303, 33-35301,
33-41916, 33-82618, 33-63841) and Form S-8 (File Nos. 33-34304, 33-60969,
33-63537) of our report with respect to the Combined Financial Statements of
DirectAmerica Corporation and California Production Group, Inc. dated December
12, 1995 included in the Current Report of National Media Corporation
(Form 8K/A) dated January 4, 1996, filed with the Securities and Exchange
Commission.
Ernst & Young LLP
Philadelphia, Pennsylvania
January 4, 1996
