<PAGE>
United States
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) May 2, 1997
MATTHEWS STUDIO EQUIPMENT GROUP
-------------------------------
(Exact name of registrant as specified in its charter)
CALIFORNIA
----------
(State or other jurisdiction of incorporation)
0-18102 95-1447751
------------------------------------------------
(Commission file number) (I.R.S. Employer
Identification No.)
3111 NORTH KENWOOD STREET, BURBANK, CA 91505
----------------------------------------------------
(Address of principal executive offices) (Zip Code)
(818) 525-5200
--------------
(Registrant's telephone number, including area code)
2405 Empire Avenue, Burbank, CA 91504-3399
------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
<PAGE>
Item 2. Acquisition or Disposition of Assets
On May 2, 1997, Matthews Studio Equipment Group ("Matthews" or "the Company")
acquired Duke City Video, Inc. ("Duke City"), pursuant to stock exchange
agreements dated as of May 2, 1997, among the shareholders of Duke City and Duke
City Holdings, Inc., a wholly-owned subsidiary of the Company. Pursuant to the
stock exchange agreements the Duke City shareholders received 285,715 restricted
shares of the Company's common stock in exchange for all of the common stock of
Duke City, in a transaction exempt from registration under the Securities Act of
1933. The amount of consideration paid to the Duke City shareholders was
reached through arms-length negotiations.
Prior to the acquisition, the ownership in Duke City was held by Harold Jay
Lefkovitz, Louise Lefkovitz, Patricia Brusati, Steve Ward and John Hensch. Duke
City has operations in Albuquerque, New Mexico, Burbank, California and Dallas,
Texas. Duke City provides rental services of audio, video, film and
professional grip equipment, as well as various levels of production expertise,
crews and expendable supplies to the film and television production industry.
Duke City will continue its business and operations as a wholly owned subsidiary
of the Company.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Business Acquired
Duke City was acquired by Matthews on May 2, 1997. The audited financial
statements of Duke City, and the related Independent Auditors' Report for the
Duke City fiscal year ended December 31, 1996 are located at Addendum I.
(b) Pro forma Financial Information (unaudited)
The required pro forma combined financial data is located at Addendum II.
<PAGE>
(2) (c) Exhibits
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Document Description
- ------- --------------------
<S> <C>
1. Stock Exchange Agreement and Plan of Reorganization dated as of
May 2, 1997, among Patricia M. Brusati, Harold Jay Lefkovitz,
Louise K. Lefkovitz, Stephen F. Ward, Duke City Video, Inc. and
Duke City Holdings, Inc., without the schedules and exhibits
thereto, other than as listed below:
i. Employment Agreement dated as of May 2, 1997, between
Patricia M. Brusati and Duke City Video, Inc.;
ii. Employment Agreement dated as of May 2, 1997, between
Harold Jay Lefkovitz and Duke City Video, Inc.;
iii. Employment Agreement dated as of May 2, 1997, between
Stephen F. Ward and Duke City Video, Inc.;
iv. Non-Competition Agreement dated as of May 2, 1997, among
Patricia M. Brusati, Duke City Video, Inc. and Duke City
Holdings, Inc.;
v. Non-Competition Agreement dated as of May 2, 1997, among
Harold Jay Lefkovitz, Duke City Video, Inc. and Duke City
Holdings, Inc.;
vi. Non-Competition Agreement dated as of May 2, 1997, among
Louise K. Lefkovitz, Duke City Video, Inc. and Duke City
Holdings, Inc.;
vii. Non-Competition Agreement dated as of May 2, 1997, among
Stephen F. Ward, Duke City Video, Inc. and Duke City
Holdings, Inc.;
viii. Promissory Note dated as of May 2, 1997 made by
Duke City Video, Inc. in favor of Harold Jay Lefkovitz;
ix. Promissory Note dated as of May 2, 1997 made by Duke
City Video, Inc. in favor of Patricia M. Brusati.
</TABLE>
2. Subordination Agreement made by Harold Jay Lefkovitz in favor of
Chase Manhattan Bank, as agent, but without the exhibit
referenced therein.
3. Stock Exchange Agreement dated as of May 2, 1997, between Duke
City Holdings, Inc. and John E. Hensch
23. Consent of Independent Auditors
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report on Form 8-K/A, to be signed on its behalf
by the undersigned hereunto duly authorized.
