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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 June 27, 1998
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 0-14399
--------------------
GOLDEN BOOKS FAMILY ENTERTAINMENT, INC.
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(Exact name of registrant as specified in its charter)
Delaware 06-1104930
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
888 Seventh Avenue, New York, New York 10106
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(Address of principal executive offices) (Zip Code)
(212) 547-6700
--------------
(Registrant's telephone number, including area code)
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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
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common stock, par value $.01 per share: 27,489,814 shares outstanding as of
August 10, 1998.
1
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GOLDEN BOOKS FAMILY ENTERTAINMENT, INC.
---------------------------------------
TABLE OF CONTENTS
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Page
Number
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets-- 3
June 27, 1998 (Unaudited) and December 27, 1997
Condensed Consolidated Statements of Operations and Comprehensive Loss-- 5
Three months ended June 27, 1998 and June 28, 1997 (Unaudited)
Condensed Consolidated Statements of Operations and Comprehensive Loss-- 6
Six months ended June 27, 1998 and June 28, 1997 (Unaudited)
Condensed Consolidated Statements of Cash Flows-- 7
Six months ended June 27, 1998 and June 28, 1997 (Unaudited)
Notes to Condensed Consolidated Financial 9
Statements (Unaudited)
Item 2. Management's Discussion and Analysis of 14
Financial Condition and Results of Operations
PART II OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K 20
SIGNATURES 21
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2
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PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO
GOLDEN BOOKS FAMILY ENTERTAINMENT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
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ASSETS JUNE 27, DECEMBER 27,
1998 1997
---- ----
(unaudited)
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CURRENT ASSETS
Cash and cash equivalents $ 16,657 $ 57,411
Accounts receivable, net 38,460 51,153
Inventories 37,319 34,659
Net assets held for sale 10,086 9,873
Other current assets 19,943 17,250
----------------- -----------------
Total current assets 122,465 170,346
----------------- -----------------
OTHER ASSETS
Accounts receivable - long term 4,813 3,207
Other noncurrent assets 17,537 17,126
----------------- -----------------
Total other assets 22,350 20,333
----------------- -----------------
PROPERTY PLANT AND EQUIPMENT, net of accumulated depreciation and
amortization of $40,016 as of June 27, 1998 and $39,620 as of December 27,
1997 44,196 38,256
FILM LIBRARY, net of accumulated amortization of $7,048 as of June 27, 1998
and $4,364 as of December 27, 1997 63,448 63,638
GOODWILL, net of accumulated amortization of $2,205 as of June 27, 1998
and $1,605 as of December 27, 1997 29,991 30,591
----------------- -----------------
TOTAL ASSETS $ 282,450 $ 323,164
================= =================
</TABLE>
See Notes to Condensed Consolidated
Financial Statements
3
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GOLDEN BOOKS FAMILY ENTERTAINMENT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
(In Thousands, Except for Share Data)
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<CAPTION>
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LIABILITIES AND STOCKHOLDERS' DEFICIT
JUNE 27, DECEMBER 27,
1998 1997
---- ----
(unaudited)
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CURRENT LIABILITIES
Accounts payable $ 19,431 $ 21,454
Revolving credit facility 12,618 -
Accrued compensation and fringe benefits 5,244 5,887
Other current liabilities 46,717 47,225
----------------- -----------------
Total current liabilities 84,010 74,566
----------------- -----------------
NONCURRENT LIABILITIES
Long term debt 149,908 149,897
Accumulated post-retirement benefit obligation 29,447 29,365
Deferred compensation and other deferred liabilities 21,022 19,938
----------------- -----------------
Total noncurrent liabilities 200,377 199,200
----------------- -----------------
GUARANTEED PREFERRED BENEFICIAL INTERESTS IN THE COMPANY'S AND GOLDEN BOOKS
PUBLISHING COMPANY, INC.'S CONVERTIBLE DEBENTURES
110,822 110,707
STOCKHOLDERS' DEFICIT:
Convertible Preferred Stock - Series B, 13,000 shares authorized,
no par value, 13,000 shares issued and outstanding; 65,000 65,000
Common Stock, $.01 par value, 60,000,000 shares authorized,
27,294,814 and 26,887,313 shares issued as of June 27, 1998 and
December 27, 1997, respectively 273 269
Additional paid in capital 128,751 128,533
Accumulated deficit (302,304) (250,791)
Cumulative foreign translation adjustments (1,657) (1,498)
----------------- -----------------
(109,937) (58,487)
Less cost of Common Stock in treasury - 208,800 shares 2,822 2,822
----------------- -----------------
Total stockholders' deficit (112,759) (61,309)
----------------- -----------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 282,450 $ 323,164
================= =================
</TABLE>
See Notes to Condensed Consolidated
Financial Statements
4
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GOLDEN BOOKS FAMILY ENTERTAINMENT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(In Thousands, Except for Per Share Data)
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THREE MONTHS ENDED
----------------------------------------
JUNE 27, JUNE 28,
1998 1997
---- ----
(unaudited)
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REVENUES $ 43,145 $ 50,631
------------------ ------------------
COSTS AND EXPENSES:
Cost of sales 41,832 35,496
Selling, general and administrative 26,996 22,647
------------------ ------------------
Total costs and expenses 68,828 58,143
------------------ ------------------
LOSS BEFORE DISTRIBUTIONS ON GUARANTEED PREFERRED BENEFICIAL
INTERESTS IN THE COMPANY'S AND GOLDEN BOOKS PUBLISHING COMPANY,
INC.'S CONVERTIBLE DEBENTURES, INTEREST EXPENSE, AND BENEFIT
FOR INCOME TAXES (25,683) (7,512)
DISTRIBUTIONS ON GUARANTEED PREFERRED BENEFICIAL INTERESTS IN THE
