UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 25, 2000
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number -14399
GOLDEN BOOKS FAMILY ENTERTAINMENT, INC.
(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
(Address of principal executive offices) (Zip Code)
(212) 547-6700
(Registrant's telephone number, including area code)
----------------------------------------------------
(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: 10,233,889 shares outstanding as of May
8, 2000.
<PAGE>
GOLDEN BOOKS FAMILY ENTERTAINMENT, INC.
TABLE OF CONTENTS
Page
Number
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets--March 25, 2000 (Unaudited)
and December 25, 1999 3
Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)-- for the three months ended March 25, 2000
(Successor Company) and March 27, 1999 (Predecessor
Company) 5
Consolidated Statements of Cash Flows (Unaudited)-- for
the three months ended March 25, 2000 (Successor
Company) and March 27,1999 (Predecessor Company) 6
Notes to Consolidated Financial Statements (Unaudited) 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 14
PART II OTHER INFORMATION
Item 1. Legal Proceedings 20
Item 2. Changes in Securities and Use of Proceeds 20
Item 6. Exhibits and reports on Form 8-K 20
SIGNATURES 21
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO
GOLDEN BOOKS FAMILY ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands)
- --------------------------------------------------------------------------------
ASSETS
March 25, December 25,
2000 1999
--------- ------------
(unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 5,368 $ 6,544
Accounts receivable, net 30,112 54,089
Inventories 26,509 26,169
Royalty advances 5,224 3,264
Other current assets 5,739 5,403
-------- --------
Total current assets 72,952 95,469
-------- --------
OTHER ASSETS
Accounts receivable-- long term 4,917 3,346
Other noncurrent assets 14,714 14,822
-------- --------
Total other assets 19,631 18,168
-------- --------
PROPERTY, PLANT AND EQUIPMENT, net of
accumulated depreciation and amortization
of $992 at March 25, 2000 16,761 17,522
EXCESS REORGANIZATION VALUE, net of
accumulated amortization of $908 at
March 25, 2000 33,955 36,319
OTHER INTANIGBLE ASSETS, net of accumulated
amortization of $1,635 at March 25, 2000 120,885 122,520
-------- --------
TOTAL ASSETS $264,184 $289,998
======== ========
See Notes to Consolidated
Financial Statements
3
<PAGE>
GOLDEN BOOKS FAMILY ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
(In Thousands, Except Share Data)
- --------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
March 25, December 25,
2000 1999
--------- ------------
(unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 21,235 $ 28,591
Accrued compensation and fringe benefits 2,364 6,790
Revolving credit and term loan agreement 10,001 15,384
Other current liabilities 41,974 49,345
--------- ---------
Total current liabilities 75,574 100,110
--------- ---------
NONCURRENT LIABILITIES
Revolving credit and term loan agreement 6,750 6,750
Senior secured notes 89,862 87,000
Accumulated post-retirement benefit obligation 30,288 30,806
Deferred compensation and other deferred 16,214 15,582
liabilities
--------- ---------
Total noncurrent liabilities 143,114 140,138
--------- ---------
STOCKHOLDERS' EQUITY:
Common Stock, $.01 par value, 30,000,000 102 102
shares authorized, 10,233,889 shares
issued as of March 25, 2000 and December
25, 1999
Additional paid in capital 50,131 50,131
Accumulated deficit (4,283) --
Accumulated other comprehensive income 29 --
--------- ---------
45,979 50,233
Less: Unearned compensation on restricted 483 483
stock
--------- ---------
Total common stockholders' equity 45,496 49,750
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 264,184 $ 289,998
========= =========
</TABLE>
See Notes to Consolidated
Financial Statements
4
<PAGE>
GOLDEN BOOKS FAMILY ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(In Thousands, Except for Per Share Data)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Successor | Predecessor
Company | Company
Three | Three Months
Months Ended | Ended
March 25, | March 27,
2000 | 1999
------------ | ------------
(unaudited) | (unaudited)
<S> <C> <C>
REVENUES $ 36,260 | $ 34,769
-------- | --------
COSTS AND EXPENSES: |
Cost of sales 20,033 | 24,507
Selling, general and administrative 17,656 | 16,756
Gains on sales of assets -- | (3,365)
-------- | --------
|
Total costs and expenses 37,689 | 37,898
-------- | --------
|
LOSS BEFORE REORGANIZATION ITEMS, DISTRIBUTIONS ON |
GUARANTEED PREFERRED BENEFICIAL INTERESTS IN THE |
COMPANY'S AND GOLDEN BOOKS PUBLISHING COMPANY, |
INC.'S CONVERTIBLE DEBENTURES, INTEREST INCOME, |
INTEREST EXPENSE AND PROVISION FOR INCOME TAXES (1,429) | (3,129)
|
REORGANIZATION ITEMS -- | 3,146
|
DISTRIBUTIONS ON GUARANTEED PREFERRED BENEFICIAL |
INTERESTS IN THE COMPANY'S AND GOLDEN BOOKS |
PUBLISHING COMPANY, INC.'S CONVERTIBLE DEBENTURES |
(Contractual distributions of $2,461 for the |
three months ended March 27, 1999) -- | 1,628
|
INTEREST INCOME (468) | (149)
|
INTEREST EXPENSE (Contractual interest expense of 3,322 | 3,020
$4,040 for the three months ended March 27, 1999) |
-------- | --------
|
LOSS BEFORE PROVISION FOR INCOME TAXES (4,283) | (10,774)
|
PROVISION FOR INCOME TAXES -- | 522
-------- | --------
|
NET LOSS (4,283) | (11,296)
|
OTHER COMPREHENSIVE INCOME: |
FOREIGN CURRENCY TRANSLATION 29 | 142
-------- | --------
|
COMPREHENSIVE LOSS $ (4,254) | $(11,154)
======== | ========
NET LOSS PER BASIC AND DILUTIVE COMMON SHARE $ (0.42) | $ (0.45)
======== | ========
</TABLE>
See Notes to Consolidated
Financial Statement
5
<PAGE>
GOLDEN BOOKS FAMILY ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Successor | Predecessor
Company | Company
Three | Three Months
Months Ended | Ended
March 25, | March 27,
2000 | 1999
------------ | ------------
(unaudited) | (unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES |
Net loss $ (4,283) | $(11,296)
