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, 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 April 12, 1996, there were 2,430,867 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
March 31, 1996 and December 31, 1995 . . . . . . . . . . . . . . 1
Condensed Consolidated Statements of
Operations for the three months ended
March 31, 1996 and 1995. . . . . . . . . . . . . . . . . . . . . 2
Condensed Consolidated Statements of
Cash Flows for the three months ended
March 31, 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. . . . . . . . . . . . . . . . . . . . . . . . . .8-11
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . 11-13
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)
March 31, December 31,
1996 1995
ASSETS
Cash and cash equivalents, including restricted
cash of $1,352 and $1,352 . . . . . . . . . . . . . . $44,650 $ 49,487
Inventories. . . . . . . . . . . . . . . . . . . . . . 5,781 4,813
Property and equipment, net. . . . . . . . . . . . . . 1,036 1,145
Film costs, net of accumulated amortization
of $529,527 and $519,604. . . . . . . . . . . . . . . 70,324 66,700
Other assets . . . . . . . . . . . . . . . . . . . . . 1,611 1,353
Goodwill, net of accumulated amortization of
$41,023 and $40,042 . . . . . . . . . . . . . . . . . 24,966 25,947
$148,368 $ 149,445
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable . . . . . . . . . . . . . . . . . . . $ 4,541 $ 6,675
Accrual for returns and advertising net of accounts
receivable of $18,381 and $15,447 . . . . . . . . . . 9,575 3,430
Accrued expenses . . . . . . . . . . . . . . . . . . . 16,674 12,451
Notes payable. . . . . . . . . . . . . . . . . . . . . 7,500 8,333
Increasing Rate Senior Subordinated Notes due
1999, including capitalized interest of
$11,340 and $13,184 . . . . . . . . . . . . . . . . . 51,340 53,184
Film obligations . . . . . . . . . . . . . . . . . . . 13,392 18,559
Dividends payable. . . . . . . . . . . . . . . . . . . 2,532 2,309
Income taxes payable and deferred income taxes . . . . 6,806 6,484
Total liabilities . . . . . . . . . . . . . . . . . . 112,360 111,425
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;
$17,207,000 liquidation preference. . . . . . . . . . 15 15
Common Stock--authorized 24,000,000 shares;
$0.01 par value; 2,430,867 and 2,418,424
shares outstanding. . . . . . . . . . . . . . . . . . 24 24
Additional paid-in capital . . . . . . . . . . . . . . 127,766 129,668
Retained deficit . . . . . . . . . . . . . . . . . . . (95,616) (95,884)
36,008 38,020
$148,368 $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 Ended
March 31,
1996 1995
Net sales. . . . . . . . . . . . . . . . . . . . . . . $ 22,553 $ 44,505
Cost of goods sold . . . . . . . . . . . . . . . . . . 16,713 34,556
GROSS PROFIT. . . . . . . . . . . . . . . . . . . . 5,840 9,949
Operating Expenses:
Selling, general and administrative expenses. . . . . 3,862 3,609
Amortization of goodwill. . . . . . . . . . . . . . . 981 981
4,843 4,590
997 5,359
Disposal of VCL/Carolco Communications GmbH (VCL):
Net sales . . . . . . . . . . . . . . . . . . . . . . -- 9,779
Costs and expenses. . . . . . . . . . . . . . . . . . -- 9,779
-- --
OPERATING PROFIT. . . . . . . . . . . . . . . . . . 997 5,359
Interest and other income. . . . . . . . . . . . . . . 789 477
Interest expense . . . . . . . . . . . . . . . . . . . (497) (432)
INCOME BEFORE INCOME TAXES. . . . . . . . . . . . . 1,289 5,404
Income tax expense. . . . . . . . . . . . . . . . . . 322 500
NET INCOME. . . . . . . . . . . . . . . . . . . . . $ 967 $ 4,904
Net income per common share:
Primary . . . . . . . . . . . . . . . . . . . . . . . $ .10 $ 1.02
Fully diluted . . . . . . . . . . . . . . . . . . . . $ .08 $ 0.29
Weighted average number of shares outstanding:
Primary . . . . . . . . . . . . . . . . . . . . . . . 2,681 2,421
Fully diluted . . . . . . . . . . . . . . . . . . . . 11,860 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,
1996 1995
OPERATING ACTIVITIES:
Net income. . . . . . . . . . . . . . . . . . . . . . $ 967 $ 4,904
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization of property
and equipment. . . . . . . . . . . . . . . . . . . . 172 174
Amortization of goodwill. . . . . . . . . . . . . . . 981 981
Amortization of and adjustments to film costs . . . . 11,521 19,817
Income taxes payable and deferred income taxes. . . . 322 (192)
(Increase) decrease in operating assets:
Accounts receivable . . . . . . . . . . . . . . . . -- (10,573)
Inventories . . . . . . . . . . . . . . . . . . . . (968) 133
Assets held for sale. . . . . . . . . . . . . . . . -- 3,164
Other assets. . . . . . . . . . . . . . . . . . . . (258) (485)
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses . . . . . . . 2,089 4,455
Accrual for returns and advertising . . . . . . . . 6,145 --
Liabilities related to assets held for sale . . . . -- (41)
Film cost additions . . . . . . . . . . . . . . . . (15,145) (5,753)
