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 June 30, 1996
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 July 11, 1996, there were 2,448,267 shares of the
Registrant's Common Stock, 3,819,802 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
June 30, 1996 and December 31, 1995. . . . . . . . . . 1
Condensed Consolidated Statements of
Operations for the three and six months ended
June 30, 1996 and 1995 . . . . . . . . . . . . . . . . 2
Condensed Consolidated Statements of
Cash Flows for the three and six months ended
June 30, 1996 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. . . . . . . . . . . . . . . . . . . . . 7-11
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . 12-13
ITEM 3(b).DEFAULTS UPON SENIOR SECURITIES - DIVIDEND
ARREARAGE ON PREFERRED STOCK . . . . . . . . . . . . . 13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. . . . . . . . . . . . 14
<PAGE>
PART I - FINANCIAL INFORMATION
LIVE ENTERTAINMENT INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Amounts in Thousands)
June 30, December 31,
1996 1995
ASSETS
Cash and cash equivalents, including restricted
cash of $1,635 and $1,352 . . . . . . . . . . . . . . $15,669 $ 49,487
Accounts receivable, less allowances of $13,852
in 1996 . . . . . . . . . . . . . . . . . . . . . . . 9,350 --
Inventories. . . . . . . . . . . . . . . . . . . . . . 5,890 4,813
Property and equipment, net. . . . . . . . . . . . . . 927 1,145
Film costs, net of accumulated amortization
of $535,199 and $519,604. . . . . . . . . . . . . . . 79,636 66,700
Other assets . . . . . . . . . . . . . . . . . . . . . 1,787 1,353
Goodwill, net of accumulated amortization of
$42,004 and $40,042 . . . . . . . . . . . . . . . . . 23,985 25,947
$137,244 $ 149,445
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable . . . . . . . . . . . . . . . . . . . $6,137 $ 6,675
Accrual for returns and advertising net of accounts
receivable of $15,447 in 1995 . . . . . . . . . . . . -- 3,430
Accrued expenses . . . . . . . . . . . . . . . . . . . 14,164 12,451
Notes payable. . . . . . . . . . . . . . . . . . . . . 6,666 8,333
Increasing Rate Senior Subordinated Notes due
1999, including capitalized interest of
$11,340 and $13,184 . . . . . . . . . . . . . . . . . 51,340 53,184
Film obligations . . . . . . . . . . . . . . . . . . . 11,393 18,559
Dividends payable. . . . . . . . . . . . . . . . . . . 3,570 2,309
Income taxes payable and deferred income taxes . . . . 7,146 6,484
Total liabilities . . . . . . . . . . . . . . . . . . 100,416 111,425
Stockholders' Equity:
Series B Cumulative Convertible Preferred Stock--
authorized 9,000,000 shares; $1.00 par value;
$38,198,000 and $41,970,000
liquidation preference; 3,819,000
and 4,197,000 shares outstanding. . . . . . . . . . . 3,819 4,197
Series C Convertible Preferred Stock--15,000 shares
authorized and outstanding; $1.00 par value;
$17,637,000 liquidation preference. . . . . . . . . . 15 15
Common Stock--authorized 24,000,000 shares;
$0.01 par value; 2,448,267 and 2,418,424
shares outstanding. . . . . . . . . . . . . . . . . . 24 24
Additional paid-in capital . . . . . . . . . . . . . . 126,144 129,668
Retained deficit . . . . . . . . . . . . . . . . . . . (93,174) (95,884)
36,828 38,020
$137,244 $149,445
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 Six Months
Ended June 30, Ended June 30,
1996 1995 1996 1995
Net Sales. . . . . . . . . . . . . . . . . . . $50,269 $22,456 $72,822 $66,961
Cost of goods sold . . . . . . . . . . . . . . 42,975 17,379 59,688 51,935
GROSS PROFIT. . . . . . . . . . . . . . . . 7,294 5,077 13,134 15,026
