SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarter ended March 31, 1995
Commission File No. 0-17342
LIVE ENTERTAINMENT INC.
(Exact name of Registrant as specified in its charter)
Delaware 95-4178252
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
15400 Sherman Way, Van Nuys, California 91406
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (818) 988-5060
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 by check mark whether the Registrant has filed all
documents and reports required to be filed by Section 12, 13 or 15(d) of
the Securities Exchange Act of 1934 subsequent to the distribution of
securities under a plan confirmed by a court.
Yes X No
As of April 21, 1995, there were 2,418,700 shares of the
Registrant's Common Stock, 4,197,302 shares of the Registrant's Series
B Cumulative Convertible Preferred Stock and 15,000 shares of the
Registrant's Series C Convertible Preferred Stock outstanding.
<PAGE>
LIVE ENTERTAINMENT INC. AND SUBSIDIARIES
INDEX
PART I - FINANCIAL INFORMATION Page
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED):
Condensed Consolidated Balance Sheets at
December 31, 1994 and March 31, 1995 . . . . . . . . . 1
Condensed Consolidated Statements of
Operations for the three months ended
March 31, 1994 and 1995. . . . . . . . . . . . . . . . 2
Condensed Consolidated Statements of
Cash Flows for the three months ended
March 31, 1994 and 1995. . . . . . . . . . . . . . . . 3
Notes to Condensed Consolidated Financial
Statements . . . . . . . . . . . . . . . . . . . . . . 4-7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS. . . . . . . . . . . . . . . . . . . . . 8-10
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . 10-12
ITEM 3(b).DEFAULTS UPON SENIOR SECURITIES - DIVIDEND
ARREARAGE ON PREFERRED STOCK . . . . . . . . . . . . . 12-13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. . . . . . . . . . . . 13
<PAGE>
PART I - FINANCIAL INFORMATION
LIVE ENTERTAINMENT INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Amounts in Thousands)
December 31, March 31,
1994 1995
ASSETS
Cash and cash equivalents, including restricted
cash of $4,663 and $1,734 . . . . . . . . . . . . . $ 24,264 $ 25,405
Accounts receivable, less allowances of $19,469
and $22,890 . . . . . . . . . . . . . . . . . . . . 1,950 12,523
Inventories. . . . . . . . . . . . . . . . . . . . . 7,842 7,709
Assets held for sale . . . . . . . . . . . . . . . . 17,916 14,752
Property and Equipment, net. . . . . . . . . . . . . 1,400 1,488
Film Rights, net of accumulated amortization
of $466,260 and $485,177. . . . . . . . . . . . . . 71,108 57,044
Other Assets . . . . . . . . . . . . . . . . . . . . 2,443 2,928
Goodwill, net of accumulated amortization of
$36,118 and $37,099 . . . . . . . . . . . . . . . . 29,871 28,890
$ 156,794 $ 150,739
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable . . . . . . . . . . . . . . . . . . $ 7,305 $ 9,881
Notes payable. . . . . . . . . . . . . . . . . . . . 3,478 1,664
Increasing Rate Senior Subordinated Notes due
1999, including capitalized interest of
$16,871 and $15,027 . . . . . . . . . . . . . . . . 57,138 55,118
Film rights obligations. . . . . . . . . . . . . . . 19,776 14,462
Accrued expenses and deferred revenue. . . . . . . . 11,071 13,126
Liabilities related to assets held for sale. . . . . 13,542 13,501
Dividends payable. . . . . . . . . . . . . . . . . . 2,131 2,241
Income taxes payable and deferred income taxes . . . 6,636 6,444
Total liabilities . . . . . . . . . . . . . . . . . 121,077 116,437
Stockholders' Equity:
Series B Cumulative Convertible Preferred Stock--
authorized 9,000,000 shares; $1.00 par value;
$56,000,000 (1994) and $41,973,000 (1995)
liquidation preference; 5,600,000 (1994)
and 4,197,302 (1995) shares outstanding . . . . . . 5,600 4,197
Series C Convertible Preferred Stock-- 15,000 shares
authorized and outstanding; $1.00 par value;
$16,378,346 liquidation preference. . . . . . . . . 15 15
Common Stock--authorized 24,000,000 shares; $0.01
par value; 2,418,720 (1994) and 2,418,700 (1995)
shares outstanding. . . . . . . . . . . . . . . . . 121 121
Additional paid-in capital . . . . . . . . . . . . . 136,656 131,740
Retained deficit . . . . . . . . . . . . . . . . . . (106,675) (101,771)
35,717 34,302
$ 156,794 $ 150,739
See notes to condensed consolidated financial statements.