MATTHEWS STUDIO EQUIPMENT GROUP
(Registrant)
Date: July 10, 1997
By: S/Gary Borman
-----------------------------------
Gary Borman
Vice President, Corporate Controller
& Principal Accounting Officer
By: S/Carlos De Mattos
-----------------------------------
Carlos De Mattos
Chairman of the Board, President
& Chief Financial Officer
<PAGE>
ADDENDUM I.
- -----------
Financial Statements
Duke City Video, Inc.
dba Duke City Studio
Year ended December 31, 1996
with Report of Independent Auditors
<PAGE>
Duke City Video, Inc.
dba Duke City Studio
Financial Statements
Year ended December 31, 1996
<TABLE>
<CAPTION>
CONTENTS
<S> <C>
Report of Independent Auditors............................................ 1
Audited Financial Statements
Balance Sheet............................................................. 2
Statement of Operations................................................... 3
Statement of Shareholders' Equity......................................... 4
Statement of Cash Flows................................................... 5
Notes to Financial Statements............................................. 6
</TABLE>
<PAGE>
Report of Independent Auditors
The Board of Directors and Shareholders
Duke City Video, Inc. dba Duke City Studio
We have audited the accompanying balance sheet of Duke City Video, Inc. dba Duke
City Studio as of December 31, 1996, and the related statements of operations,
shareholders' equity, and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Duke City Video, Inc. dba Duke
City Studio at December 31, 1996, and the results of its operations and cash
flows for the year then ended in conformity with generally accepted accounting
principles.
S/Ernst & Young LLP
March 28, 1997
1
<PAGE>
Duke City Video, Inc.
dba Duke City Studio
Balance Sheet
December 31, 1996
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Current assets:
Cash $ 60,468
Accounts receivable less allowance for
doubtful accounts of $150,162 1,373,756
Deposits 266,739
Prepaid expenses 53,248
-----------
Total current assets 1,754,211
Property, plant and equipment, net (Notes 2, 3 and 4) 9,169,381
-----------
Total assets $10,923,592
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 874,693
Accrued liabilities 195,463
Line of credit 278,017
Current portion of long-term debt (Notes 5 and 6) 1,056,330
Current portion of capital lease obligations (Notes 4 and 6) 2,395,043
-----------
Total current liabilities 4,799,546
Long-term debt, less current portion (Notes 5 and 6) 2,848,819
Notes payable - shareholders (Notes 5 and 6) 644,257
Capital lease obligations, less current portion (Notes 4 and 6) 3,908,439
Shareholders' equity:
Common stock, no par value:
Authorized shares - 500
Issued and outstanding shares - 116 204,874
Accumulated deficit (1,482,343)
-----------
Total shareholders' equity (1,277,469)
-----------
Total liabilities and shareholders' equity $10,923,592
===========
</TABLE>
See accompanying notes.
2
<PAGE>
Duke City Video, Inc.
dba Duke City Studio
Statement of Operations
Year ended December 31, 1996
<TABLE>
<S> <C>
Revenues from rental operations $8,692,103
Product sales 365,477
----------
9,057,580
Costs and expenses:
Cost of rental operations 6,986,418
Cost of sales 171,641
Selling, general and administrative 1,409,075
Provision for doubtful accounts 121,109
Interest 1,097,153
----------
9,785,396
----------
Loss before income taxes (727,816)
Provision for income taxes 1,000
----------
Net loss $ (728,816)
==========
</TABLE>
See accompanying notes.
3
<PAGE>
Duke City Video, Inc.
dba Duke City Studio
Statement of Shareholders' Equity
<TABLE>
<CAPTION>
Common Stock
------------------------
Number of Accumulated
Shares Amount Deficit Total
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at December 31, 1995 100 $104,874 $ (753,527) $ (648,653)
Net loss - - (728,816) (728,816)
Stock issuance proceeds 16 100,000 - 100,000
-------------------------------------------------------------
Balance at December 31, 1996 116 $204,874 $(1,482,343) $(1,277,469)
=============================================================
</TABLE>
See accompanying notes.