Operating Expenses:
Selling, general and administrative expenses. 4,196 3,160 8,058 6,767
Amortization of goodwill. . . . . . . . . . . 981 981 1,962 1,962
5,177 4,141 10,020 8,729
2,117 936 3,114 6,297
Disposal of VCL/Carolco Communications GmbH:
Net Sales . . . . . . . . . . . . . . . . . . -- 8,446 -- 18,225
Costs and Expenses. . . . . . . . . . . . . . -- 8,446 -- 18,225
-- -- -- --
OPERATING PROFIT. . . . . . . . . . . . . . 2,117 936 3,114 6,297
Interest and other income . . . . . . . . . . 523 616 1,312 1,092
Interest expense. . . . . . . . . . . . . . . (315) (393) (812) (826)
INCOME BEFORE INCOME TAXES. . . . . . . . . 2,325 1,159 3,614 6,563
Income tax expense. . . . . . . . . . . . . . 582 100 904 600
NET INCOME. . . . . . . . . . . . . . . . . $ 1,743 $ 1,059 $ 2,710 $ 5,963
Net income (loss) per common share:
Primary . . . . . . . . . . . . . . . . . . $ 0.30 $ (0.38)$ 0.39 $ 0.64
Fully diluted . . . . . . . . . . . . . . . $ 0.17 $ (0.38)$ 0.25 $ 0.41
Weighted average number of shares outstanding:
Primary . . . . . . . . . . . . . . . . . . 2,543 2,442 2,612 2,432
Fully diluted . . . . . . . . . . . . . . . 10,529 2,442 10,753 14,522
See notes to condensed consolidated financial statements.
LIVE ENTERTAINMENT INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in Thousands)
Six Months Ended
June 30,
1996 1995
OPERATING ACTIVITIES:
Net income. . . . . . . . . . . . . . . . . . . . . . $ 2,710 $ 5,963
Adjustments to reconcile net income to
net cash (used for) provided by operating activities:
Depreciation and amortization of property
and equipment. . . . . . . . . . . . . . . . . . . . 334 353
Amortization of goodwill. . . . . . . . . . . . . . . 1,962 1,962
Amortization of and adjustments to film costs . . . . 24,563 29,904
Income taxes payable and deferred income taxes. . . . 662 (92)
(Increase) decrease in operating assets:
Accounts receivable . . . . . . . . . . . . . . . . (9,350) 1,950
Inventories . . . . . . . . . . . . . . . . . . . . (1,077) 631
Assets held for sale. . . . . . . . . . . . . . . . -- 3,177
Other assets. . . . . . . . . . . . . . . . . . . . (434) (32)
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses . . . . . . . 1,175 3,014
Accrual for returns and advertising . . . . . . . . (3,430) 8,945
Liabilities related to assets held for sale . . . . -- (177)
Film cost additions . . . . . . . . . . . . . . . . (37,499) (19,000)
Payments on film obligations. . . . . . . . . . . . (7,166) (6,823)
Cash (used for) provided by operating
activities. . . . . . . . . . . . . . . . . . . . (27,550) 29,775
INVESTING ACTIVITIES:
Acquisition of property and equipment . . . . . . . . (116) (334)
Cash (used for) investing activities. . . . . . . (116) (334)
FINANCING ACTIVITIES:
Issuance of long-term obligations . . . . . . . . . . -- 10,000
Payments on long-term obligations . . . . . . . . . . (3,511) (5,177)
Repurchase of Series B Cumulative Convertible
Preferred Stock . . . . . . . . . . . . . . . . . . (2,332) (5,460)
Dividends paid on Series B Cumulative Convertible
Preferred Stock . . . . . . . . . . . . . . . . . . (477) (1,800)
Issuance of Common Stock. . . . . . . . . . . . . . . 168 --
Cash (used for) financing activities. . . . . . . (6,152) (2,437)
(Decrease)increase in cash and cash
equivalents . . . . . . . . . . . . . . . . . . . (33,818) 27,004
Cash and cash equivalents at beginning
of period. . . . . . . . . . . . . . . . . . . . 49,487 24,264
Cash and cash equivalents at end of period. . . . $ 15,669 $ 51,268
See notes to condensed consolidated financial statements.