<PAGE>
LIVE ENTERTAINMENT INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Amounts in Thousands, Except Per Share Data)
Three Months Ended
March 31,
1994 1995
Net Sales. . . . . . . . . . . . . . . . . . . . . . $ 18,265 $ 44,505
Cost of goods sold . . . . . . . . . . . . . . . . . 15,198 34,556
GROSS PROFIT. . . . . . . . . . . . . . . . . . . 3,067 9,949
Operating Expenses:
Selling, general and administrative expenses. . . . 3,716 3,609
Amortization of goodwill. . . . . . . . . . . . . . 981 981
4,697 4,590
(1,630) 5,359
Disposal of VCL/Carolco Communications GmbH (VCL):
Net Sales . . . . . . . . . . . . . . . . . . . . . 5,341 9,779
Costs and Expenses. . . . . . . . . . . . . . . . . 5,341 9,779
-- --
OPERATING (LOSS) PROFIT . . . . . . . . . . . . . (1,630) 5,359
Interest and other income. . . . . . . . . . . . . . 967 477
Interest expense . . . . . . . . . . . . . . . . . . (2,175) (432)
(LOSS) INCOME BEFORE INCOME TAXES . . . . . . . . (2,838) 5,404
Income tax expense. . . . . . . . . . . . . . . . . -- 500
NET (LOSS) INCOME . . . . . . . . . . . . . . . . $ (2,838) $ 4,904
Net (loss) income per common share:
Primary . . . . . . . . . . . . . . . . . . . . . . $ (1.81) $ 1.02
Fully diluted . . . . . . . . . . . . . . . . . . . $ (1.81) $ 0.29
Weighted average number of shares outstanding:
Primary . . . . . . . . . . . . . . . . . . . . . . 2,419 2,421
Fully diluted . . . . . . . . . . . . . . . . . . . 2,419 16,907
See notes to condensed consolidated financial statements.
<PAGE>
LIVE ENTERTAINMENT INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in Thousands)
Three Months Ended
March 31,
1994 1995
OPERATING ACTIVITIES:
Net (loss) income . . . . . . . . . . . . . . . . . $ (2,838) $ 4,904
Adjustments to reconcile net (loss) income to
net cash provided by operating activities:
Depreciation and amortization of property
and equipment. . . . . . . . . . . . . . . . . . . 191 174
Amortization of goodwill. . . . . . . . . . . . . . 981 981
Amortization of film rights . . . . . . . . . . . . 6,292 19,817
Income taxes payable and deferred income taxes. . . -- (192)
(Increase) decrease in operating assets:
Accounts receivable . . . . . . . . . . . . . . . 2,432 (10,573)
Inventories . . . . . . . . . . . . . . . . . . . 509 133
Assets held for sale. . . . . . . . . . . . . . . 1,786 3,164
Other assets. . . . . . . . . . . . . . . . . . . 390 (485)
Increase (decrease) in operating liabilities:
Accounts payable, accrued expenses
and deferred revenue . . . . . . . . . . . . . . (2,030) 4,631
Accrual for returns and advertising . . . . . . . 18,570 --
Liabilities related to assets held for sale . . . (1,668) (41)
Acquisition of and adjustment to film rights. . . (8,428) (5,753)
Film rights obligations incurred. . . . . . . . . 8,428 4,118
Payments on film rights obligations . . . . . . . (11,115) (9,432)
Cash provided by operating activities . . . . . 13,500 11,446
INVESTING ACTIVITIES:
Acquisition of property and equipment . . . . . . . (220) (262)
Cash used for investing activities. . . . . . . (220) (262)
FINANCING ACTIVITIES:
Issuance of bank debt and long-term obligations . . 186 276
Payments on bank debt and long-term obligations . . (3,077) (4,109)
Repurchase of Series B Cumulative
Preferred Stock . . . . . . . . . . . . . . . . . -- (5,460)
Dividends paid on Series B Cumulative
Preferred Stock . . . . . . . . . . . . . . . . . (1,500) (750)
Cash (used for) financing activities. . . . . . (4,391) (10,043)
Increase in cash and cash equivalents . . . . . 8,889 1,141
Cash and cash equivalents at beginning
of period. . . . . . . . . . . . . . . . . . . 42,358 24,264
Cash and cash equivalents at end of period. . . $ 51,247 $ 25,405
See notes to condensed consolidated financial statements.