Payments on film obligations. . . . . . . . . . . . (5,167) (5,314)
Cash provided by operating activities . . . . . . 659 11,270
INVESTING ACTIVITIES:
Acquisition of property and equipment . . . . . . . . (63) (262)
Cash used for investing activities. . . . . . . . (63) (262)
FINANCING ACTIVITIES:
Payments on long-term obligations . . . . . . . . . . (2,677) (3,657)
Repurchase of Series B Cumulative Convertible
Preferred Stock . . . . . . . . . . . . . . . . . . (2,332) (5,460)
Dividends paid on Series B Cumulative Convertible
Preferred Stock . . . . . . . . . . . . . . . . . . (477) (750)
Issuance of Common Stock. . . . . . . . . . . . . . . 53 --
Cash (used for) financing activities. . . . . . . (5,433) (9,867)
(Decrease)increase in cash and cash
equivalents . . . . . . . . . . . . . . . . . . . (4,837) 1,141
Cash and cash equivalents at beginning
of period. . . . . . . . . . . . . . . . . . . . 49,487 24,264
Cash and cash equivalents at end of period. . . . $ 44,650 $ 25,405
See notes to condensed consolidated financial statements.
<PAGE>
LIVE ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
March 31, 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 February 1995, LIVE executed a preliminary agreement providing
for the disposal of its interest in VCL. In November 1995, LIVE
completed this sales transaction. 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.
Net Income Per Common Share:
Primary:
Per share information has been determined on the basis of
2,681,137 and 2,421,299 weighted average number of shares
outstanding for the three months ended March 31, 1996 and 1995,
respectively. The net income per common share for the three months
ended March 31, 1995 gives effect to the accretion of the
redemption value of the Series B Cumulative Convertible Preferred
Stock ("Series B Preferred Stock") of $1,571,000. The net income
per common share for the three months ended March 31, 1996 and 1995
gives effect to dividends of $699,000 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
11,860,005 and 16,906,779 weighted average number of shares
outstanding for the three months ended March 31, 1996 and 1995,
respectively, assuming conversion of the Series B Preferred Stock
and the Series C Preferred Stock.
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, which accrues from September
1, 1992 at 5% ($0.50 per share) if paid in cash or 8% if paid in
kind ("PIK") and increases on May 1, 1996 to 10% ($1.00 per share)
if paid in cash and 12% if PIK. Dividends of $512,000 ($0.13 per
share) were accrued on the Series B Preferred Stock for the quarter
ending March 31, 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.
Note 3 - Commitments
The Company has certain 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. <PAGE>
Note 4 - 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 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, as well as a
lender to LFM 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 Pioneer 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.
The plaintiffs have taken no actions in either of these cases
for over one year. The Company had asked the U.S. District Court
to dismiss both cases for non-prosecution and on April 8th, 1996
the U.S. District Court granted LIVE's request and dismissed both
cases. The plaintiffs have 30 days to file an appeal.
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.
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 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, 1996 Compared to Three Months
Ended March 31, 1995
Continuing Operations
Net sales of LIVE decreased to $22,553,000 during 1996 compared
to $44,505,000 during 1995. The decrease of $21,952,000, or 49.3%,
is primarily attributable to the successful video rental release of
Stargate in the first quarter of 1995 for which there was no
comparable title released in the first quarter of 1996. The
decrease in revenue was partially offset by increased
international, television and video sell-through sales.
Gross profits of LIVE decreased $4,109,000, or 41.3%, to
$5,840,000 during 1996 compared to $9,949,000 during 1995. The
decrease in gross profit dollars was primarily related to the
decrease in sales. As a percentage of sales, gross profit
increased to 25.9% during 1996 from 22.4% during 1995, primarily
due to lower costs associated with international royalty overages
received in 1996.
Selling, general and administrative expenses of LIVE increased
$253,000, or 7.0%, to $3,862,000 during 1996 compared to $3,609,000
during 1995. As a percentage of sales, the amount increased to
17.1% during 1996 from 8.1% during 1995. The dollar increase is
primarily a result of higher overhead costs associated with
expansion of the Company's business into theatrical, international
and television operations. The percentage increase is primarily
due to the decrease in sales.