COMPANY'S AND GOLDEN BOOKS PUBLISHING COMPANY, INC.'S
CONVERTIBLE DEBENTURES 2,516 2,516
INTEREST EXPENSE, NET OF INTEREST INCOME OF $354 AND $1,679 , RESPECTIVELY 2,650 1,279
------------------ ------------------
LOSS BEFORE BENEFIT FOR INCOME TAXES (30,849) (11,307)
BENEFIT FOR INCOME TAXES (207) (15)
------------------ ------------------
NET LOSS (30,642) (11,292)
OTHER COMPREHENSIVE (LOSS) INCOME :
FOREIGN CURRENCY TRANSLATION (233) 99
------------------ ------------------
COMPREHENSIVE LOSS (30,875) $ (11,193)
================== ==================
NET LOSS PER BASIC COMMON SHARE $ (1.21) $ (0.52)
================== ==================
</TABLE>
See Notes to Condensed Consolidated
Financial Statements
5
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GOLDEN BOOKS FAMILY ENTERTAINMENT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except for Per Share Data)
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<CAPTION>
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SIX MONTHS ENDED
----------------------------------------
JUNE 27, JUNE 28,
1998 1997
---- ----
(unaudited)
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REVENUES $ 89,679 $ 116,447
------------------ ------------------
COSTS AND EXPENSES:
Cost of sales 78,807 80,497
Selling, general and administrative 52,691 48,772
------------------ ------------------
Total costs and expenses 131,498 129,269
------------------ ------------------
LOSS BEFORE DISTRIBUTIONS ON GUARANTEED PREFERRED BENEFICIAL
INTERESTS IN THE COMPANY'S AND GOLDEN BOOKS PUBLISHING COMPANY,
INC.'S CONVERTIBLE DEBENTURES, INTEREST EXPENSE, AND BENEFIT
FOR INCOME TAXES (41,819) (12,822)
DISTRIBUTIONS ON GUARANTEED PREFERRED BENEFICIAL INTERESTS IN THE
COMPANY'S AND GOLDEN BOOKS PUBLISHING COMPANY, INC.'S
CONVERTIBLE DEBENTURES 5,032 5,032
INTEREST EXPENSE, NET OF INTEREST INCOME OF $1,025 AND $3,578,
RESPECTIVELY 4,919 2,333
------------------ ------------------
LOSS BEFORE BENEFIT FOR INCOME TAXES (51,770) (20,187)
BENEFIT FOR INCOME TAXES (257) (23)
------------------ ------------------
NET LOSS (51,513) (20,164)
OTHER COMPREHENSIVE (LOSS) INCOME:
FOREIGN CURRENCY TRANSLATION (159) 42
------------------ ------------------
COMPREHENSIVE LOSS (51,672) (20,122)
================== ==================
NET LOSS PER BASIC COMMON SHARE $ (2.06) $ (0.93)
================== ==================
</TABLE>
See Notes to Condensed Consolidated
Financial Statements
6
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GOLDEN BOOKS FAMILY ENTERTAINMENT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
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SIX MONTHS ENDED
----------------------------------------
JUNE 27, JUNE 28,
1998 1997
---- ----
(unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (51,513) $ (20,164)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 6,391 5,273
(Gain) on sale of equipment (492) -
Provision for losses on accounts receivable 232 1,879
Other non-cash 790 992
Changes in assets and liabilities:
Decrease in accounts receivable 10,855 305
Increase in inventories (2,660) (2,123)
Increase in other current assets (2,693) (2,627)
Decrease in accounts payable (2,023) (2,666)
Decrease in accrued compensation and fringe
benefits (643) (3,422)
Other assets and liabilities (510) (9,431)
------------------ ------------------
Net cash used in operating activities (42,266) (31,984)
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of property, plant and equipment (9,330) (4,519)
Proceeds from sale of equipment 655 -
Additions to film library (2,494) (393)
Collateral for letter of credit associated with lease
for new corporate office - (3,305)
------------------ ------------------
Net cash used in investing activities (11,169) (8,217)
</TABLE>
See Notes to Condensed Consolidated
Financial Statements
7
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GOLDEN BOOKS FAMILY ENTERTAINMENT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(In Thousands)
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SIX MONTHS ENDED
----------------------------------------
JUNE 27, JUNE 28,
1998 1997
---- ----
(unaudited)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from revolving credit facility $ 12,618 -
Proceeds from exercise of stock options 222 $ 1,032
------------------ ------------------
Net cash provided by financing activities 12,840 1,032
EFFECT OF EXCHANGE RATE CHANGES ON CASH (159) (47)
------------------ ------------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (40,754) (39,216)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 57,411 139,686
------------------ ------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 16,657 $ 100,470
================== ==================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest and distribution on Guaranteed Preferred
Beneficial Interests in the Company's and Golden
Books Publishing Company, Inc.'s Convertible Debentures $ 10,774 $ 10,768
================== ==================
Income taxes, net of refunds received $ 15 $ (317)
================== ==================
</TABLE>
See Notes to Condensed Consolidated
Financial Statements
8
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GOLDEN BOOKS FAMILY ENTERTAINMENT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A - Basis of Presentation
---------------------
In the opinion of management, the accompanying unaudited condensed consolidated
financial statements contain all adjustments necessary to present fairly the
financial position of Golden Books Family Entertainment, Inc. and Subsidiaries
(the "Company") as of June 27, 1998 and the results of operations and cash
flows for the three month and six month periods ended June 27, 1998 and June
28, 1997. These condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements of the Company contained
in the Company's Form 10-K for the year ended December 27, 1997.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. The results of operations for
any interim period are not necessarily indicative of the results to be expected
for the full fiscal period. The business of the Company in general is seasonal
and depends to a significant extent on the Christmas selling season, resulting
in a disproportionately higher percentage of revenues in the Company's third
and fourth fiscal quarters.