<PAGE>
LIVE ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
March 31, 1995
Note 1 - Summary of Significant Accounting Policies
Background and Operations: LIVE Entertainment Inc. ("LIVE" or
the "Company") was formed in 1988 and its largest ongoing
businesses are LIVE Home Video ("LHV") and LIVE Entertainment
International Inc. (formerly LEI-IVE Entertainment N.V.)("LEII"),
which acquire rights to theatrical motion pictures, children's
films and special interest programs (including CD-ROM) which they
market and distribute in all media to wholesalers, retailers and
consumers in the United States and Canada (LHV) and internationally
(LEII). As part of its international activities, the Company also
owns an 81% interest in VCL/Carolco Communications GmbH ("VCL"), a
home video distribution and marketing company headquartered in
Munich, Germany. VCL's year-end is November 30. In February 1995
the Company executed a preliminary agreement providing for the
disposal of its interest in VCL. The Company's continuing
operations are principally in a single business segment, the
distribution and retail sale of a broad variety of entertainment
software products.
Basis of Presentation: The accompanying consolidated financial
statements and footnotes are unaudited and are condensed, as
contemplated by the Securities and Exchange Commission under Rule
10-01 of Regulation S-X. Accordingly, they do not contain all
disclosures required by generally accepted accounting principles,
but in the opinion of management of LIVE include all adjustments
(consisting only of normal recurring accruals) necessary to fairly
state the financial position and results of operations of LIVE.
The financial statements include the accounts of LIVE and its
subsidiaries - LHV, LEII and VCL. The financial statements reflect
LIVE's interests in VCL as "Assets Held For Sale" and "Liabilities
Related To Assets Held For Sale" and have been restated to account
for VCL as a disposal of a portion of a line of business. All
significant intercompany balances and transactions have been
eliminated.
LIVE suggests that these condensed consolidated financial
statements be read in conjunction with its consolidated financial
statements for the year ended December 31, 1994 and related notes
thereto included on Form 10-K filed with the Securities and
Exchange Commission.
Certain reclassifications of 1994 amounts have been made in
order to conform with the 1995 financial statement presentation.
Net (Loss) Income Per Common Share:
Primary:
Per share information has been determined on the basis of
2,418,722 and 2,421,299 weighted average number of shares
outstanding for the three months ended March 31, 1994 and 1995,
respectively. The net (loss) income per common share for the three
months ended March 31, 1994 and 1995 gives effect to the accretion
of the redemption value of the Series B Cumulative Convertible
Preferred Stock ("Series B Preferred Stock") of $600,000 and
$1,571,000, respectively, and also gives effect to dividends of
$937,000 and $859,000, respectively, on both the Series B Preferred
Stock and the Series C Convertible Preferred Stock ("Series C
Preferred Stock").
Fully Diluted:
Per share information has been determined on the basis of
16,906,779 weighted average number of shares outstanding for the
three months ended March 31, 1995, assuming conversion of the
Series B Preferred Stock and the Series C Preferred Stock. Such
conversion was not assumed for the three months ended March 31,
1994, because the effect thereof would have been antidilutive.
Note 2 - Series B Preferred Stock
Although LIVE has no obligation to redeem any Series B Preferred
Stock, subject to the availability of funds and the prior approval
of its Board of Directors and its lenders, LIVE may acquire shares
of its Series B Preferred Stock from time to time, either through
private purchases or through open market purchases. On March 7,
1995, LIVE acquired, and subsequently retired, 1,400,000 shares of
Series B Preferred Stock at a price of $3.90 per share.
Note 3 - Litigation
On January 9, 1992, a purported class action lawsuit was filed
in the U.S. District Court, Central District of California, by
alleged stockholders of LIVE against LIVE, Carolco Pictures Inc.
("Carolco") and certain of LIVE's past and present directors and
executive officers. The complaint alleges, among other things,
that the defendants violated Section 10(b) of the Securities
Exchange Act of 1934 (the "Exchange Act") and Rule 10b-5
promulgated thereunder (a) by concealing the true value of certain
of LIVE's assets, and overstating goodwill, stockholders' equity,
operating profits and net income in LIVE's Form 10-K for the year
ended December 31, 1990, in its 1990 Annual Report and in its Forms
10-Q for the quarters ended March 31, 1991 and June 30, 1991, and
(b) by materially understating the true extent of the write off of
goodwill in connection with the sale of substantially all of the
assets of LIVE's wholly owned subsidiary, Lieberman Enterprises
Incorporated ("Lieberman"), to Handleman Company ("Handleman") in
July 1991. In addition, the complaint alleges that certain of the
defendants are liable as controlling persons under Section 20 of
the Exchange Act and alleges that certain other defendants are
liable for aiding and abetting the primary violations.
Subsequently, two additional lawsuits were filed in the U.S.