LIVE ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
June 30, 1996
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 Film & Mediaworks ("LFM") (formerly LIVE Home
Video Inc.) and LIVE International ("LI"), which primarily acquire
rights to produce and distribute 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 (LFM) and
internationally (LI). As part of its international activities, the
Company also owned 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 November 1995, LIVE completed a sales transaction providing for
the disposal of its interest in VCL. The Company's continuing
operations are principally in a single business segment, the
production, distribution and retail sale of a broad variety of film
related 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 - LFM, LI and VCL (1995) 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, 1995 and related notes
thereto included on Form 10-K filed with the Securities and
Exchange Commission.
Certain reclassifications of 1995 amounts have been made in
order to conform with the 1996 financial statement presentation.
<PAGE>
Net Income Per Common Share:
Primary:
Per share information has been determined on the basis of
2,542,737 and 2,611,937 weighted average number of shares
outstanding for the three and six months ended June 30, 1996 and
2,442,280 and 2,431,750 weighted average number of shares
outstanding for the three and six months ended June 30, 1995,
respectively. The net income per common share for the three and
six months ended June 30, 1996 and 1995 gives effect to dividends
of $984,000 and $1,683,000, and $716,000 and $1,575,000,
respectively, on both the Series B Cumulative Convertible Preferred
Stock ("Series B Preferred Stock") and the Series C Convertible
Preferred Stock ("Series C Preferred Stock"). The net income for
the three and six months ended June 30, 1995 gives effect to the
accretion of the redemption value of the Series B Preferred Stock
of $1,259,000 and $2,830,000, respectively.
Fully Diluted:
Per share information has been determined on the basis of
10,529,208 and 10,753,552, for the three and six months ended June
30, 1996, respectively, assuming conversion of the Series B
Preferred Stock and the Series C Preferred Stock. Per share
information for the six months ended June 30, 1995 has been
determined on the basis of 14,521,936 weighted average number of
shares outstanding. Such conversion was not assumed for the three
months ended June 30, 1995, because the effect thereof would have
been antidilutive.
Note 2 - Series B Preferred Stock
The Series B Preferred Stock has a liquidation value of $10.00
per share. Holders of the Series B Preferred Stock are entitled to
an annual dividend, payable quarterly, of 10% ($1.00 per share) if
paid in cash and 12% if paid in kind. Dividends of $796,000 ($0.21
per share) were accrued on the Series B Preferred Stock for the
quarter ending June 30, 1996. The Company may redeem the Series B
Preferred Stock at any time at 100% of the liquidation value.
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. In March 1996
the Company purchased 377,500 shares of the Series B Preferred
Stock at an average price of approximately $6.00 per share.
<PAGE>
Note 3 - Commitments
The Company has certain existing and potential commitments for
film acquisitions, theatrical prints, advertising and release costs
which will require the use of a substantial portion of the existing
cash balances over the next two fiscal quarters of 1996.
Note 4 - Litigation
LIVE had been the defendant in two purported class action law
suits that were filed in 1992. The Company had requested the U.S.
District Court to dismiss both cases for non-prosecution due to the
fact that the plaintiffs had taken no action in either of these
cases for over one year. On April 8, 1996, the U.S. District Court
granted LIVE's request and dismissed both cases.
In May 1994, a breach of contract claim was filed against a
subsidiary of the Company, claiming nonpayment of royalties from
licensing of films in foreign territories and deprivation of
royalty payments as a result of misallocation of certain values
asserted with licensed film properties. Films subject to the
complaint were contained in the assets of Vestron, Inc. purchased
by the Company in July 1991, and the period covered included the
license periods both prior to, and subsequent to, the acquisition
date by the Company. The Company filed a reply brief (including a
Motion to Dismiss) on October 5, 1994, and such Motion to Dismiss
was granted on the grounds of forum non conviens. Plaintiff filed
a complaint in New York on March 22, 1995. The Company filed its
answer, affirmative defenses and counterclaim on April 20, 1995.