The results of Golden Books Financing Trust (the "Trust") are included in the
Company's condensed consolidated financial statements since its inception on
August 20, 1996. The Trust, which is the issuer of 8 3/4% Convertible Trust
Originated Preferred Securities, referred to in the Company's financial
statements as "the 8 3/4% Guaranteed Preferred Beneficial Interests in the
Company's and Golden Books Publishing Company Inc.'s Convertible Debentures"
(the "Preferred Securities"), is wholly owned by the Company, has no
independent operations and its assets consist solely of the $118.6 million in
aggregate principle amount of 8 3/4% Convertible Debentures due 2016 of the
Company and Golden Books Publishing Company, Inc. ("Golden Books Publishing")
(see Note F). The obligations of the Trust, which consist of the Preferred
Securities, are fully and unconditionally guaranteed by the Company. All
material intercompany items and transactions have been eliminated.
NOTE B - Liquidity
---------
As of June 27, 1998, the Company had approximately $38.5 million in working
capital, including approximately $16.7 million in cash and cash equivalents.
The continued implementation of management's plan to return the Company's core
publishing business to profitability and to re-deploy assets (the "Plan")
beyond the next twelve months may require financial resources greater than the
Company's current cash position and future cash flow. In connection therewith,
the Company has obtained a $30.0 million revolving credit facility ("Line of
Credit"). The Line of Credit is secured by certain receivables and inventory of
Golden Books Publishing Company, Inc. On June 2, 1998 Golden Books Publishing
amended the Indenture governing it's 7.65% Senior Notes due 2002 to, among
other things, (i) permit Golden Books Publishing to secure up to $30.0 million
of borrowings and related obligations under the Line of Credit, (ii) grant to
the Trustee for its benefit and for the benefit of the holders of the Senior
Notes a security interest in certain assets of Golden Books Publishing, (iii)
add a guarantee from the Company and (iv) add certain additional restrictive
covenants and amend certain existing covenants. At June 27, 1998, the Company
had outstanding borrowings under the revolving credit facility totaling $12.6
million of which $15.0 million was drawn down and $2.4 million was repaid. As
previously reported by the Company on July 8, 1998, the Company and Golden
Press Holdings L.L.C. ("Golden Press Holdings") have reached a business
understanding pursuant to which Golden Press Holdings would provide up to $25
million in financing to the Company. The Company and Golden Press Holdings are
discussing the financial and other terms upon which such financing would be
made available to the Company, including the appropriate interest or dividend
rate, and whether and to what extent such financing may be convertible into
common stock. Unforeseen circumstances could affect the Company's financial
resources.
9
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NOTE C - Recent Accounting Pronouncements
--------------------------------
PER SHARE DATA
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, "Earnings Per Share" ("FAS 128"), which is effective for fiscal periods
beginning after December 15, 1997. FAS 128 replaced the calculation of primary
and fully diluted earnings per share with basic and diluted earnings per share.
Unlike primary earnings per share, basic earnings per share excludes any
dilutive effects of options, warrants and convertible securities. Diluted
earnings per share is very similar to the previously reported fully diluted
earnings per share. All earnings per share amounts for all periods have been
presented to conform to the FAS 128 requirements. The Company adopted the
requirements in the first quarter of 1998.
Net loss per basic common share for the three and six months ended June 27,
1998 and June 28, 1997, is based on the net loss for the period plus preferred
dividend requirements divided by the weighted average number of basic common
shares outstanding. Shares issuable upon the exercise of all common stock
equivalents consisting primarily of stock options and warrants are not included
in the computations since their effect is antidilutive.
REPORTING COMPREHENSIVE INCOME
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("FAS
130"), which is effective for fiscal years beginning after December 15, 1997.
FAS 130 established new rules for the reporting and display of comprehensive
income and its components. FAS 130 requires the Company's foreign currency
translation adjustments, which are currently reported in stockholders' deficit,
to be included in other comprehensive income and the disclosure of total
comprehensive income. The Company adopted the requirements in the first quarter
of 1998.
DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures About Segments of an
Enterprise and Related Information" ("FAS 131"), which is effective for fiscal
years beginning after December 15, 1997. FAS 131 establishes standards for the
way that public business enterprises report information about operating
segments in annual financial statements and requires that those enterprises
report selected information about operating segments in interim financial
reports. It also establishes standards for related disclosures about products
and services, geographic areas and major customers. FAS 131 is effective for
financial statements for fiscal years beginning after December 15, 1997, and
therefore the Company will adopt the new requirements in 1998. Although FAS 131
need not be applied to interim financial statements in the initial year of its
application, comparative information for interim periods in the initial year of
application must be reported in financial statements for interim periods in the
second year of application. Management has not yet completed its review of FAS
131, but its adoption will not have a material effect on the Company's
statement of position or revenues, only on the composition of its reportable
segments.
EMPLOYER'S DISCLOSURE ABOUT PENSIONS AND OTHER POST-RETIREMENT BENEFITS
In February 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 132, "Employer's Disclosures about Pensions
and Other Post-Retirement Benefits" ("FAS 132"), which is effective for fiscal
years beginning after December 15, 1997. FAS 132 standardizes the disclosure
requirements for pension and other post-retirement benefits to the extent
practicable, requires additional information on charges in the benefit
obligations and fair value of plan assets that will facilitate financial
analysis, and eliminates certain disclosure. FAS 132 is effective for financial
statements for fiscal years beginning after December 15, 1997, and therefore
the Company will adopt the new requirements in 1998. Management has not
completed its review of FAS 132 but does not anticipate that its adoption will
have a material effect on the consolidated financial statements.
10
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NOTE D - Inventories
-----------
Inventories consisted of the following:
June 27, December 27,
1998 1997
---- ----
(In thousands)
Raw materials $ 2,665 $ 2,373
Work-in-process 3,024 3,819
Finished goods 27,724 25,121
Film library 3,906 3,346
------------------ -----------------
$ 37,319 $ 34,659
================== ==================
NOTE E - Net Assets Held for Sale
------------------------
As of June 27, 1998, net assets held for sale totaling approximately $10.1
million included the Company's, (i) Fayetteville facility, which was closed in
conjunction with the sale of the Company's game and puzzle business, (ii)
Creative Center, a facility of Golden Books Publishing, and (iii) Coffeyville
Distribution Center, a facility of Golden Books Publishing.