District Court, Central District of California, by alleged
stockholders of LIVE against the same persons and entities who were
defendants in the original actions, making substantially the same
allegations as were made in the first lawsuit. On March 30, 1992,
these lawsuits were consolidated. Further, in April 1992, an
amended complaint was filed in the consolidated action, lengthening
the alleged class period and adding as defendants certain
additional officers, directors and affiliates of LIVE and Carolco,
including Pioneer LDCA, Inc. ("PLDCA"), as well as a lender to LHV
and Carolco. On June 17, 1992, the U.S. District Court, Central
District of California, entered an order conditionally certifying
the class, subject to possible decertification after discovery is
completed. On January 27, 1993, a second amended complaint was
filed in the consolidated class action making additional and
modified allegations against certain of the defendants claiming
they are liable as controlling persons under Section 20 of the
Exchange Act and claiming that certain other defendants are liable
for aiding and abetting the primary violations. On April 19, 1993,
the court issued a ruling dismissing defendant PLDCA from this
lawsuit.
In February 1992, a purported class action lawsuit was filed in
the U.S. District Court, District of Delaware, by an alleged holder
of Carolco's public debt, against LIVE, Carolco and certain
directors and executive officers of Carolco. The Delaware
complaint alleges, among other things, that the defendants violated
Section 10(b) of the Exchange Act and Rule 10b-5 promulgated
thereunder by concealing the true value of certain of LIVE's
assets, and overstating goodwill, stockholders' equity, operating
profits and net income in LIVE's Form 10-K for the year ended
December 31, 1990 and in its Forms 10-Q for the quarters ended
March 31, 1991 and June 30, 1991. In April of 1992 this lawsuit
was transferred to the U.S. District Court, Central District of
California. The proceedings are being coordinated with the
consolidated action described in the preceding paragraph. On July
17, 1992, the U.S. District Court, Central District of California,
entered an order conditionally certifying the class, subject to
possible decertification after discovery is completed.
Discovery is currently taking place in both lawsuits.
Management and counsel to LIVE are unable to predict the
ultimate outcome of the above-described actions at this time.
However, LIVE and the other defendants believe that all these
lawsuits are without merit and intend to defend them vigorously.
Accordingly, no provision for any liability which may result has
been made in LIVE's condensed consolidated financial statements.
In the opinion of management, these actions, when finally concluded
and determined, will not have a material adverse effect upon LIVE's
financial position or results of operations.
Other than as described above, there are no material legal
proceedings to which LIVE or any of its subsidiaries are a party
other than ordinary routine litigation in the ordinary course of
business. In the opinion of management (which is based in part on
the advice of outside counsel), resolution of these matters will
not have a material adverse impact on LIVE's financial position or
results of operations.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Three Months Ended March 31, 1995 Compared to Three Months
Ended March 31, 1994
Continuing Operations
Net sales of LIVE increased to $44,505,000 during 1995 compared
to $18,265,000 during 1994. The increase of $26,240,000, or
143.7%, is primarily attributable to a stronger video rental
release schedule in the first quarter of 1995 compared to the first
quarter of 1994. LHV released six rental titles during the three
months ended March 31, 1995 compared to four rental titles during
the comparable period in 1994. The first quarter of 1995 included
the successful video release of Stargate, for which there was no
comparable title in the first quarter of 1994.
Gross profits of LIVE increased $6,882,000, or 224.4%, to
$9,949,000 during 1995 compared to $3,067,000 during 1994. The
increase in gross profit dollars was primarily related to the
increase in sales. As a percentage of sales, gross profit
increased to 22.4% during 1995 from 16.8% during 1994, primarily
due to the increase in video rental sales, which usually generate
higher margins than video sell-through sales.
Selling, general and administrative expenses of LIVE decreased
$107,000, or 2.9%, to $3,609,000 during 1995 compared to $3,716,000
during 1994. As a percentage of sales, the amount decreased to
8.1% during 1995 from 20.3% during 1994. The dollar decrease is
primarily a result of the Company's efforts to reduce overhead.
The percentage decrease is primarily due to the increase in sales.
Interest expense of LIVE decreased $1,303,000, or 75.1%, to
$432,000 during 1995 compared to $1,735,000 during 1994. Interest
expense decreased as a result of the redemption of $37,000,000 of
12% Subordinated Secured Notes due 1994 (the "12% Notes") during
September and October of 1994. The entire balance of the 12% Notes
was outstanding during the entire first quarter of 1994.
Interest and other income decreased $490,000 or 50.1% to
$477,000 during 1995 compared to $967,000 during 1994, which was
primarily the result of lower cash balances in the first quarter of
1995 compared to the first quarter of 1994.
Preferred dividends of $859,000 in 1995 and $937,000 in 1994
represents the 5% cash dividend accrued on both the Series B
Preferred Stock and the Series C Preferred Stock, as well as, in
the case of the Series C Preferred Stock, additional 5% dividends
on accrued but unpaid dividends.