Plaintiff filed a motion for class certification on September 8,
1995 to which the Company filed its opposition to the motion on
November 6, 1995. After limited pre-trial discovery, a motion for
class certification was argued on December 6, 1995. By order dated
June 21, 1996 and filed on June 25, 1996, the Court in this action
determined that the action should be maintained as a class action
under the provisions of Section 901(a) of the New York Civil
Practice Law and Rules.
The Company filed an appeal from the Order granting class
certification on July 19, 1996 and filed a Motion for
Decertification of the class on July 24, 1996. A hearing on the
motion has been scheduled for August 21, 1996.
Management and counsel to LIVE are unable to predict the
ultimate outcome of the above-described action at this time.
However, LIVE and the other defendants believe that this lawsuit is
without merit and intends to defend it vigorously. Accordingly, no
provision for any liability which may result has been made in
LIVE's consolidated financial statements. In the opinion of
management, this action, 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 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Three Months Ended June 30, 1996 Compared to Three Months
Ended June 30, 1995
Continuing Operations
Net sales of LIVE increased to $50,269,000 during 1996 compared
to $22,456,000 during 1995. The increase of $27,813,000, or 124%,
is primarily attributable to theatrical releases of The Substitute
and The Arrival and increases in international and television sales
in the second quarter of 1996 as compared to the second quarter
1995. In addition, the second quarter of 1996 contained the video
rental release of Cutthroat Island, for which there was no
comparable title released in the second quarter of 1995.
Gross profits of LIVE increased $2,217,000, or 43.7%, to
$7,294,000 during 1996 compared to $5,077,000 during 1995. The
increase in gross profit dollars was primarily related to the
increase in sales. As a percentage of sales, gross profit
decreased to 14.5% during 1996 from 22.6% during 1995. The
decrease in gross profit as a percentage of sales is primarily
the result of substantial print and advertising expenditures
outweighing anticipated theatrical revenues from the Company's 1996
theatrical releases.
Selling, general and administrative expenses of LIVE increased
$1,036,000, or 32.8%, to $4,196,000 during 1996 compared to
$3,160,000 during 1995. As a percentage of sales, the amount
decreased to 8.3% during 1996 from 14.1% during 1995. The dollar
increase is primarily a result of the recovery of a previously
written-off bad debt from a former distributor included in the
second quarter of 1995. The percentage decrease is primarily due
to the increase in sales.
Interest and other income decreased $93,000 or 15.1% to $523,000
during 1996 compared to $616,000 during 1995. This decrease was
primarily the result of lower interest earned on smaller cash
balances in the second quarter of 1996 compared to the second
quarter of 1995.
Interest expense of LIVE decreased $78,000, or 19.8%, to
$315,000 during 1996 compared to $393,000 during 1995.
Preferred dividends of $984,000 in 1996 and $716,000 in 1995
represents the 5% cash dividend accrued on the Series B Preferred
Stock through May 1996, with 10% being accrued thereafter, and the
5% cash dividend accrued on 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.
Six Months Ended June 30, 1996 Compared to Six Months Ended
June 30, 1995
Continuing Operations
Net sales of LIVE increased to $72,822,000 during 1996 compared
to $66,961,000 during 1995. The increase of $5,861,000, or 8.8%,
is primarily attributable to theatrical releases of The Substitute
and The Arrival and increases in international and television sales
in 1996. The increase in revenue was offset by decreased rental
sales in 1996 which is attributable to the successful video rental
release of Stargate in 1995, for which there was no comparable
video title released in 1996.
Gross profits of LIVE decreased $1,892,000, or 12.6%, to
$13,134,000 during 1996 compared to $15,026,000 during 1995. As a
percentage of sales, gross profit decreased to 18.0% during 1996
from 22.4% during 1995. The decrease in both gross profit dollars
and as a percentage of sales is primarily the result of substantial
print and advertising expenditures outweighing anticipated
theatrical revenues from the Company's 1996 theatrical releases.
Selling, general and administrative expenses of LIVE increased
$1,291,000, or 19.1%, to $8,058,000 during 1996 compared to
$6,767,000 during 1995. As a percentage of sales, the amount
increased to 11.1% during 1996 from 10.1% during 1995. The dollar
increase and percentage increase is primarily a result of the
recovery of a previously written-off bad debt from a former
distributor included in the second quarter of 1995.