Adjustments to reconcile net loss to net cash |
provided by (used in) operating activities: |
Depreciation and amortization 3,556 | 3,520
Non-cash interest expense 2,912 | 300
Reorganization items __ | 3,146
Gains on sales of assets __ | (3,365)
Changes in assets and liabilities, net of disposals: |
Decrease in accounts receivable 22,406 | 15,682
(Increase) decrease in inventories (340) | 3,625
Increase in royalty advances (1,960) | (2,698)
Decrease (increase) in other current assets 1,120 | (771)
Decrease in accounts payable (7,356) | (1,523)
Decrease in accrued compensation and fringe benefits (4,426) | (900)
Other assets and liabilities (7,223) | (2,692)
-------- | --------
Net cash provided by operating activities before |
Reorganization items 4,406 | 3,028
Reorganization items -- | (3,146)
-------- | --------
Net cash provided by (used in) operating activities 4,406 | (118)
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
Acquisitions of property, plant and equipment (228) | (496)
Additions to film library -- | (387)
Proceeds from sales of assets -- | 4,191
Deposits and other -- | 1,737
-------- | --------
Net cash (used in) provided by investing activities (228) | 5,045
</TABLE>
See Notes to Consolidated
Financial Statements
6
<PAGE>
GOLDEN BOOKS FAMILY ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(In Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Successor | Predecessor
Company | Company
Three | Three Months
Months Ended | Ended
March 25, | March 27,
2000 | 1999
------------ | ------------
(unaudited) | (unaudited)
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
Net Repayments under Revolving Credit and |
Term Loan Agreement (5,383) | --
Repayment of Revolving Credit Facility -- | (21,637)
Borrowings under DIP loan -- | 10,000
------- | --------
Net cash used in financing activities (5,383) | (11,637)
|
EFFECT OF EXCHANGE RATE CHANGES ON CASH 29 | 142
------- | --------
|
NET DECREASE IN CASH AND CASH EQUIVALENTS (1,176) | (6,568)
|
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 6,544 | 15,330
------- | --------
|
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 5,368 | $ 8,762
======= | ========
|
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: |
Cash paid during the period for: |
|
Interest expense $ 849 | $ 850
======= | ========
Income taxes, net of refunds received $ 7 | $ (37)
======= | ========
Non-cash activity: |
Stock conversion on Guaranteed Preferred Beneficial |
Interests in the Company's and Golden Books |
Publishing Company, Inc.'s Convertible Debentures -- | $ 5,205
======= | ========
</TABLE>
See Notes to Consolidated
Financial Statements
7
<PAGE>
GOLDEN BOOKS FAMILY ENTERTAINMENT, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A - Nature of Business, Organization and Basis of Presentation
Golden Books Family Entertainment, Inc. and Subsidiaries (the "Company" or the
"Registrant") is a publisher of children's books and family related
entertainment products primarily in the North American retail market. The
Company, through its Consumer Products division creates, publishes and markets
an extensive range of children's entertainment products, including "Little
Golden Books" and other storybooks, coloring / activity books, electronic
storybooks, puzzles, educational workbooks, reference books and novelty book
formats. The Company has published its flagship product line, "Little Golden
Books," for over 50 years.
The Company's Golden Books Entertainment Group ("Golden Books Entertainment")
consists of an extensive library of character-based family entertainment
properties. The Golden Books Entertainment division's library is comprised of
copyrights, distribution rights, trademarks and licenses relating to characters,
television programs and motion pictures, both animation and live action, and
includes individual specials and multiple episode series.
In February 1999, the Company reached an agreement with its major creditors
pursuant to which its then existing long-term debt would be significantly
reduced and its existing trade obligations would be paid in full. In accordance
with that agreement, the Registrant, as well as Golden Books Publishing, Inc and
Golden Books Home Video, Inc. filed petitions for reorganization under Chapter
11 of the United States Bankruptcy Code ("Bankruptcy Code"). Significant
components of the Company's amended joint plan of reorganization (the "Amended
Joint Plan of Reorganization") were approved by the Bankruptcy Court on December
22, 1999. On January 27, 2000, the Company formally emerged from protection
under the Bankruptcy Code upon the consummation of the Amended Joint Plan of
Reorganization. The Company has applied the reorganization and fresh-start
reporting adjustments as required by American Institute of Certified Public
Accountants' Statement of Position 90-7 "Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code" ("SOP 90-7") to the consolidated
balance sheet as of December 25, 1999 (the "Effective Date"). As used herein,
Successor Company refers to Golden Books Family Entertainment, Inc. and
subsidiaries from the Effective Date and Predecessor Company refers to Golden
Books Family Entertainment, Inc. and subsidiaries prior to the Effective Date. A
vertical black line has been drawn to separate the Successor Company's
consolidated statements of operations and comprehensive loss and consolidated
statements of cash flows from those of the Predecessor Company to signify that
they are different reporting entities and have not been prepared on the same
basis.
In the opinion of management, the accompanying unaudited consolidated financial
statements contain all adjustments necessary to present fairly the financial
position of the Company as of March 25, 2000 (Successor Company) and the results
of operations and cash flows for the three month periods ended March 25, 2000
(Successor Company) and March 27, 1999 (Predecessor Company). These unaudited
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 25, 1999.