NOTE F - Preferred Securities
--------------------
During the eleven months ended December 28, 1996, the Company raised a total of
$115.0 million through a private placement of Preferred Securities under Rule
144A under the Securities Act of 1933, as amended (the "Securities Act"). The
Preferred Securities were issued by the Trust, a Delaware business trust
financing vehicle. The Company owns all of the common securities of the Trust.
The net proceeds of such offering, after commissions and expenses, were
approximately $110.8 million. The Preferred Securities pay quarterly
distributions at an annual distribution rate of 8 3/4% (subject to any deferral
of interest payments on the Preferred Securities by the Company and Golden
Books Publishing), have an aggregate liquidation preference of $115.0 million
and are convertible at the option of their holders into Convertible Debentures,
which are immediately convertible into Common Stock of the Company at an
initial conversion price of $13.00 per share. The Convertible Debentures will
mature August 20, 2016, and may be redeemed, in whole or in part, at anytime
after the occurrence of a Tax Event or on an Investment Company Event. The
carrying amount of the Preferred Securities approximates its fair value.
Effective January 10, 1997, the Company registered the resale of the Preferred
Securities with the Securities and Exchange Commission.
The Company and its subsidiary, Golden Books Publishing, are joint and several
obligors of the Preferred Securities and the Company has fully and
unconditionally guaranteed the Trust's obligations under the Preferred
Securities. Separate financial statements of Golden Books Publishing are not
presented in their entirety as the separate financial statements would not be
materially different from the consolidated financial statements of the Company.
Summarized financial statements of Golden Books Publishing as of and for the
three and six months ended June 27, 1998 are as follows (in thousands):
Current assets $ 119,017
Noncurrent assets 150,244
------------------
Total Assets $ 269,261
==================
Current liabilities $ 186,472
Noncurrent liabilities 189,327
------------------
Total Liabilities 375,799
Preferred Securities 110,822
Stockholders' Deficit (217,360)
------------------
Total Liabilities and Stockholders' Deficit $ 269,261
==================
11
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NOTE F - Preferred Securities (cont'd)
-----------------------------
Three Months Ended Six Months Ended
------------------ ----------------
June 28, June 28,
1997 1997
---- ----
Revenues $ 43,145 $ 89,679
Gross profit 1,313 10,872
Loss before interest expense and
benefit for income taxes (25,169) (43,989)
Net loss $ (32,567) $ (58,455)
The Indenture covering the Company's 7.65% Senior Notes due 2002 restricts the
ability of Golden Books Publishing to pay cash dividends or make other cash
distributions to the Company.
NOTE G - Loss Per Common Share
---------------------
Loss per common share was computed as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
June 27, June 28, June 27, June 28,
1998 1997 1998 1997
---- ---- ---- ----
(In thousands except for per share data) (In thousands except for per share data)
<S> <C> <C> <C> <C>
Net Loss $ (30,642) $ (11,292) $ (51,513) $ (20,164)
Preferred dividend requirements (2,206) (2,206) (4,400) (4,083)
------------ ------------- ------------- -----------------
Loss applicable to basic common stock $ (32,848) $ (13,498) $ (55,913) $ (24,247)
============= ============== ============== =================
Weighted average basic common shares
outstanding 27,165 26,139 27,121 26,061
------------ ------------- ------------- -----------------
Loss per basic common share $ (1.21) $ (0.52) $ (2.06) $ (0.93)
============= ============== ============== =================
</TABLE>
NOTE H - Contingencies
-------------
Golden Books Publishing and Penn have been informed by the Environmental
Protection Agency (the "EPA") and/or state regulatory agencies that they may be
potentially responsible parties ("PRPs") and face liabilities under the
Comprehensive Environmental Response, Compensation, and Liability Act (commonly
know as "CERCLA" or "Superfund") or similar state laws. In all cases except
those described below, the Company has resolved its liability or is in the
process of resolving its liability for amounts not material. Although the
Company divested Penn in December 1996, the Company has agreed to indemnify
Peacock Papers, Inc. against certain of Penn's environmental liabilities,
including the Cork Street Landfill and Fulford Street Property discussed
herein.
The Wisconsin Department of Natural Resources (the "WDNR") alleges that the
Company is a responsible party for drums found at a site located in
unincorporated Racine County. The WDNR and the Company have entered into an
agreement which requires the Company to remove drums and soil from the site.
The disposal of these drums dates back almost 30 years. Golden Books Publishing
did not authorize disposal of its waste drums at the site. The Company has
completed the removal of drums and soil from the site.
At the Hunt's Landfill site in Racine County, Wisconsin, Golden Books
Publishing's liability pursuant to the terms of a consent decree is limited to
approximately 4% of the total remedial costs. Although the last phase of
construction activities was completed in 1996, Golden Books Publishing and the
other potentially responsible parties are obligated to fund the operation and
maintenance of the site for the next 20-30 years. The current estimate of the
total costs of such operation and maintenance is in the range of $14 million.
In accordance with the consent decree, the Company has established a reserve
for its share of the probable clean-up costs.
At the Hertel Landfill in Plattekill, New York, Golden Books Publishing is one
of five PRPs sued by the EPA in 1994 for recovery of past EPA response costs of
approximately $2.5 million. In September 1991, the EPA approved a remedial
12
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action for the Hertel Landfill site that currently is estimated to cost $4.4
million other than groundwater remediation costs, if any are required. One of
the site's non-defendant PRPs has been complying with an EPA unilateral
administrative order requiring investigation and clean-up of the site and is
now seeking contribution towards its cost from Golden Books Publishing and more
than 20 other PRPs. At the time the 1991 order was issued, Golden Books
Publishing did not comply. As of June 26, 1996, representatives of Golden Books
Publishing reached agreement with the EPA to come into compliance with the
order and pay a penalty of $625,000 for previous non-compliance. Additionally,
during 1997, Golden Books Publishing paid a total of $1,701,000 for the
remediation of the Hertel site, including settlement payments to other PRPs.