Interest and other income increased $312,000 or 65.4% to
$789,000 during 1996 compared to $477,000 during 1995, which was
primarily the result of interest earned on higher cash balances in
the first quarter of 1996 compared to the first quarter of 1995.
Interest expense of LIVE increased $65,000, or 15.0%, to
$497,000 during 1996 compared to $432,000 during 1995. Interest
expense increased as a result of the additional amount advanced by
Warner-Electra-Atlantic Corporation ("WEA") in May of 1995 under
the Company's distribution agreement.
Preferred dividends of $699,000 in 1996 and $859,000 in 1995
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.
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, 1996, the Company generated positive cash
flow from operations of $659,000.
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 March 31, 1996, there
was $7,500,000 outstanding under the advance, and the interest rate
on the advance at March 31, 1996 was 5.9%.
Investing activities generated a negative cash flow of $63,000,
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 March 31, 1996 the Company was
in compliance with all such financial ratios. There were no
amounts outstanding under the Foothill Credit Facility as of March
31, 1996.
<PAGE>
The Company has not borrowed any funds under the Foothill Credit
Facility since it was obtained in November 1994, and, as noted
above, the Company has had substantial cash balances throughout the
1995 fiscal year and through March of 1996. As a result of the
Company's upcoming cash expenditures relating to planned 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 and 1995 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 and
1995 cash dividends on the Series C Preferred Stock which, together
with accrued and unpaid dividends thereon, totaled $2,207,000 as of
March 31, 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 and
1995 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 $5,433,000 during the three months ended March 31, 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 March 31, 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 March
31, 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.
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 Pioneer, as well as a
lender to LFM 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 Pioneer 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.
The plaintiffs have taken no actions in either of these cases
for over one year. The Company had asked the U.S. District Court
to dismiss both cases for non-prosecution and on April 8th, 1996
the U.S. District Court granted LIVE's request and dismissed both
cases. The plaintiffs have 30 days to file an appeal.
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.
<PAGE>
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 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, 1994 and 1995 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 and 1995 cash dividends on
the Series C Preferred Stock which, together with accrued and
unpaid dividends thereon, totaled $2,207,000 as of March 31, 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 and
1995 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 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: April 29, 1996 By: /s/ RONALD B. CUSHEY
Ronald B. Cushey
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
11 Computation of Income Per Common Share (Unaudited)
27 Financial Data Schedule (Electronic Filing Only)
EXHIBIT 11
LIVE ENTERTAINMENT INC. AND SUBSIDIARIES
COMPUTATION OF INCOME PER COMMON SHARE
(Unaudited)
(Amounts in Thousands, Except Per Share Data)
Three Months Ended
March 31,
1996 1995
PRIMARY
Earnings:
Net income . . . . . . . . . . . . . . . . . . . $ 967 $ 4,904
Less accretion in redemption value
of Series B Preferred Stock . . . . . . . . . . -- 1,571
Less preferred dividends . . . . . . . . . . . . 699 859
Net income attributable
to common stock . . . . . . . . . . . . . . . . $ 268 $ 2,474
Shares:
Weighted average number of common
shares outstanding. . . . . . . . . . . . . . . 2,423 2,419
Net effect of dilutive stock options -
based on the treasury stock method
using average market price. . . . . . . . . . . 258 2
Total. . . . . . . . . . . . . . . . . . . . . . 2,681 2,421
Net income per common share. . . . . . . . . . . . $ .10 $ 1.02
FULLY DILUTED
Earnings:
Net income . . . . . . . . . . . . . . . . . . . $ 967 $ 4,904
Shares:
Weighted average number of common
shares outstanding. . . . . . . . . . . . . . . 2,423 2,419
Net effect of dilutive stock options -
based on the treasury stock method
using the period-end market price, if
higher than average market price. . . . . . . . 114 10
Assuming conversion of Series B and
Series C Preferred Stock. . . . . . . . . . . . 9,323 14,478
Total. . . . . . . . . . . . . . . . . . . . . . 11,860 16,907
Net income per common share. . . . . . . . . . . . $ .08 $ 0.29
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 44,650
<SECURITIES> 0
<RECEIVABLES> 18,381
<ALLOWANCES> (27,956)
<INVENTORY> 5,781
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<DEPRECIATION> (6,061)
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<CURRENT-LIABILITIES> 0
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0
3,834
<COMMON> 24
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<TOTAL-LIABILITY-AND-EQUITY> 148,368
<SALES> 22,553
<TOTAL-REVENUES> 23,342
<CGS> 16,713
<TOTAL-COSTS> 4,843
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<INCOME-TAX> 322
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