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 consolidated financial statements for the three months ended March 27,
1999 (Predecessor Company). The Trust, which was the issuer of 8 3/4%
Convertible Trust Originated Preferred Securities, referred to in the Company's
consolidated financial statements as the Guaranteed
8
<PAGE>
GOLDEN BOOKS FAMILY ENTERTAINMENT, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
NOTE A - Nature of Business, Organization and Basis of Presentation (continued)
Preferred Beneficial Interests in the Company's and Golden Books Publishing
Company Inc.'s Convertible Debentures (the "TOPrS" or the "Preferred
Securities"), was owned by the Company, had no independent operations and its
assets consisted solely of the $109.8 million in aggregate principal amount of 8
3/4% Convertible Debentures due 2016 of the Company and Golden Books Publishing
Company, Inc. ("Golden Books Publishing") (see Note C). On the Effective Date of
the Amended Joint Plan of Reorganization, The TOPrS obligations were discharged
and, accordingly, the results of the Trust are not required to be presented in
the Successor Company's financial statements.
NOTE B - Inventories
Inventories consisted of the following
(in thousands)
March 25, December 25,
2000 1999
---- ----
(unaudited)
Raw materials $ 355 $ 250
Work-in-progress 715 819
Finished goods 23,259 22,920
Film library 2,180 2,180
------- -------
$26,509 $26,169
======= =======
NOTE C - Preferred Securities
The Predecessor 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 "Preferred Securities"). The Preferred Securities were
issued by the Trust, a Delaware business trust financing vehicle. The
Predecessor Company owned all of the common securities of the Trust. The
Preferred Securities paid quarterly distributions at an annual distribution rate
of 8 3/4% (subject to deferral of interest payments on the Preferred Securities
by the Predecessor Company and Golden Books Publishing), and were convertible at
the option of their holders into Convertible Debentures, which were immediately
convertible into Predecessor Company common stock at an initial conversion price
of $13.00 per share. In January 1999, certain holders of the Preferred
Securities converted $5.2 million worth of Preferred Securities for 400,003
shares of the Predecessor Company's common stock. The Convertible Debentures
were due to mature on August 20, 2016.
The Predecessor Company and its subsidiary, Golden Books Publishing, were joint
and several obligor's of the Preferred Securities and they fully and
unconditionally guaranteed the Trust's obligations under the Preferred
Securities. Separate financial statements of Golden Books Publishing were not
presented in their entirety as the separate financial statements would not be
materially different from the consolidated financial statements of the
Predecessor Company. Summarized financial statements of Golden Books Publishing
were as follows (in thousands):
Predecessor
Company
March 27, 1999
--------------
(unaudited)
Current $ 95,066
Noncurrent assets 123,400
--------
Total assets $218,466
========
9
<PAGE>
GOLDEN BOOKS FAMILY ENTERTAINMENT, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
NOTE C - Preferred Securities (continued)
Predecessor
Company
March 27, 1999
--------------
(unaudited)
Current liabilities $199,639
Noncurrent liabilities 47,964
Liabilities subject to compromise 288,706
--------
Total liabilities 536,309
Stockholders' deficit (317,843)
--------
Total Liabilities and Stockholders' Deficit $218,466
========
Three Months Ended
March 27, 1999
--------------
(unaudited)
Revenues $34,769
Gross profit 10,262
Loss before interest expense, interest income,
reorganization items and provision
for income taxes (6,327)
Reorganization items 3,146
--------
Net loss $(13,917)
========
On the Effective Date of the Amended Joint Plan of Reorganization, the TOPrS
were converted into 50% of the Successor Company's common stock issued post
recapitalization, prior to dilution (5,000,000 shares).
NOTE D - Loss Per Basic and Dilutive Common Share
Loss per basic and dilutive common share was computed as follows (in thousands
except for per share data):
Successor | Predecessor
Company | Company
Three Months | Three Months
Ended | Ended
March 25, | March 27,
2000 | 1999
---- | ----
Net loss $ (4,283) | $(11,296)
Preferred dividend requirements -- | (1,252)
-------- | --------
Loss applicable to basic and dilutive |
common stock $ (4,283) | $(12,548)
======== | ========
Weighted average basic and dilutive |
common shares outstanding 10,234 | 28,167
-------- | --------
Loss per basic and dilutive common |
share $ (0.42) | $ (0.45)
======== | ========
10
<PAGE>
GOLDEN BOOKS FAMILY ENTERTAINMENT, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
NOTE E - Contingencies
On February 26, 1999, the Predecessor Company and certain of its subsidiaries
filed petitions for reorganization under the Bankruptcy Code, and emerged
therefrom on January 27, 2000. In accordance with the Amended Joint Plan of
Reorganization, the Successor Company is in the process of paying all
pre-petition trade creditors with undisputed claims all amounts due with
interest, and is working to resolve all disputed claims of pre-petition trade
creditors in the Bankruptcy Court.
The Company and Penn Corporation ("Penn") have been informed by the United
States 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 known as "CERCLA" or "Superfund") and/or similar state
laws. 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
sites discussed herein. In all cases except those described below, the Company
has resolved its liability or is in the process of resolving its liability for
amounts that are not material.
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
Kalamazoo which was allegedly used by Beach Products. 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 provided financial contribution to the
remediation.
On November 14, 1996, the Michigan Department of Environmental Quality requested
that corrective actions be taken at the Company's former Fulford Street Property
site located in Kalamazoo, Michigan as a result of the discovery on November 8,
1996 of a leaking underground storage tank system. Recent sampling results taken
pursuant to the corrective action plan for this site indicated the presence of
groundwater contamination at levels exceeding the Michigan Department of
Environmental Quality standards in one of six groundwater samples. Additional
sampling will be undertaken to determine the source of the contamination.
Current estimates indicate that future costs associated with this release are
not expected to exceed $200,000. However, in the event that the contamination
has migrated off the site, these costs could increase.