Discontinued Operations
As a result of the Board of Directors' decision to dispose of
the Company's interests in VCL, the results of operations for VCL
for the three months ended March 31, 1994 and 1995 have been
restated and accounted for as a disposal of a portion of a line of
business. Accordingly, a provision for losses during the phase-out
period totaling $3,885,000 for VCL has been accrued and accounted
for at December 31, 1993. Net sales of VCL increased to $9,779,000
during the first quarter of 1995 compared to $5,341,000 during the
first quarter of 1994. The increase of $4,438,000, or 83%, was due
primarily to the successful release by VCL of the film True Lies
into the German video rental market in the first quarter of 1995.
Liquidity and Capital Resources
Historically, the Company has funded its operations through a
combination of cash generated from operations, bank borrowings,
advances from distributors under distribution agreements and the
proceeds from the issuance of debt instruments. For the three
months ending March 31, 1995, the Company generated positive cash
flow from continuing operations of $11,446,000.
On May 11, 1992, LHV entered into a three-year distribution
agreement with WEA Corp. ("WEA") that became effective on June 1,
1992. The amount of the advance outstanding as of March 31, 1995
was $1,664,000. LHV is currently in negotiations for a potential
extension of the distribution agreement with WEA beyond its May
1995 expiration date. There is no assurance that such an extension
will be agreed upon or, if so, what the terms of such extension may
be.
Investing activities generated a negative cash flow during the
first quarter of 1995 of $262,000, primarily as a result of the
acquisition of property and equipment at LHV.
On November 16, 1994 LIVE replaced its prior credit facility
from a group of banks headed by Chemical Bank (the "Previous
Facility") with a three-year $30,000,000 revolving credit facility
with Foothill Capital Corporation (the "Foothill Credit Facility").
Borrowings available under the Foothill Credit Facility are limited
to $20,000,000 until additional participant lenders are added to
the Facility, at which time the borrowings available will be
increased to a maximum $30,000,000. Borrowings under the Foothill
Credit Facility are secured by substantially all of the assets of
LIVE and its subsidiaries. Outstanding borrowings under the
Foothill Credit Facility bear interest at the rate of 2% per annum
above the highest of the Bank of America, Mellon Bank or Citibank
prime rate, payable monthly. In no event will interest under the
Foothill Credit Facility be less than 7% per annum. The Foothill
Credit Facility provided for a closing fee of $500,000, an annual
facility fee of 1/4 of 1% and a commitment fee of 1/4 of 1% on any
unused amount. The Foothill Credit Facility also requires LIVE to
meet certain financial ratios, and as of December 31, 1994 and
March 31, 1995 the Company was in compliance with all such
financial ratios. There were no amounts outstanding under the
Foothill Credit Facility as of March 31, 1995.
Dividends on the Series C Preferred Stock, at the rate of 5% per
annum on the unreturned $15,000,000 liquidation value of the Series
C Preferred Stock, are due on June 30 and December 31 of each year.
Although the dividends scheduled to be paid on June 30 and December
31, 1993, and June 30 and December 31, 1994 were accrued by LIVE,
those dividends were not paid due to restrictions imposed on LIVE
by the terms of the Series B Preferred Stock, which prohibit the
payment of dividends on the Series C Preferred Stock unless the
aggregate amount of such dividends, together with all cash
dividends paid on the Series B Preferred Stock, does not exceed the
net income of LIVE (adding back specified net worth exclusions)
since the March 23, 1993 date of issuance of the Series B Preferred
Stock and Series C Preferred Stock. LIVE has had a consolidated
net loss for the period subsequent to March 23, 1993. Thus,
pursuant to the terms of the Series B Preferred Stock, LIVE was
prohibited from paying the June 30 and December 31, 1993, and June
30 and December 31, 1994 cash dividends on the Series C Preferred
Stock which, together with accrued and unpaid dividends thereon,
totalled $1,378,000 as of March 31, 1995.
The unpaid Series C Preferred Stock dividend itself bears a
dividend of 5% per annum, and is due on the next regularly
scheduled dividend payment date for the Series C Preferred Stock.
LIVE intends to pay the June 30 and December 31, 1993, and June 30
and December 31, 1994 dividends, plus the additional dividends
thereon, as soon as it has sufficient net income to permit such
payment to occur or as soon as the Series B Preferred Stock has
been redeemed, provided that such payment does not impair the
capital of LIVE and is permitted under the Delaware General
Corporation Law ("DGCL").