The Company, other PRPs and the government have reached an allocation and are
in the process of entering a consent decree which will establish the Company's
future responsibilities at the site.
Golden Books Publishing also has been identified as a PRP at another site
located in Poughkeepsie, New York. Golden Books Publishing and eight other PRPs
received a notice letter in 1995 from the State of New York regarding this
site. New York State will be seeking recovery of its past oversight costs of
more than $600,000 plus future oversight and maintenance costs associated with
this site, currently estimated by the State at $830,000. There has been no
attempt made to develop an allocation or to identify all PRPs to date, but the
construction phase of the remedy has been completed by other parties without
Company involvement.
On October 2, 1996, the Company received notice from the City Attorney of
Kalamazoo, Michigan that Beach Products, a division of Penn, will be asked to
participate in the remediation of the Cork Street Landfill site located in the
city which was allegedly used by Beach Products in the past. Current cost
estimates for the remediation required at the site are as high as $24,000,000.
More than 70 entities will be requested to provide financial contribution to
the remediation.
On November 14, 1996, the Michigan Department of Environmental Quality
requested that corrective actions be taken as a result of the discovery of a
leaking underground storage tank system at the Fulford Street Property of the
Company on November 8, 1996. An initial site assessment is being completed by
the Company's outside consultant. Current estimates indicate that the costs
associated with this release should not exceed $200,000. However, in the event
that the contamination has migrated off the Company's property, these costs
could increase.
In addition to these environmental matters, Golden Books Publishing filed an
action in 1994 in the United States District Court, Eastern District of
Wisconsin captioned as Western Publishing Company, Inc. v. MindGames, Inc.
seeking a declaration of rights in regard to Golden Books Publishing's alleged
breach of various of its obligations under its licensing agreement with the
defendant for distribution through 1994 of the adult board game known as
"Clever Endeavor." This case involves the Company's now-discontinued adult and
children's game division. The defendant, believing its board game had the
potential to become one of the most popular of all time, has maintained that
certain of the alleged breaches entitle it to damages of as much as $40 million
resulting from lost profits and unpaid royalties. The Court recently granted
Golden Books Publishing's partial motion for summary judgment and held that the
defendant is precluded from recovering lost profits. Accordingly, the
defendant's damage claim is now limited to its unpaid royalties of $1.2
million. Golden Books Publishing denies that it has any liability to defendant.
In consideration of the aforementioned matters, the Company has recorded
accruals in the deferred compensation and other deferred liabilities account of
approximately $5.9 million in the consolidated balance sheet.
The Company is actively pursuing resolution of the aforementioned matters or,
in the case environmental matters, is awaiting further government response.
While it is not feasible to predict or determine the outcomes of these
proceedings, it is the opinion of management that these outcomes have been
adequately reserved for and will not have a materially adverse effect on the
Company's financial position or future results of operations.
The Company and its subsidiaries are parties to certain other legal proceedings
which are incidental to their ordinary business, none of which the Company
believes are material to the Company and its subsidiaries taken together as a
whole.
NOTE I - Subsequent Events
-----------------
On August 2, 1998, Shari Lewis passed away. In July 1997, the Company acquired
Shari Lewis Enterprises, Inc., expanding its library with the addition of the
Lamb Chop, Charlie Horse, and Hush Puppy characters, books, television
specials, films and home video titles. In January of 1998, the Company began
producing The Charlie Horse Music Pizza
13
<PAGE>
television show. The Company is insured against, and therefore will not suffer
any adverse financial impact from the termination in production of the show
caused by Shari Lewis's untimely death.
On August 4, 1998, the Company announced that it has engaged Allen & Company as
financial advisors to assist the Company in evaluating strategic opportunities
to enhance shareholder value. The Company has not made a decision to pursue any
particular opportunity and there is no assurance that any transaction will
result from this process.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL AND ADOPTION OF NEW BUSINESS STRATEGY
- ---------------------------------------------
CERTAIN OF THE MATTERS DISCUSSED IN THIS ITEM MAY CONSTITUTE FORWARD-LOOKING
STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933 AND
SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934 AND, AS SUCH, MAY INVOLVE
KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE THE
OPERATIONS OF THE COMPANY TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS,
PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING
STATEMENTS.
The following discussion should be read in conjunction with the unaudited
condensed consolidated financial statements of Golden Books Family
Entertainment, Inc. and Subsidiaries (the "Company") for the three and six
months ended June 27, 1998 and June 28, 1997 and the related notes thereto.
As part of the Company's plan to return its core publishing business to
profitability and to re-deploy assets, the Company incurred approximately $13.3
million in 1998 in one-time transition costs in connection with the Company's
strategic plan, consisting of : (i) $4.3 million in outsourcing premium and
(ii) $9.0 million in costs associated with the new move to the new Racine
manufacturing facility. During 1997, the Company incurred one-time transition
costs of $11.5 million in connection with the Company's strategic plan. This
consisted of: $3.1 million of moving costs associated with new facilities, (ii)
$3.5 million for outsourcing of the information technology department, (iii)
$4.5 million in consulting services associated with implementing the strategic
plan, and (iv) $0.4 million in other costs. The Company's return to
profitability is dependent in part on the successful implementation of
management's new strategy. As the Company's new strategy has not yet been fully
implemented, the Company does not expect to generate positive net income until
beyond 1999 at the earliest.