Interest and other income increased $220,000 or 20.1% to
$1,312,000 during 1996 compared to $1,092,000 during 1995, which
was primarily the result of interest earned on higher cash balances
on-hand during the first quarter 1996.
Interest expense of LIVE decreased $14,000, or 1.7%, to $812,000
during 1996 compared to $826,000 during 1995.
<PAGE>
Preferred dividends of $1,683,000 in 1996 and $1,575,000 in 1995
represents the 5% cash dividend accrued on the Series B Preferred
Stock through May of 1996, with 10% being accrued thereafter, and
the 5% cash dividend accrued on 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.
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 six months
ending June 30, 1996, the Company generated negative cash flow from
operations of $27,550,000 primarily due to increases in accounts
receivable and film costs associated with the release of The
Substitute and The Arrival.
On May 27, 1995, LIVE entered into a three year extension of its
distribution agreement with WEA. Under the terms of the agreement,
WEA advanced $10,000,000 to LIVE, recoupable from distribution
revenues during the three year term of the agreement at $277,778
per month, plus interest at LIBOR, plus 0.2%. In order to obtain
the advance, LIVE granted WEA a second priority security interest
in substantially all of LIVE's assets. As of June 30, 1996, there
was $6,666,000 outstanding under the advance, and the interest rate
on the advance at June 30, 1996 was 5.7%.
Investing activities generated a negative cash flow of $116,000
during the six months ended June 30, 1996, primarily as a result of
the acquisition of property and equipment at LIVE.
LIVE and its affiliates are a party to 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 $27,500,000 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
affiliates. 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 June 30, 1996 the Company was
in compliance with all such financial ratios. There were no
amounts outstanding under the Foothill Credit Facility as of June
30, 1996.
The Company has not borrowed any funds under the Foothill Credit
Facility since it was obtained in November 1994, and, as noted, the
Company has had substantial cash balances throughout the 1995
fiscal year and through June of 1996. As a result of the Company's
upcoming cash expenditures relating to theatrical releases and
production/acquisition schedules for 1996, it is anticipated that
the cash balances on hand will be utilized and the Company will
have to draw funds against its credit facility to meet its
anticipated 1996 cash expenditures. This will reduce the liquidity
of the Company in 1996 when compared to the 1995 cash and borrowing
positions.
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 of 1993, 1994, 1995 and June 30, 1996 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 cumulative
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, 1994,
1995 and June 30, 1996 cash dividends on the Series C Preferred
Stock which, together with accrued and unpaid dividends thereon,
totaled $2,637,000 as of June 30, 1996.
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, 1994, 1995
and June 30, 1996 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 $6,152,000 during the six months ended June 30, 1996 primarily
due to the repurchase of 377,500 shares of the Company's Series B
Preferred Stock, interest and principal payments on long term
obligations and payment of dividends on the Series B Preferred
Stock.
As of June 30, 1996, the aggregate redemption price for the
Series B Preferred Stock was $38,198,000 ($10.00 per share).
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. Through June
30, 1996, LIVE acquired, and subsequently retired, a total of
2,177,500 shares of the Series B Preferred Stock at an average
price of $4.27 per share.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
LIVE had been the defendant in two purported class action law
suits that were filed in 1992. The Company had requested the U.S.
District Court to dismiss both cases for non-prosecution due to the
fact that the plaintiffs had taken no action in either of these
cases for over one year. On April 8, 1996, the U.S. District Court
granted LIVE's request and dismissed both cases.
In May 1994, a breach of contract claim was filed against a
subsidiary of the Company, claiming nonpayment of royalties from
licensing of films in foreign territories and deprivation of
royalty payments as a result of misallocation of certain values
asserted with licensed film properties. Films subject to the
complaint were contained in the assets of Vestron, Inc. purchased
by the Company in July 1991, and the period covered included the
license periods both prior to, and subsequent to, the acquisition
date by the Company. The Company filed a reply brief (including a
Motion to Dismiss) on October 5, 1994, and such Motion to Dismiss
was granted on the grounds of forum non conviens. Plaintiff filed
a complaint in New York on March 22, 1995. The Company filed its
answer, affirmative defenses and counterclaim on April 20, 1995.