LIVE experienced negative cash flows from financing activities
of $10,043,000 during the first quarter of 1995 primarily due to
the repurchase of 1,400,000 shares of the Company's Series B
Cumulative Preferred Stock, interest payments on long term
obligations and payment of dividends on the Series B Cumulative
Preferred Stock.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On January 9, 1992, a purported class action lawsuit was filed
in the U.S. District Court, Central District of California, by
alleged stockholders of LIVE against LIVE, Carolco and certain of
LIVE's past and present directors and executive officers. The
complaint alleges, among other things, that the defendants violated
Section 10(b) of the Securities Exchange Act of 1934 (the "Exchange
Act") and Rule 10b-5 promulgated thereunder (a) by concealing the
true value of certain of LIVE's assets, and overstating goodwill,
stockholders' equity, operating profits and net income in LIVE's
Form 10-K for the year ended December 31, 1990, in its 1990 Annual
Report and in its Forms 10-Q for the quarters ended March 31, 1991
and June 30, 1991, and (b) by materially understating the true
extent of the write off of goodwill in connection with the sale of
substantially all of the assets of LIVE's wholly owned subsidiary,
Lieberman Enterprises Incorporated ("Lieberman"), to Handleman
Company ("Handleman") in July 1991. In addition, the complaint
alleges that certain of the defendants are liable as controlling
persons under Section 20 of the Exchange Act and alleges that
certain other defendants are liable for aiding and abetting the
primary violations. Subsequently, two additional lawsuits were
filed in the U.S. District Court, Central District of California,
by alleged stockholders of LIVE against the same persons and
entities who were defendants in the original actions, making
substantially the same allegations as were made in the first
lawsuit. On March 30, 1992, these lawsuits were consolidated.
Further, in April 1992, an amended complaint was filed in the
consolidated action, lengthening the alleged class period and
adding as defendants certain additional officers, directors and
affiliates of LIVE and Carolco, including PLDCA, as well as a
lender to LHV and Carolco. On June 17, 1992, the U.S. District
Court, Central District of California, entered an order
conditionally certifying the class, subject to possible
decertification after discovery is completed. On January 27, 1993,
a second amended complaint was filed in the consolidated class
action making additional and modified allegations against certain
of the defendants claiming they are liable as controlling persons
under Section 20 of the Exchange Act and claiming that certain
other defendants are liable for aiding and abetting the primary
violations. On April 19, 1993, the court issued a ruling
dismissing defendant PLDCA from this lawsuit.
In February 1992, a purported class action lawsuit was filed in
the U.S. District Court, District of Delaware, by an alleged holder
of Carolco's public debt, against LIVE, Carolco and certain
directors and executive officers of Carolco. The Delaware
complaint alleges, among other things, that the defendants violated
Section 10(b) of the Exchange Act and Rule 10b-5 promulgated
thereunder by concealing the true value of certain of LIVE's
assets, and overstating goodwill, stockholders' equity, operating
profits and net income in LIVE's Form 10-K for the year ended
December 31, 1990 and in its Forms 10-Q for the quarters ended
March 31, 1991 and June 30, 1991. In April of 1992 this lawsuit
was transferred to the U.S. District Court, Central District of
California. The proceedings are being coordinated with the
consolidated action described in the preceding paragraph. On July
17, 1992, the U.S. District Court, Central District of California,
entered an order conditionally certifying the class, subject to
possible decertification after discovery is completed.
Discovery is currently taking place in both lawsuits.
Management and counsel to LIVE are unable to predict the
ultimate outcome of the above-described actions at this time.
However, LIVE and the other defendants believe that all these
lawsuits are without merit and intend to defend them vigorously.
Accordingly, no provision for any liability which may result has
been made in LIVE's condensed consolidated financial statements.
In the opinion of management, these actions, when finally concluded
and determined, will not have a material adverse effect upon LIVE's
financial position or results of operations.
Other than as described above, there are no material legal
proceedings to which LIVE or any of its subsidiaries are a party
other than ordinary routine litigation in the ordinary course of
business. In the opinion of management (which is based in part on
the advice of outside counsel), resolution of these matters will
not have a material adverse impact on LIVE's financial position or
results of operations.
ITEM 3(b). DEFAULTS UPON SENIOR SECURITIES - DIVIDEND ARREARAGE
ON PREFERRED STOCK
Dividends on the Series C Preferred Stock, at the rate of 5% per
annum on the unreturned $15,000,000 liquidation value of the Series
C Preferred Stock, are due on June 30 and December 31 of each year.