THREE AND SIX MONTHS ENDED JUNE 27, 1998 COMPARED TO THREE AND SIX MONTHS ENDED
JUNE 28, 1997
The Company reports results under three segments: (i) the Consumer Products
Segment ("Consumer"), (ii) the Entertainment Segment ("Entertainment") and
(iii) the Commercial Products Segment ("Commercial"). Consumer includes the
Children's and Adult Publishing Divisions. Entertainment, which was formed
following the Broadway Video Acquisition, includes home video, television
program licensing, merchandising and other character licensing. Commercial
includes the Commercial Printing division and during the year ended December
28, 1997 included the Cambridge commercial printing operation which was sold
during December of 1997. Commercial makes use of excess capacity in the
Consumer manufacturing facility and is operated to absorb fixed overhead costs
of that operation and is not considered to be a core business segment of the
Company.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosure about Segments of an
Enterprise and Related Information" ("FAS 131"). FAS 131 changes the way
companies report segment information in financial statements. The Company has
not yet determined the impact of the implementation of FAS 131 on the Company's
segment reporting, but its adoption will not have a material effect on the
Company's statement of position or revenues, only on the composition of its
reportable segments.
Revenues
Total revenues for the three months ended June 27, 1998 decreased $7.5 million
(14.8%) to $43.1 million compared to $50.6 million for the three months ended
June 28, 1997, and decreased $26.7 million (22.9%) to $89.7 million from $116.4
million for the six months ended June 27, 1998 compared to the six months ended
June 28, 1997. Excluding operations that have been sold, revenues declined $1.9
million (4.2%) to $43.1 million for the three months ended June 27, 1998
compared to
14
<PAGE>
$45.0 million for the three months ended June 28, 1997, and decreased $11.5
million (11.4%) to $89.7 million from $101.2 million for the six months ended
June 27, 1998 compared to the six months ended June 28, 1997.
Consumer revenues decreased $2.2 million (5.9%) to $34.8 million for the three
months ended June 27, 1998 compared to $37.0 million for the three months ended
June 28, 1997, and decreased $5.9 million (7.7%) to $71.0 million from $76.9
million for the six months ended June 27, 1998 compared to the six months ended
June 28, 1997. The decrease in revenues for the Consumer Product Segments for
the three months ended June 27, 1998 was due to reduced promotional activity.
This was partially offset by revenue increases in the Company's strategically
priced Merrigold line. In addition, lower sales were also due to temporary
reductions in buying levels by certain major retailers including Toys-R-Us and
Zellers. The decline for the six months ended June 27, 1998 is principally the
result of lower sales due to reduced promotional activity including a major
promotion based on a "Star Wars" theme that took place during the first quarter
of 1997 which was not repeated in 1998. This decline was partially offset by
revenue increases in the Company's strategically priced Merrigold line. In
addition, lower sales were also due to temporary reductions in buying levels by
certain major retailers including Toys-R-Us and Zellers.
Entertainment revenues increased $1.3 million (39.4%) to $4.6 million for the
three months ended June 27, 1998 compared to $3.3 million for the three months
ended June 28, 1997, and decreased $1.8 million (13.4%) to $11.6 million from
$13.4 million for the six months ended June 27, 1998 compared to the six months
ended June 28, 1997. The increase in revenue for the three months ended June
27, 1998 was due primarily to increased television revenues associated with
Shari Lewis's Charlie Horse Music Pizza and Lassie along with increased
merchandising revenue for toys based on Shari Lewis's Charlie Horse Music Pizza
and the Golden Books characters. The increase in revenues was partially offset
by a decline in Home Video Sales primarily due to the timing of recording
revenues for the video promotion with the U.S. Postal Service. The decline for
the six months ended June 27, 1998 was primarily due to the timing of revenue
for a major annual Christmas video promotion with the U.S. Postal Service. This
decline was partially offset by increased television revenues associated with
Shari Lewis's Charlie Horse Music Pizza and Lassie as well as increased
merchandising revenue for toys based on Shari Lewis's Charlie Horse Music Pizza
and the Golden Books characters.
Commercial revenues excluding operations that were sold (in the quarter ended
June 28, 1997 Cambridge operations had revenue of $5.6 million) decreased $1.0
million (21.3%) to $3.7 million for the three months ended June 27, 1998
compared to $4.7 million for the three months ended June 28, 1997 and decreased
$3.8 million (34.9%) to $7.1 million from $10.9 million for the six months
ended June 27, 1998 compared to the six months ended June 28, 1997. The decline
in revenues for both three and six month periods ended June 27, 1998 were
primarily due to the lack of printing capacity resulting from the move to the
new manufacturing facility.
Gross Profit
Total gross profit excluding operations that were sold and one-time transition
costs decreased $10.4 million to $3.8 million (73.2%) for the three months
ended June 27, 1998, from $14.2 for the three months ended June 27, 1997 and
decreased $18.4 (54.8%) from $33.6 to $15.2 million for the six months ended
June 27, 1998 compared to the six months ended June 28, 1997. As a percentage
of revenues, total gross profit margin before operations that have been sold
and one-time transition costs decreased to 8.8% for the three months ended June
27, 1998 from 31.6% for the three months ended June 28, 1997 and decreased to
16.9% from 33.2% for the six months ended June 27, 1998 compared to the six
months ended June 28, 1997. For the three months ended June 27, 1998, one-time
transition costs of $2.4 million related to the move to the new manufacturing
facility.
Consumer gross profit decreased $10.6 million (87.6%) to $1.5 million for the
three months ended June 27, 1998, compared to $12.1 million for the three
months ended June 28, 1997, and decreased $17.3 million (66.0%) to $8.9 million
from $26.2 million for the six months ended June 27, 1998, compared to the six
months ended June 28, 1997. As a percentage of revenues, the Consumer gross
profit margin decreased to 4.3% for the three months ended June 27, 1998 from
32.7% for the three months ended June 28, 1997, and decreased to 12.5% from
34.1% for the six months ended June 27,1998, compared to the six months ended
June 28, 1997. The decrease in gross profit and gross profit margin for the
three and six months ended June 27, 1998 was primarily due to the establishment
of a reserve for a significant royalty/advance guarantee totaling $5.6 million,
along with higher manufacturing and distribution costs and higher royalty rates
associated with the Disney and Mattel license agreements. Excluding this
guarantee, the gross profit would have been $7.1 million a decrease of $5.0
million (41.3%) from the three months ended June 28, 1997 and as a percentage
of revenue, the gross profit margin would have been 20.4% for the three months
ended June 27, 1998. For the six months ended June 28, 1998, the gross profit
would have been
15
<PAGE>
$14.5 a decrease of $11.7 (44.7%) from the six months ended June 28, 1997 and
as a percentage of revenue, the gross profit margin would have been 20.4% for
the six months ended June 27, 1998.