Plaintiff filed a motion for class certification on September 8,
1995 to which the Company filed its opposition to the motion on
November 6, 1995. After limited pre-trial discovery, a motion for
class certification was argued on December 6, 1995. By order dated
June 21, 1996 and filed on June 25, 1996, the Court in this action
determined that the action should be maintained as a class action
under the provisions of Section 901(a) of the New York Civil
Practice Law and Rules.
The Company filed an appeal from the Order granting class
certification on July 19, 1996 and filed a Motion for
Decertification of the class on July 24, 1996. A hearing on the
motion has been scheduled for August 21, 1996.
Management and counsel to LIVE are unable to predict the
ultimate outcome of the above-described action at this time.
However, LIVE and the other defendants believe that this lawsuit is
without merit and intends to defend it vigorously. Accordingly, no
provision for any liability which may result has been made in
LIVE's consolidated financial statements. In the opinion of
management, this action, when finally concluded and determined,
will not have a material adverse effect upon LIVE's financial
position or results of operations.
<PAGE>
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, 1994, 1995 and June 30, 1996 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 cumulative 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, 1994,
1995 and June 30, 1996 cash dividends on the Series C Preferred
Stock which, together with accrued and unpaid dividends thereon,
totaled $2,637,000 as of June 30, 1996.
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, 1994, 1995
and June 30, 1996 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.
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits:
11 Computation of Income (Loss) Per Common Share (Unaudited).
27 Financial Data Schedule (Electronic Filing Only).
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: August 1, 1996 By: /s/ RONALD B. CUSHEY
Ronald B. Cushey
Chief Financial Officer
EXHIBIT INDEX
11 Computation of Income (Loss) Per Common Share (Unaudited)
27 Financial Data Schedule (Electronic Filing Only)
EXHIBIT 11
LIVE ENTERTAINMENT INC. AND SUBSIDIARIES
COMPUTATION OF INCOME (LOSS) PER COMMON SHARE
(Unaudited)
(Amounts in Thousands, Except Per Share Data)
Three Months Six Months
Ended June 30, Ended June 30,
1996 1995 1996 1995
PRIMARY
Earnings:
Net income. . . . . . . . . . . . . . . . . . . $1,743 $1,059 $2,710 $5,963
Less preferred dividends. . . . . . . . . . . . 984 716 1,683 1,575
Less accretion in redemption value of
LIVE Series B Cumulative Convertible
Preferred Stock. . . . . . . . . . . . . . . . -- 1,259 -- 2,830
Net income (loss) attributable to common stock. $ 759 $ (916) $1,027 $1,558
Shares:
Weighted average number of common
shares outstanding. . . . . . . . . . . . . . 2,445 2,418 2,434 2,418
Net effect of dilutive stock options-
based on the treasury stock method
using average market price. . . . . . . . . . 98 24 178 14
Total . . . . . . . . . . . . . . . . . . . . . 2,543 2,442 2,612 2,432
Net income (loss) per common share. . . . . . . $ 0.30 $(0.38) $ 0.39 $ 0.64
FULLY DILUTED
Earnings:
Net income. . . . . . . . . . . . . . . . . . . $1,743 $ -- $2,710 $5,963
Shares:
Weighted average number of common
shares outstanding. . . . . . . . . . . . . . 2,445 -- 2,434 2,418
Net effect of dilutive stock options -
based on the treasury stock method
using the period-end market price, if
higher than average market price. . . . . . . 135 -- 124 25
Assuming conversion of Series B and Series C
Preferred Stock . . . . . . . . . . . . . . . 7,949 -- 8,195 12,079
Total . . . . . . . . . . . . . . . . . . . . . 10,529 -- 10,753 14,522
Net income per common share. . . . . . . . . . . $ 0.17 $ -- $ 0.25 $ 0.41
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<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 15,669
<SECURITIES> 0
<RECEIVABLES> 23,202
<ALLOWANCES> (13,852)
<INVENTORY> 5,890
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