4
<PAGE>
Duke City Video, Inc.
dba Duke City Studio
Statement of Cash Flows
Year ended December 31, 1996
<TABLE>
<S> <C>
OPERATING ACTIVITIES
Net loss $ (728,816)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Provision for doubtful accounts 121,109
Depreciation and amortization 3,288,110
Gain on sale of assets (27,018)
Changes in operating assets and liabilities:
Accounts receivable (609,433)
Deposits (104,042)
Prepaid and other assets 57,681
Accounts payable and accrued liabilities 135,327
---------------
Net cash provided by operating activities 2,132,918
INVESTING ACTIVITIES
Purchase of property, plant and equipment (226,464)
Proceeds from sale of property, plant and equipment 41,685
---------------
Net cash used in investing activities (184,779)
FINANCING ACTIVITIES
Proceeds from note payable -- shareholder 236,000
Proceeds from borrowings
Repayments of borrowings (2,334,933)
Proceeds from stock issuance 100,000
--------------
Net cash used in financing activities (1,998,933)
--------------
Net decrease in cash (50,794)
Cash at beginning of year 111,262
--------------
Cash at end of year $ 60,468
==============
Cash paid during the year for:
Taxes $ 800
Interest $ 1,125,748
Schedule of noncash investing and financing transaction:
Long-term loans incurred to acquire equipment $ 4,727,536
</TABLE>
See accompanying notes.
5
<PAGE>
DUKE CITY VIDEO, INC.
dba Duke City Studio
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
1. ACCOUNTING POLICIES
BUSINESS
Duke City Video, Inc. conducts its business under the trade name of Duke City
Studio (the Company). The Company provides rental services of audio, video, film
and professional grip equipment, as well as various levels of production
expertise, crews and expendable supplies to the film and television production
communities. In addition, the Company provides tape duplication services and
sells an immaterial amount of its equipment. The Company provides, as a single
source, the necessary production equipment which is otherwise only available by
using many different suppliers. The Company serves customers both domestically
and internationally. The Company's headquarters are located in Albuquerque, New
Mexico, with branch offices located in Burbank, California and Dallas, Texas.
USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make certain estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CONCENTRATION OF CREDIT RISK
The Company's customers are located around the world and are principally engaged
in the motion picture and television production, theatrical production or
commercial photography. The Company generally rents its products or provides its
services on credit terms of 30 days and does not require collateral. Credit
losses on receivables are provided for in the financial statements and have
historically been within management's expectations. Two customers accounted for
16% and 11% of the Company's total net revenues for the year ended December 31,
1996.
6
<PAGE>
DUKE CITY VIDEO, INC.
dba Duke City Studio
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
1. ACCOUNTING POLICIES (continued)
REVENUE RECOGNITION
The Company recognizes revenue from rentals when the equipment has been
delivered or when the services have been provided, pursuant to the contract
terms.
LONG-LIVED ASSETS
Long-lived assets used in operations are reviewed periodically to determine that
the current carrying values are not impaired and if indicators of impairment are
present or if long-lived assets are expected to be disposed of, impairment
losses are recorded.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, including capital leases, are stated at cost. For
financial reporting purposes, depreciation of automotive equipment, rental
equipment and furniture and fixtures is provided using the double-declining
balance method of depreciation. Depreciation and amortization on buildings and
improvements is calculated using the straight-line method. The Company uses the
following estimated useful lives:
<TABLE>
<CAPTION>
Years
-------
<S> <C>
Automotive 5
Rental equipment 5
Furniture and fixtures 5
Buildings and improvements 10-40
</TABLE>
Amortization of capital leases is included in depreciation expense.
7
<PAGE>
DUKE CITY VIDEO, INC.
dba Duke City Studio
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
1. ACCOUNTING POLICIES (continued)
ADVERTISING EXPENSES
The Company expenses its advertising costs as incurred. Total advertising costs
for 1996 were $47,834.
PREPAID LEASE FEES
Prepaid lease fees are capitalized and amortized over the life of the lease.
DEPOSITS
Deposits represent prepayments on capital lease obligations and are capitalized
until the payment is due. Deposits made during the year totaled $101,274.
INCOME TAXES
The Company, with the consent of its shareholders, has elected to be taxed as an
S corporation for federal and state income tax purposes. Accordingly, the
Company's taxable income is included in the income tax returns of its
shareholders. The state tax provision reflects the California S Corporation tax
rate of 1.5% of taxable income, or $800, whichever is greater, and the S
Corporation tax rate for other states that tax the income of S Corporations.
2. NET INVESTMENT IN LEASED ASSETS
OPERATING LEASES
The Company is a lessor of audio, video, film and professional grip equipment to
the film and television production industries. The lease terms generally range
from a few days to several weeks. Substantially all of the leases are
noncancelable. The original cost and accumulated depreciation of rental
equipment held for operating leases was $15,459,468 and $8,710,125, respectively
at December 31, 1996.