Entertainment gross profit increased $.2 million (9.5%) to $2.3 million for the
three months ended June 27, 1998 compared to $2.1 million for the three months
June 28, 1997, and decreased $1.1 million (14.9%) to $6.3 million from $7.4
million for the six months ended June 27, 1998, compared to the six months
ended June 28, 1997. As a percentage of revenues, the gross profit margin
decreased to 50.0% for the three months ended June 27, 1998 compared to 63.4%
for the three months ended June 28, 1997, and decreased to 54.3% from 55.2% for
the six months ended June 27,1998, compared to the six months ended June 28,
1997. The increase in the Entertainment Segment for the three months ended June
27, 1998 was primarily due to higher margin television license sales, offset by
lower margins on the product mix of Home Video sales. The decline for the six
months ended June 27, 1998 is due to lower margins on the product mix of Home
Video sales, offset by higher margin television license sales.
Commercial utilizes excess capacity in the consumer manufacturing facility and
is operated to absorb fixed overhead costs of that operation. In the future,
commercial cost of sales are expected to approximate revenues. In the three and
six months ended June 28, 1997 Cambridge operations which were sold had a gross
profit of $.9 million and $2.3 million, respectively.
Selling, General and Administrative Expenses
Selling, general and administrative expenses before one-time transition costs,
increased $1.8 million to $22.2 million for the three months ended June 27,
1998 compared to $20.4 million for the three months ended June 28, 1997. The
increase reflects higher selling and marketing costs partially offset by
ongoing corporate cost reductions. One-time transition costs of $4.8 million in
the three months ended June 27, 1998 are primarily related to the move to the
new manufacturing facility. One-time transition costs of $2.3 million for the
three months ended June 28, 1997 included $1.2 million of consulting costs,
$0.8 million of information system changeover costs and $0.3 million of costs
associated with a move of the Company's Racine, Wisconsin manufacturing
facility. Selling, general and administrative expenses before one-time
transition costs, remained unchanged at $43.7 million for the six months ended
June 27, 1998 and June 28, 1997. One-time transition costs of $9.0 million in
the six months ended June 27, 1998 are primarily related to the move to the new
manufacturing facility. One-time transition costs of $5.1 million for the six
months ended June 28, 1997 included $2.5 million of consulting costs, $2.3
million of information system changeover costs and $0.3 million of costs
associated with a move of the Company's Racine, Wisconsin manufacturing
facility.
Interest Expense, net
Interest income for the three months ended June 27, 1998 decreased $1.4 million
to $0.3 million from $1.7 million for the three months ended June 28, 1997 and
decreased $2.6 million to $1.0 from $3.6 for the six months ended June 27, 1998
compared to the six months ended June 27, 1997 The decrease in interest income
was due to lower cash and cash equivalent balances throughout the period.
Interest expense (including the distributions on the guaranteed preferred
beneficial interest in the Company's and Golden Books Publishing's Convertible
Debentures (the "Preferred Securities" and Revolving Credit Facility) for the
three months ended June 27, 1998 increased by $.1 million to $5.5 million, as
compared to $5.4 million for the three months ended June 28, 1997, and
increased $.1 million to $11.0 million from $10.9 million for the six months
ended June 27, 1998, compared to the six months ended June 27, 1997. Total
average outstanding debt (including the Preferred Securities) was $267.0
million for the three months ended June 27, 1998 and $266.0 for the six months
ended June 27, 1998 and $265.0 million for the three and six months period
ended June 28, 1997.
Income Taxes
The Company does not anticipate any significant provision or benefit for income
taxes in the fiscal period ending December 26, 1998. As such, operations for
the three and six months ended June 27, 1998 do not include an income tax
benefit from domestic operations as no tax benefit was provided on operating
losses. Profitable operating results in subsequent periods will benefit from an
income tax rate which will be lower than the statutory rate due to the
reinstatement of deferred tax assets for which a valuation allowance was
established.
16
<PAGE>
Net Loss
The net loss for the three months ended June 27, 1998 was $(30.6) million, or
$(1.21) per basic common share, compared to a net loss of $(11.3) million, or
$(0.52) per basic common share, for the three months ended June 28, 1997. The
net loss for the six months ended June 27, 1998 was $(51.5) million, or $(2.06)
per basic common share, compared to a net loss of $(20.1) million, or $(0.93)
per basic common share, for the six months ended June 28, 1997 The
deterioration was due to the factors described above.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
As of June 27, 1998, the Company had approximately $38.5 million in working
capital, including approximately $16.6 million in cash and cash equivalents.
The Company had outstanding borrowings under the revolving credit facility
totaling $12.6 million. The continued implementation of management's plan to
return the Company's core publishing business to profitability and to re-deploy
assets (the "Plan") beyond the next twelve months may require financial
resources greater than the Company's current cash position and future cash
flow.
Operations for the six months ended June 27, 1998, excluding one-time
transition costs of $13.3 million resulting from the strategic redirection of
the Company and payments of restructuring costs accrued during the period ended
December 28, 1996 of $1.9 million, utilized cash of approximately $27.0 million
compared to cash utilized of $24.0 million, excluding one-time transition costs
of $5.1 million and payments of restructuring costs accrued during the period
ended December 28, 1996 of $2.8 million for the six months ended June 28, 1997.
Acquisitions of property, plant and equipment were $9.3 million during the six
months ended June 27, 1998, as compared to $4.5 million during the six months
ended June 27, 1997.