At the Hunt's Landfill site in Racine County, Wisconsin, the Company'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 remediation activities was
completed in 1996, the Company and the other PRPs 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 approximately
$5 million. In accordance with the consent decree, the Company has established a
reserve for its share of the probable clean-up costs.
In 1991 the EPA issued a unilateral administrative order (the "1991 Order") to
the Company and four other PRPs, requiring the Company and the other PRPs to
perform a remedial design and remedial action at the Hertel Landfill Superfund
Site in Plattekill, New York. The Company did not agree to comply with the
Order. The EPA subsequently sued the Company and other PRPs seeking recovery of
its costs at this site. Various PRPs in the litigation brought claims for
contribution against each other and the Company. The Company settled its
liability to the United States for noncompliance with the 1991 Order and agreed
to comply with the 1991 Order by implementing the remedy at the site, which is
now estimated to cost up to $4.9 million, excluding potential groundwater
remediation costs. On July 9, 1998, the Company and other PRPs entered into a
consent decree with the United States and the State of New York to resolve their
alleged liability for past response costs and formalize their agreement to
perform the remedy at the site. Under the consent decree, the Company and the
other settling parties are jointly and severally obligated to perform the remedy
and reimburse certain governmental past and future costs. The Company has paid
approximately $1.7 million toward remedial costs since 1996 and has completed
construction of the landfill cap. The Company's share of future costs for
operation and maintenance of the cap and landfill monitoring are expected to be
less than $500,000. The Company's share of the government's future costs is
expected to be $170,000.
The Company also has been identified as a PRP at a site located in Poughkeepsie,
New York. The Company and eight other
11
<PAGE>
GOLDEN BOOKS FAMILY ENTERTAINMENT, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
NOTE E Contingecies (continued)
PRPs received a notice letter in 1995 from the State of New York regarding this
site. The State of New York sought recovery of its past oversight costs of more
than $600,000 plus future oversight and maintenance costs associated with this
site, estimated by the State of New York to be $830,000. The Company has
received no further communications from the State of New York with respect to
this site but believes that the construction phase of the remedy has been
completed.
In addition to these environmental matters, the Company is party to the
following legal proceedings.
Live Entertainment, Inc. (Artisan Entertainment, Inc.) filed an action in
December 1998 in the California Superior Court against the Company to recover
damages in excess of $2.3 million as a result of the Company allegedly breaching
certain of its obligations under a licensing agreement. The Company has filed an
answer and cross complaint alleging breaches of the licensing agreement by Live
Entertainment, Inc. and seeking recission of the agreement.
The Company 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 the Company'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." The District Court has granted the Company's motion for
summary judgment with respect to MindGames, Inc.'s claims to recover
approximately $2.4 million in lost profits and other losses. MindGames, Inc. has
agreed to dismiss its remaining claim to recover approximately $120,000 of
unpaid royalties in order to appeal the District Court's ruling. Although the
parties have filed initial briefs with the 7th Circuit Court of Appeals, the
appeal was stayed during the Company's bankruptcy proceeding.
In consideration of the aforementioned matters, the Successor Company has
recorded accruals in the "deferred compensation and other deferred liabilities"
account of approximately $8.3 million in the consolidated balance sheet at March
25, 2000.
While it is not feasible to predict or determine the outcomes of these
aforementioned proceedings, it is the opinion of management that they maintain
adequate reserves in the consolidated balance sheet.
The Successor Company and its subsidiaries are parties to certain other legal
proceedings which are incidental to their ordinary business, none of which the
Successor Company believes are material to the Successor Company and its
subsidiaries taken together as a whole.
NOTE F - Industry Segments
The Company currently has two operating segments: Consumer Products and
Entertainment. The Company previously maintained a third segment (Commercial
Products) until its sale in November 1999. The Company's Consumer Products
segment is engaged in the creation, publication, manufacturing, printing and
marketing of story and picture books, coloring books and other activity books,
interactive electronic books and games, and products for children as well as
multimedia "entertainment" products. The Company's foreign operations within the
Consumer Products segment consists of a sales subsidiary in Canada and a small
sales branch in the United Kingdom. The Consumer Products segment included the
Company's adult publishing division until its sale in April 1999.
The Entertainment segment includes the Company's extensive library of
character-based family entertainment properties. The Entertainment segment's
library is comprised of copyrights, distribution rights, trademarks or licenses
relating to characters, television programs and motion pictures, both animation
and live action, and includes individual specials and multiple episode series.
The Commercial segment provided printing and other services to third parties
until the sale of the Company's manufacturing facility in November 1999.
12
<PAGE>
GOLDEN BOOKS FAMILY ENTERTAINMENT, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
NOTE F - Industry Segments (continued)
The Company evaluates performance based on several factors, of which the primary
measure is operating segment earnings before interest, taxes, depreciation and
amortization ("EBITDA").