Although the dividends scheduled to be paid on June 30 and December
31, 1993, and June 30 and December 31, 1994 were accrued by LIVE,
those dividends were not paid due to restrictions imposed on LIVE
by the terms of the Series B Preferred Stock, which prohibit the
payment of dividends on the Series C Preferred Stock unless the
aggregate amount of such dividends, together with all cash
dividends paid on the Series B Preferred Stock, does not exceed the
net income of LIVE (adding back specified net worth exclusions)
since the March 23, 1993 date of issuance of the Series B Preferred
Stock and Series C Preferred Stock. LIVE has had a consolidated
net loss for the period subsequent to March 23, 1993. Thus,
pursuant to the terms of the Series B Preferred Stock, LIVE was
prohibited from paying the June 30 and December 31, 1993, and June
30 and December 31, 1994 cash dividends on the Series C Preferred
Stock which, together with accrued and unpaid dividends thereon,
totalled $1,378,000 as of March 31, 1995.
The unpaid Series C Preferred Stock dividend itself bears a
dividend of 5% per annum, and is due on the next regularly
scheduled dividend payment date for the Series C Preferred Stock.
LIVE intends to pay the June 30 and December 31, 1993, and June 30
and December 31, 1994 dividends, plus the additional dividends
thereon, as soon as it has sufficient net income to permit such
payment to occur or as soon as the Series B Preferred Stock has
been redeemed, provided that such payment does not impair the
capital of LIVE and is permitted under the DGCL.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits:
10.1 First Amendment to Employment Agreement, dated as of April 1,
1995, for the services of Michael J. White (Management
contract or compensatory plan or arrangement required to be
filed pursuant to Item 14(c)).
10.2 Amendment No. One to Amended and Restated Loan and Security
Agreement, dated as of February 28, 1995 among Foothill
Capital Corporation and each of LIVE Home Video Inc., LIVE
Film and Mediaworks Inc., LIVE Entertainment International
Inc., LIVE America Inc. and Vestron Inc.
11 Computation of Income (Loss) Per Common Share (Unaudited).
Reports on Form 8-K: None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
LIVE ENTERTAINMENT INC.
Dated: April 27, 1995 By: /s/ RONALD B. CUSHEY
Ronald B. Cushey
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
10.1 First Amendment to Employment Agreement, dated as of April 1,
1995, for the services of Michael J. White (Management
contract or compensatory plan or arrangement required to be
filed pursuant to Item 14(c))
10.2 Amendment No. One to Amended and Restated Loan and Security
Agreement, dated as of February 28, 1995 among Foothill
Capital Corporation, and each of LIVE Home Video Inc., LIVE
Film and Mediaworks Inc., LIVE Entertainment International
Inc., LIVE America Inc. and Vestron Inc.
11 Computation of Income (Loss) Per Common Share (Unaudited)
FIRST AMENDMENT TO
EMPLOYMENT AGREEMENT
THIS FIRST AMENDMENT TO EMPLOYMENT AGREEMENT is made and
entered into as of the 1st day of April, 1995, by and between LIVE
ENTERTAINMENT INC., a Delaware corporation ("Company"), and MICHAEL
J. WHITE ("Employee").
RECITALS:
WHEREAS, Company and Employee entered into that certain
Employment Agreement dated as of February 1, 1994 (the
"Agreement"); and
WHEREAS, Company and Employee desire to modify the Agreement
in certain respects.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, it is hereby CONTRACTED, COVENANTED
and AGREED as follows, to wit:
1. Section 3.2.2 (i) of the Agreement shall be deleted and
shall be replaced in its entirety by the following:
"(i) a total of $250,000, paid in equal installments on
Company's regular pay dates, and"
2. Except as modified hereby, the Agreement shall remain
unmodified and in full force and effect. In the event of any
conflict between the terms of the Agreement and the terms of this
First Amendment, the terms of this First Amendment shall control.
IN WITNESS WHEREOF, the parties have executed this First
Amendment to Employment Agreement as of the day and year first
above written.
LIVE ENTERTAINMENT INC.
By:
Roger A. Burlage Michael J. White
President and Chief Executive Officer
AMENDMENT NUMBER ONE TO AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
This Amendment Number One To Amended And Restated Loan
And Security Agreement (this "Amendment") is entered into
as of February 28, 1995, between FOOTHILL CAPITAL
CORPORATION, a California corporation ("Foothill"), with a
place of business located at 11111 Santa Monica Boulevard,
Suite 1500, Los Angeles, California 90025-3333, on the one
hand, and LIVE HOME VIDEO INC., a Delaware corporation
("LHV"), LIVE FILM AND MEDIAWORKS INC. (formerly known as
INTERNATIONAL VIDEO PRODUCTIONS INC.), a California
corporation ("LFM"), LIVE ENTERTAINMENT INTERNATIONAL INC.,
a Delaware corporation ("LEI"), LIVE AMERICA INC., a
Delaware corporation ("LAI") and VESTRON INC., a Delaware
corporation ("VESTRON"), each with its chief executive
office located at 15400 Sherman Way, Suite 500, Van Nuys,
California 91406 (sometimes individually referred to herein
as "Borrowers," and collectively as the "Borrowers"), in
light of the following facts:
FACTS
FACT ONE: Borrowers and Foothill have previously
entered into that certain Amended And Restated Loan And
Security Agreement dated November 14, 1994 (the
"Agreement").