On June 3, 1998, the Company obtained a $30.0 million revolving credit
facility. At June 27, 1998, the Company had outstanding borrowings under the
revolving credit facility totaling $12.6 million. As previously reported by the
Company on July 8, 1998, the Company and Golden Press Holdings L.L.C. ("Golden
Press Holdings") have reached a business understanding pursuant to which Golden
Press Holdings would provide up to $25 million in financing to the Company. The
Company and Golden Press Holdings are discussing the financial and other terms
upon which such financing would be made available to the Company, including the
appropriate interest or dividend rate, and whether and to what extent such
financing may be convertible into common stock. Unforeseen circumstances could
affect the Company's financial resources.
Working capital at June 27, 1998 was $38.5 million, as compared to $95.8
million at December 27, 1997. The decrease resulted from the investment in
property, plant and equipment and the funding requirements for the Company's
operations during the six months ended June 27, 1998 and the payment of
one-time transition and restructuring costs described above.
The Company maintains sufficient accruals for restructuring costs which are
expected to be paid out during the remainder of 1998.
The Company believes that, based on the carrying value of both certain assets
held for sale and inventory to be discontinued or replaced in connection with
the Company's strategic actions, it will realize cash proceeds in excess of
$10.0 million on the sale of these assets. Such proceeds and cash attributable
to the Company's cost savings will be used in connection with the Company's
change in strategic focus and other strategic measures.
On August 4, 1998, the Company announced that it has engaged Allen & Company as
financial advisors to assist the Company in evaluating strategic opportunities
to enhance shareholder value. The Company has not made a decision to pursue any
particular opportunity and there is no assurance that any transaction will
result from this process.
The Indenture covering the Company's 7.65% Senior Notes due 2002 restricts the
ability of Golden Books Publishing to pay cash dividends or make other cash
distributions to the Company, as well as the ability of the Company to pay cash
dividends or make other distributions on the Company's common stock. On June 2,
1998 Golden Books Publishing amended the Indenture governing it's 7.65% Senior
Notes due 2002 to, among other things, (i) permit Golden Books Publishing to
secure up to $30.0 million of borrowings and related obligations under the Line
of Credit, (ii) grant to the Trustee for its benefit and for the benefit of the
holders of the Senior Notes a security interest in certain assets of Golden
17
<PAGE>
Books Publishing, (iii) add a guarantee from the Company and (iv) add certain
additional restrictive covenants and amend certain existing covenants.
YEAR 2000 COMPLIANCE
Many currently installed computer systems and software products are coded to
accept only two digit entries to represent years. Any computer program that has
date-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in a system failure or other
miscalculation causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices or engage
in similar normal business activities. Since early 1997, the Company has been
pursuing a strategy of replacing and updating its information systems in
connection with its change in strategic focus. The Company believes that the
costs of modifying and replacing those systems which are not Year 2000
compliant will be approximately $15.0 million, of which approximately $10.0
million represents new systems development, which will be capitalized, and
approximately $5.0 million represents making existing systems year 2000
compliant, which will be expensed as incurred. In addition, the Company is
discussing with its vendors and customers the possibility of any interface
difficulties which may affect the Company. The project is estimated to be
completed prior to any anticipated impact on its operating systems. The Company
believes that with a modification and replacement strategy the Year 2000 issue
will not pose significant conversion problems for its computer systems.
However, if this strategy is not completed on a timely basis, the Year 2000
issue could have a material impact on the operations of the Company.
18
<PAGE>
PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
---------
Exhibit Number Description
- -------------- -----------
4.1* Amendment Agreement dated as of June 2, 1998 executed and
delivered by Golden Books Publishing Company, Inc. ("GBPC") and
Golden Books Family Entertainment, Inc. ("GBFE") and
acknowledged by Marine Midland Bank, as trustee ("The Trustee").
4.2* Second Supplemental Indenture dated as of June 2, 1998 among
GBPC, GBFE and the Trustee, to Indenture dated as of September
15, 1992 between GBPC and the Trustee.
4.3* Security Agreement dated as of June 2, 1998 between GBPC and the
Trustee.
4.4* Registration Rights Agreement dates as of June 2, 1998 among
GBPC, GBFE and the Trustee.
10.1* Loan and Security Agreement dated as of June 3, 1998 between
GBPC and NationsCredit Commercial Corporation, through it's
NationsCredit Commercial Funding division.
* Incorporated by reference to Form 8-K dated June 15, 1998.
27.1 Financial Data Schedule
(b) Reports on Form 8-K:
--------------------
Current report on Form 8-K dated June 15, 1998.
19
<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.
GOLDEN BOOKS FAMILY ENTERTAINMENT, INC.
August 11, 1998 /s/ Richard E. Snyder
------------------------
Richard E. Snyder
Chairman of the Board, President and
Chief Executive Officer
August 11, 1998 /s/ John C. Ferrara
---------------------
John C. Ferrara
Executive Vice President and
Chief Financial Officer
20
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0000790706
<NAME> GOLDEN BOOKS FAMILY ENTERTAINMENT, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-26-1998
<PERIOD-END> JUN-27-1998
<CASH> 16,657
<SECURITIES> 0
<RECEIVABLES> 56,059
<ALLOWANCES> 17,599
<INVENTORY> 37,319
<CURRENT-ASSETS> 122,465
<PP&E> 84,212
<DEPRECIATION> 40,016
<TOTAL-ASSETS> 282,450
<CURRENT-LIABILITIES> 84,010
<BONDS> 149,908
273
0
<COMMON> 65,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 282,450
<SALES> 89,679
<TOTAL-REVENUES> 89,679
<CGS> 78,807
<TOTAL-COSTS> 131,498
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,951
<INCOME-PRETAX> (51,770)
<INCOME-TAX> (257)
<INCOME-CONTINUING> (51,513)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (51,513)
<EPS-PRIMARY> (2.06)
<EPS-DILUTED> 0
<FN>
For the attached financials, the value EPS-DILUTED is not applicable
</FN>
</TABLE>