Information by industry segment is set forth below (in millions):
Successor | Predecessor
Company | Company
Three Months | Three Months
Ended | Ended
March 25, | March 27,
2000 | 1999
---- | ----
Revenues: |
Consumer Products $32.0 | $29.0
Entertainment 4.3 | 3.8
Commercial -- | 2.0
----- | -----
Total Revenues $36.3 | $34.8
===== | =====
Gross Profit: |
Consumer Products $14.1 | $ 8.3
Entertainment 2.1 | 2.0
----- | -----
Total Gross Profit $16.2 | $10.3
===== | =====
|
EBITDA |
Gross profit $16.2 | $10.3
SG&A (17.6) | (16.8)
Gains on sales of assets -- | 3.4
Reorganization items -- | (3.1)
----- | -----
Operating loss (1.4) | (6.2)
Depreciation and amortization 3.6 | 3.5
----- | -----
Total EBITDA $ 2.2 | $(2.7)
===== | =====
Depreciation and Amortization: |
Consumer Products $ 2.1 | $ 1.4
Entertainment 0.7 | 1.2
Corporate 0.8 | 0.8
Commercial -- | 0.1
----- | -----
Total Depreciation and |
Amortization $ 3.6 | $ 3.5
===== | =====
13
<PAGE>
GOLDEN BOOKS FAMILY ENTERTAINMENT, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
This Quarterly Report on Form 10-Q and in particular Management's Discussion and
Analysis of Financial Condition and Results of Operations contains
forward-looking statements within the meaning of Section 21E of the Securities
Exchange Act of 1934, as amended. The Company's actual results of operations and
future financial condition may differ materially from those expressed or implied
in any such forward-looking statements as a result of many factors, including
factors that may be beyond the Company's control. On January 27, 2000, the
Company formally emerged from proceedings under Chapter 11 of the Bankruptcy
Code. Future success of the Company depends on the Company's ability to maintain
lower operating costs, return to profitability and generate sufficient cash flow
to meet its operational and financing requirements including servicing its
reduced indebtedness and Revolving Credit and Term Loan Agreement. Other factors
that may cause actual results of operations and future financial condition to
differ from those expressed or implied in any forward-looking statements
contained herein include loss of key licenses, adverse changes in relationships
with key customers, the degree of acceptance of new product introductions, the
level of product returns, changes in consumer preferences, such as the growth of
computer-based products, and consumer spending habits, competition from existing
and potential competitors, pricing pressures, costs of labor and other costs and
expenses, demographics and general economic conditions. The Company cautions
that the foregoing list of important factors is not exclusive. The Company does
not undertake to update any forward-looking statements contained herein or that
may be made from time to time by or on behalf of the Company.
The operating performance of entertainment companies, such as the Company, is
measured, in part, by their ability to generate EBITDA. Further, the Company
uses EBITDA as the primary indicator of its operating performance and
secondarily as a measure of liquidity. The Company defines "EBITDA" as earnings
before interest, taxes and depreciation and amortization. Although EBITDA is not
a measure of performance calculated in accordance with generally accepted
accounting principals ("GAAP"), the Company believes that the entertainment
industry accepts EBITDA as a generally recognized measure of performance and
analysts who report publicly on the performance of entertainment companies use
EBITDA. Nevertheless, this measure should not be considered in isolation or as a
substitute for operating income, net income, net cash provided by operating
activities or any other measure for determining operating performance or
liquidity that is calculated in accordance with GAAP. The Company believes that
the operating performance of entertainment companies is measured in part by
their ability to generate EBITDA. Further, the Company uses EBITDA as its
primary indicator of operating performance and as a measure of liquidity.
EBITDA, as the Company calculates it, may not be comparable to calculations of
similarly titled measure presented by other companies.
The Company's financial results in Fiscal 1999 were impacted as a result of its
filing for reorganization under Chapter 11 of the Bankruptcy code on February
26, 1999, from which the Company did not formally emerge until January 27, 2000.
Because significant components of the Amended Joint Plan of Reorganization were
approved by the Bankruptcy Court on December 22, 1999, pursuant to guidance
provided by SOP 90-7, the Company adopted Fresh-Start accounting as of December
25, 1999. As used herein, Successor Company refers to Golden Books Family
Entertainment, Inc. and Subsidiaries from the Effective Date and Predecessor
Company refers to Golden Books Family Entertainment, Inc. and Subsidiaries prior
to the Effective Date. Accordingly, the Successor Company's financial statements
are not prepared on the same basis as the Predecessor Company's financial
statements.
The Company currently has two business segments, which it operates primarily
through its principal operating subsidiary, Golden Books Publishing Company,
Inc. ("Golden Books Publishing"): (1) Consumer Products, which includes its
Children's Publishing and, until its sale in April 1999, Adult Publishing
divisions, and (2) Entertainment, which operates as the Golden Books
Entertainment Group ("GBEG") division. The Company previously maintained a third
business segment
14
<PAGE>
GOLDEN BOOKS FAMILY ENTERTAINMENT, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
(Commercial Products) until the sale of its Manufacturing facility in November
1999 which provided printing, graphic, creative and distribution services to
third parties.
The following discussion should be read in conjunction with the unaudited
consolidated financial statements of the Company at March 25, 2000 (Successor
Company) and for the three month periods ended March 25, 2000 (Successor
Company) and March 27, 1999 (Predecessor Company) and the related notes thereto.
Three months ended March 25, 2000 (Successor Company) compared to three months
ended March 27, 1999 (Predecessor Company)
Revenues
Total revenues for the three months ended March 25, 2000 increased $1.5 million
(4%) to $36.3 million compared to $34.8 million for the three months ended March
27, 1999.
Consumer Products revenues increased $3.0 million (10%) to $32.0 million for the
three months ended March 25, 2000 compared to $29.0 million for the three months
ended March 27, 1999. The increase in revenue was due to a $6.4 million (25%)
increase in Children's Publishing revenues which was partially offset by a $3.4
million decline in Consumer Products revenue related to the Adult Publishing
business. For the three months ended March 25, 2000, Children's Publishing
revenues were responsible for all of the revenues of the Consumer Products
segment. Children's Publishing revenues were $32.0 million for the three months
ended March 25, 2000 compared to $25.6 million for the three months ended March
27, 1999. The increase in Children's Publishing revenue is due to increased
revenues generated primarily by sales of Pokemon, Tigger and Barbie licensed
product through mass market retailers (Target, Toys R Us), other retailers
(Eckerd Drug, CVS) and international sales. The three months ended March 27,
1999 included revenues from the Adult Publishing business totaling approximately
$3.4 million. The Adult Publishing business was sold in April 1999.