FACT TWO: Borrowers and Foothill desire to amend the
Agreement as provided herein. Terms defined in the
Agreement which are used herein shall have the same meanings
as set forth in the Agreement, unless otherwise specified.
NOW, THEREFORE, Borrowers and Foothill hereby modify
and amend the Agreement as follows:
1. Section 1.1 of the Agreement is hereby amended to
revise Subsection (iii) of the Definition of "Permitted
Payments" in its entirety to read as follows: "(iii) redeem
or repurchase of up to Seven Million Dollars ($7,000,000) of
LIVE s Series B Preferred Stock so long as after giving
effect to any such redemption or repurchase Borrowers will
not have less than Five Million Dollars ($5,000,000) of
borrowing availability under this Agreement,"
2. Borrowers shall pay to Foothill a fee of $5,000.
Said fee shall be fully-earned, non-refundable, and due and
payable on the date of signing and delivery of this
Amendment by Borrowers to Foothill.
3. In the event of a conflict between the terms and
provisions of this Amendment and the terms and provisions of
the Agreement, the terms and provisions of this Amendment
shall govern. In all other respects, the Agreement, as
supplemented, amended and modified, shall remain in full
force and effect.
IN WITNESS WHEREOF, Borrowers and Foothill have
executed this Amendment as of the day and year first written
above.
FOOTHILL CAPITAL CORPORATION LIVE HOME VIDEO, INC.
By By
Lisa M. Gonzales
Its Assistant Vice President Its
LIVE FILM AND MEDIAWORKS INC. LIVE ENTERTAINMENT
(formerly known as INTERNATIONAL INTERNATIONAL INC.
VIDEO PRODUCTIONS INC.)
By
By
Its
Its
LIVE AMERICA INC. VESTRON INC.
By
By
Its
Its
- ------------------------------------------------------------
By its acceptance below as of this _________ day of March 1995,
the undersigned guarantor hereby reaffirms its Continuing
Guaranty dated November 16, 1994, and consents to the above-
stated terms.
LIVE ENTERTAINMENT INC.
By
Its
<PAGE>
- ------------------------------------------------------------
By its acceptance below as of this ________ day of March 1995,
the undersigned guarantor hereby reaffirms its Continuing
Guaranty dated November 16, 1994 and consents to the above-
stated terms.
LIVE VENTURES INC.
By
Its
EXHIBIT 11
LIVE ENTERTAINMENT INC. AND SUBSIDIARIES
COMPUTATION OF INCOME (LOSS) PER COMMON SHARE
(Unaudited)
(Amounts in Thousands, Except Per Share Data)
Three Months Ended
March 31,
1994 1995
PRIMARY
Earnings:
Net (loss) income. . . . . . . . . . .$ (2,838) $ 4,904
Less accretion in redemption value
of Series B Preferred Stock . . . . . 600 1,571
Less preferred dividends . . . . . . . 937 859
Net (loss) income attributable
to common stock . . . . . . . . . . .$ (4,375) $ 2,474
Shares:
Weighted average number of common
shares outstanding. . . . . . . . . . 2,419 2,421
Net (loss) income per common share . . .$ (1.81) $ 1.02
FULLY DILUTED
Earnings:
Net income . . . . . . . . . . . . . . -- $ 4,904
Shares:
Weighted average number of common
shares outstanding. . . . . . . . . . -- 2,421
Assuming conversion of Series B and
Series C Preferred Stock. . . . . . . -- 14,486
Weighted average number of common
shares outstanding as adjusted. . . . -- 16,907
Net income per common share. . . . . . . -- $ 0.29
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 25,405
<SECURITIES> 0
<RECEIVABLES> 35,413
<ALLOWANCES> (22,890)
<INVENTORY> 7,709
<CURRENT-ASSETS> 0
<PP&E> 6,837
<DEPRECIATION> (5,349)
<TOTAL-ASSETS> 150,739
<CURRENT-LIABILITIES> 0
<BONDS> 55,118
<COMMON> 121
0
4,212
<OTHER-SE> 29,969
<TOTAL-LIABILITY-AND-EQUITY> 150,739
<SALES> 44,505
<TOTAL-REVENUES> 44,982
<CGS> 34,556
<TOTAL-COSTS> 4,590
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 432
<INCOME-PRETAX> 5,404
<INCOME-TAX> 500
<INCOME-CONTINUING> 4,904
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,904
<EPS-PRIMARY> 1.02
<EPS-DILUTED> 0.29
</TABLE>