Entertainment revenues increased $0.5 million (13%) to $4.3 million for the
three months ended March 25, 2000 compared to $3.8 million for the three months
ended March 27, 1999. The increase is due to increased foreign television
licencing revenue relating to Rudoph the Red Nosed Reindeer, among other
characters, and a new Lassie licensing agreements. These increases were offset
by a decrease in home video revenue primarily attributable to fewer new releases
in 2000 as compared to 1999.
Commercial Products revenues were $2.0 million for the three months ended March
27, 1999. The Company ceased operations of its Commercial Products segment after
the sale of its manufacturing facility in November 1999.
Gross Profit
Total gross profit increased $5.9 million to $16.2 million for the three months
ended March 25, 2000 from $10.3 million for the three months ended March 27,
1999. As a percentage of revenues, total gross profit margin increased to 45%
for the three months ended March 25, 2000 from 30% for the three months ended
March 27, 1999. The increase was attributable to improved gross profit margins
in the Consumer Products Segment slightly offset by decreased gross profit in
the Entertainment Segment as described below.
Consumer Products gross profit increased $5.8 million to $14.1 million for the
three months ended March 25, 2000, compared to $8.3 million for the three months
ended March 27, 1999. As a percentage of revenues, Consumer Products gross
profit margin increased to 44% for the three months ended March 25, 2000 from
29% for the three months ended March 27, 1999. The improvement in gross profit
margin was primarily attributable to a change in the product mix toward more
profitable formats including the new Pokemon formats and reduced manufacturing
costs (primarily as a result of the sale of the manufacturing facility in
November 1999), distribution costs and pre-production costs.
Entertainment gross profit increased $0.1 million to $2.1 million for the three
months ended March 25, 2000 compared to $2.0 million for the three months ended
March 27, 1999. As a percentage of revenues, the gross profit margin decreased
to
15
<PAGE>
GOLDEN BOOKS FAMILY ENTERTAINMENT, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
49% for the three months ended March 25, 2000 compared to 52% for the three
months ended March 27, 1999. The decrease in gross profit percentage relates to
increased royalties related to the increased television and licensing revenues
as noted above.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $0.8 million to $17.6
million for the three months ended March 25, 2000 compared to $16.8 million for
the three months ended March 27, 1999. The increase is due primarily to
increased amortization expense related to intangible assets established in
accordance with SOP 90-7 and the Company's consummation of its Amended Joint
Plan of Reorganization.
Reorganization Items
Reorganization items related to the Chapter 11 proceedings of $3.1 million
during the three months ended March 27, 1999 includes $2.0 million in
professional fees and $1.2 million in financing costs primarily related to the
Predecessor Company's DIP Loan, partially offset by interest income.
Interest Expense, Net
Interest income for the three months ended March 25, 2000 increased $0.4 million
to $0.5 million from $0.1 million for the three months ended March 27, 1999. The
increase in interest income was attributable to generally higher cash and cash
equivalent balances throughout the period.
Interest expense for the three months March 25, 2000 was $3.3 million. Interest
expense recorded during the three months ended March 25, 2000 related to the
Company's Revolving Credit and Term Loan Agreement and Senior Secured Notes.
Interest expense for the three months ended March 27, 1999 was $4.6 million
(including the distributions on the guaranteed preferred beneficial interest in
the Company's and Golden Books Publishing's Convertible Debentures). During the
three months ended March 27, 1999 the Predecessor Company stopped recording
interest expense relating to its then outstanding debt facilities effective
February 27, 1999 in accordance with the requirements of SOP 90-7.
Income Tax
At December 25, 1999, the Company had approximately $203.0 million of net
operating loss carryforwards for Federal income tax purposes which are subject
to certain limitation-on-utilization rules (as defined in Internal Revenue Code
Section 382). The Company incurred an additional taxable loss of approximately
$4.3 million for the three months ended March 25, 2000. Due to the uncertainty
of generating future taxable income, management believes it is appropriate to
reserve the deferred tax asset. Accordingly, there is no provision for income
taxes for the three months ended March 25, 2000.
The provision for income taxes was $0.5 million for the three months ended March
27, 1999 and related primarily to gains recognized on certain asset dispositions
in Canada, where the Company files separate tax returns.
Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)
EBITDA increased $4.9 million to $2.2 million for the three months ended March
25, 2000, compared to $(2.7) for the three months ended March 27, 1999. The
increase is due primarily to improved gross profit resulting from increased
revenues and lower cost of sales attributable to a change in product mix toward
more profitable products and reduced manufacturing costs (primarily as a result
of the sale of the manufacturing facility in November 1999), distribution costs
and pre-production costs.
16
<PAGE>
GOLDEN BOOKS FAMILY ENTERTAINMENT, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
Net Loss
The net loss for the three months ended March 25, 2000 was $(4.3) million, or
$(0.42) per basic and dilutive common share, compared to a net loss of $(11.3)
million, or $(0.45) per basic and dilutive common share, for the three months
ended March 27, 1999. The decrease in net loss is attributable to the factors
described above.
Financial Condition, Liquidity and Capital Resources
In February 1999, the Company reached an agreement with its major creditors
pursuant to which its then existing long-term debt would be significantly
reduced and its existing trade obligations would be paid in full. In accordance
with that agreement, the Company, as well as Golden Books Publishing and Golden
Books Home Video, Inc. filed petitions for reorganization under Chapter 11 of
the United States Bankruptcy Code on February 26, 1999. Under an order dated
September 24, 1999, the Bankruptcy Court confirmed the Company's Amended Joint
Plan of Reorganization (the "Amended Joint Plan of Reorganization"). Significant
components of the Amended Joint Plan of Reorganization were approved by the
Bankruptcy Court on December 22, 1999. On January 27, 2000, the Company formally
emerged from protection under the Bankruptcy Code upon the consummation of the
Amended Joint Plan of Reorganization. The Company applied the reorganization and
fresh-start accounting adjustments as required by SOP 90-7 to the consolidated
balance sheet as of December 25, 1999.
Upon the consummation of the Amended Joint Plan of Reorganization, the Successor
Company entered into a revolving credit and term loan agreement consisting of a
revolving credit facility of up to $50.0 million and a term loan in the amount
of $10.0 million (the "Revolving Credit and Term Loan Agreement"). The revolving
portion of the Revolving Credit and Term Loan Agreement in the amount of $50.0
million for the revolving credit portion of the Revolving Credit Agreement
matures on December 31, 2002 together will all accrued and unpaid interest
thereon. The term loan portion of the Revolving Credit and Term Loan Agreement
in the amount of $10.0 million is payable in installments by the Successor
Company over its three year term with all remaining principal together with all
accrued and unpaid interest thereon due in full on December 31, 2002. Interest
on the term loan portion of the Revolving Credit and Term Loan Agreement is
payable monthly in arrears on the first day of each month commencing February 1,
2000 at a rate equal to the Prime Rate plus 1.75%.
The Revolving Credit and Term Loan Agreement requires the Successor Company to
maintain compliance with certain financial and non-financial covenants,
including minimum EBITDA and limitations on: (i) dividends, distributions and
prepayment, (ii) incurences of additional indebtedness and (iii) capital
expenditures (all as defined in the Revolving Credit and Term Loan Agreement),
among others. The minimum EBITDA covenant requires the achievement of
approximately $1.0 million in EBITDA for Fiscal 2000. While the Company's budget
projects EBITDA in excess of this amount, the Company has not achieved this
level of EBITDA in recent years. The Successor Company has approximately $10.0
million of revolving credit portion and $6.8 million of the term loan portion
outstanding, respectively, under the Revolving Credit and Term Loan Agreement as
of March 25, 2000. At April 29, 2000, the Successor Company had available
borrowings of $11.1 million under the revolving credit portion of the Revolving
Credit and Term Loan Agreement.
Upon consummation of the Amended Joint Plan of Reorganization, the Successor
Company entered into an indenture agreement (the "Indenture") governing the
terms of the senior secured notes in the principal amount of $87.0 million (the
"Senior Secured Notes") due in full on December 31, 2004 together with all
accrued and unpaid interest thereon. Interest at the rate of 10.75% per annum
commencing January 1, 2000 is payable semi-annually on June 30th and December
31st of each year of the term of the Senior Secured Notes. Interest may be paid
in the form of additional Senior Secured Notes at a rate of 14.25% per annum in
lieu of cash at the Successor Company's option for all interest payments due on
or prior to December 31, 2002. The Senior Secured Notes are secured by the
existing collateral which had been granted to the holders of the Predecessor
Company's senior notes as well as certain additional collateral. The Indenture
requires the Successor Company to maintain compliance with certain financial and
non-financial covenants, including minimum EBITDA and limitations on: (i)
restricted payments, (ii) incurences of additional indebtedness and (iii)
capital expenditures (all as defined in the Indenture), among others. The
Successor Company has outstanding $89.9 million in Senior Secured Notes as of
March 25, 2000.
17
<PAGE>
GOLDEN BOOKS FAMILY ENTERTAINMENT, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
At March 25, 2000, the Company was in compliance with all covenants related to
the Revolving Credit and Term Loan Agreement and the Senior Secured Notes.
In accordance with the Amended Joint Plan of Reorganization, the Company is in
the process of paying remaining pre-petition trade creditors with undisputed
claims all amounts due with interest at 4.25% and working to resolve all
disputed claims of pre-petition trade creditors in the Bankruptcy Court.
Cash flow for the three months ended March 25, 2000 utilized cash of
approximately $1.2 million compared to cash utilized of approximately $6.6
million for the three months ended March 27, 1999.
The Company had cash provided by operations of $4.4 million for the three months
ended March 25, 2000, compared to cash used in operations of $0.1 million for
the three months ended March 27, 1999. The improvement in cash flow from
operations is primarily attributable to the Company's reduction in operating
loss and an increase in accounts receivable collections, offset by decreased
accounts payable balances related to payments made to vendors.
Cash used in investing activities for the three months ended March 25, 2000 was
$0.2 million compared to cash provided by investing activities of $5.0 million
for the three months ended March 27, 1999. Acquisitions of property, plant and
equipment were approximately $0.2 million during the three months ended March
25, 2000, as compared to approximately $0.5 million during the three months
ended March 27, 1999. Additions to the Company's film library were approximately
$0.4 million during the three months ended March 27, 1999. During the three
months ended March 27, 1999, the Company received proceeds from the sale of
assets of $4.2 million
Cash used in financing activities was $5.4 million for the three months ended
March 25, 2000, as compared to $11.6 million for the three months ended March
27, 1999. The Company used cash in financing activities of $5.4 million, net of
additional borrowings, in 2000 to repay amounts outstanding under its Revolving
Credit and Term Loan Agreement. The Company used cash in financing activities of
$21.6 million to repay its then outstanding pre-bankruptcy credit facility and
had cash provided by financing activities of $10.0 million from borrowings under
its DIP loan facility.
Working capital deficiency of the Company at March 27, 2000 was approximately
$(2.6) million compared to working capital deficiency of approximately $(4.6)
million at December 25, 1999. The decrease in working capital deficiency is
primarily attributable to lower accounts payable balances and accrued expense
balances due to payments made to vendors and lower borrowings under the
Revolving and Term Loan Agreement offset by lower accounts receivable balances
due to cash collections.
On December 12, 1998, the Company signed an amended license agreement with
Disney (the "Amended Disney License Agreement"). The Amended Disney License
Agreement superseded a prior agreement signed on September 26, 1997 that ran
through December 31, 2001. The Amended Disney License Agreement commenced on
December 12, 1998 and ends December 31, 2000 with a possible extension through
September 30, 2001 under certain conditions. Royalty rates under the Amended
Disney License Agreement vary by product. The Amended Disney License Agreement
contains minimum royalty guarantees.
On March 21, 2000, the Company announced that the Amended Disney License
Agreement would not be renewed and will thus expire on December 31, 2000 (the
"Expiration Date"). In accordance with the rights and obligations of the Company
under the Amended Disney License Agreement, commencing on the Expiration Date,
the Company will have a 13 month period, expiring on January 31, 2002 (the
"Sell-off Period") in which it can continue to sell Disney licensed product
manufactured by the Company until the Expiration Date. Until the Amended Disney
License Agreement expires, all rights and obligations of the Company are to
remain in effect and the Company is obligated to continue to honor all terms of
the Amended Disney License Agreement through the Sell-off Period. In Fiscal
1999, the sales of Disney licensed product accounted for slightly less than 20%
of the Company's net sales. The Company believes the termination of the Amended
Disney License Agreement will enable it to continue its change toward more
profitable product. The Company does not
18
<PAGE>
GOLDEN BOOKS FAMILY ENTERTAINMENT, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
believe that the expiration of the Amended Disney License Agreement will have a
negative impact in Fiscal 2000. While the Company is currently evaluating the
long-term impact of the expiration of the Amended Disney License Agreement, the
Company believes that anticipated lost revenues due to the expiration of this
agreement can be mitigated over time from increased revenues generated from
other licensed products as well as increased sales of proprietary product.
The Company maintains a printing services agreement which it entered into upon
the sale of its manufacturing facility which terminates at the end of December
2004. Under the printing services agreement, the Company is obligated to
purchase a substantial portion of the Company's existing product from the buyer
and maintain certain minimum purchase levels.
The Company is required to meet minimum contractual payments in effect at March
25, 2000 of approximately $40.0 million in Fiscal 2000 and $28.8 million in
Fiscal 2001. Of the payments due in Fiscal 2000 and Fiscal 2001, a significant
portion is comprised of two obligations (i) the minimum purchase levels under
the printing services agreement and (ii) the minimum royalty guarantees under
the Amended Disney License Agreement. The Company believes that its cash on
hand, cashflows from operations and borrowing availability under the revolving
portion of the Company's Revolving and Term Loan Agreement will be sufficient to
satisfy existing commitments and plans, including those described above.
However, there can be no assurance that the Company will be able to make planned
borrowings, that the Company's business will generate sufficient cash from
operations, or that future borrowings will be available in an amount to enable
the Company to service its debt and to make necessary capital or other
expenditures.
Seasonality
The Company has historically experienced significant fluctuations in quarterly
operating results. The children's publishing business in general is seasonal and
depends to a significant extent on the Christmas selling season, generally
resulting in a disproportionately higher percentage of revenues in the Company's
third fiscal quarter. The Company's quarterly operating results also will
fluctuate based on the timing of the introduction of products that utilize
licensed characters, which, in the case of characters appearing in movies, will
be dependent upon the period in which costs and expenses attributable to the
development and introduction of such products are incurred.
19
<PAGE>
GOLDEN BOOKS FAMILY ENTERTAINMENT, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Note E
ITEM 2. Changes in Securities and Use of Proceeds
On January 27, 2000, the Company consummated its Amended Joint Plan of
Reorganization. On that date the common and preferred stock of the Predecessor
Company was exchanged for warrants to purchase common stock of the Successor
Company for $23.03 per common share, the TOPrS securities of the Predecessor
Company were exchanged for 50% of the common stock of the Successor Company and
the $150.0 million Senior Notes of the Predecessor Company were exchanged for
$87.0 million Senior Notes of the Successor Company and 42.5% of the common
stock of the Successor Company.
Please see the Company's Form 10-K dated December 25, 1999, the Company's
Amended Joint Plan of Reorganization (incorporated by reference to Exhibit 2.1
to the Registrant's Form 8-K filed May 20, 1999) and the Indenture governing the
10 3/4% Senior Secured Notes due 2004 issued by Golden Books Publishing Company,
Inc., dated as of January 25, 2000, among Golden Books Publishing Company, Inc.,
the Guarantors named therein and HSCB Bank USA, as Indenture Trustee
(incorporated by reference to Exhibit Form T3/A filed by the Golden Books
Publishing Company, Inc. on January 26, 2000).
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit Number Description
- -------------- -----------
27.1 Financial Data Schedule
(b) Reports on Form 8-K:
Report date of earliest event reported
January 27, 2000
20
<PAGE>
GOLDEN BOOKS FAMILY ENTERTAINMENT, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
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 there unto duly authorized.
GOLDEN BOOKS FAMILY ENTERTAINMENT, INC.
May 9, 2000 /s/ Richard E. Snyder
-----------------------------------------
Richard E. Snyder
Chairman of the Board and
Chief Executive Officer
May 9, 2000 /s/ Colin Finkelstein
-----------------------------------------
Colin Finkelstein
Chief Financial Officer
[Principal financial and
accounting officer]
21
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-30-2000
<PERIOD-END> MAR-25-2000
<CASH> 5,368
<SECURITIES> 0
<RECEIVABLES> 30,112
<ALLOWANCES> 0
<INVENTORY> 26,509
<CURRENT-ASSETS> 72,952
<PP&E> 17,753
<DEPRECIATION> 992
<TOTAL-ASSETS> 264,184
<CURRENT-LIABILITIES> 75,574
<BONDS> 0
0
0
<COMMON> 102
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 264,184
<SALES> 37,689
<TOTAL-REVENUES> 37,689
<CGS> 20,033
<TOTAL-COSTS> 37,689
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,854
<INCOME-PRETAX> (4,283)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,283)
<EPS-BASIC> (0.42)
<EPS-DILUTED> 0
<FN>
For the attached financials, the value EPS-DILUTED is not applicable.
</FN>
</TABLE>