8
<PAGE>
DUKE CITY VIDEO, INC.
dba Duke City Studio
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following at December 31, 1996:
<TABLE>
<S> <C>
Rental equipment $15,459,468
Vehicles 204,022
Office equipment, furniture and fixtures 299,550
Leasehold improvements 138,351
Land and building 2,210,184
-----------
18,311,575
Less depreciation and amortization 9,142,194
-----------
$ 9,169,381
===========
</TABLE>
Substantially all of the property, plant and equipment serves as collateral for
the Company's lease and debt obligations.
4. LEASES
The Company leases its facilities in California and Texas under noncancelable
operating leases expiring in May 1998 and May 2001, respectively. These leases
require the Company to pay utilities, insurance and other taxes. The California
facility lease contains a buyout clause for $15,600 which allows the Company to
cancel the remaining term of the lease beginning April 1997. The Company also
leases a furnished condominium in California for use by employees on temporary
assignment at the Burbank office which expires in 1997. The Company also leases
equipment and vehicles under noncancelable operating leases. Subsequent to
December 31, 1996, the Company entered into leases to acquire additional rental
equipment resulting in future payment obligations of $580,000.
Property and equipment includes the following assets recorded under capital
leases at December 31, 1996:
<TABLE>
<S> <C>
Property and equipment $13,909,872
Less accumulated amortization 7,839,113
-----------
$ 6,070,759
===========
</TABLE>
9
<PAGE>
DUKE CITY VIDEO, INC.
dba Duke City Studio
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
4. LEASES (continued)
Future minimum payments under capital leases and noncancelable operating leases
with initial terms of one year or more consisted of the following at December
31, 1996:
<TABLE>
<CAPTION>
Capital Operating
Leases Leases
----------------------------
<S> <C> <C>
1997 $2,652,384 $147,104
1998 2,363,938 107,330
1999 1,338,396 78,210
2000 435,092 68,397
2001 18,926 22,425
Thereafter 16,295 --
----------------------------
6,825,031 423,466
Amounts representing interest (521,549) --
----------------------------
Present value of net minimum lease payments
(including current portion of $2,395,043) $6,303,482 $423,466
============================
</TABLE>
Rental expense under operating leases approximated $1,165,158 for 1996.
5. DEBT
Debt consists of the following components (including capitalized lease
obligations) as of December 31, 1996:
<TABLE>
<S> <C>
Obligations incurred to acquire equipment, with interest rates
ranging from 5.64% to 22.0% and with maturity dates ranging from
April 1997 to February 2003
$ 8,388,039
Obligations incurred to acquire building, with interest rates
ranging from 6.35% to 9.75% and with maturity dates ranging from
December 2010 to December 2015
2,098,609
Notes payable to shareholders, payable upon demand with interest
rates ranging from 4.0% to 10.25% 644,257
-----------
$11,130,905
===========
</TABLE>
10
<PAGE>
DUKE CITY VIDEO, INC.
dba Duke City Studio
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
5. DEBT (continued)
The aggregate annual maturities of debt consists of the following at December
31, 1996:
<TABLE>
<S> <C>
1997 $1,056,330
1998 554,596
1999 253,101
2000 76,394
2001 72,313
Thereafter 1,892,415
----------
$3,905,149
===========
</TABLE>
The weighted average interest rate at December 31, 1996 for short-term
borrowings was 10.25%.
6. RELATED PARTIES
A shareholder of the Company has provided loans to the Company under various
notes and at various interest rates and maturities. Loans were made by the
shareholder in the amount of $185,000 during 1996. No payments were made on the
principal of these notes during 1996; however, the Company has provided expense
advances to the shareholder which have been offset against the interest incurred
on these notes, resulting in no unpaid interest expense at December 31, 1996
related to these notes. The total expense advances incurred in 1996 was $49,951.
The outstanding principal balance on the notes owed to the shareholder was
$580,257 at December 31, 1996. These notes are subordinate to the Company's
other note and lease obligations.
A shareholder of the Company has provided a loan to the Company during 1996 in
the amount of $51,000 with an interest rate of 9.25%. No payments were made on
the note during 1996, resulting in an outstanding principal balance and accrued
interest of $51,000 and $3,307, respectively.
A majority of the notes payable and capital lease obligations are personally
guaranteed by certain of the shareholders.
11
<PAGE>
DUKE CITY VIDEO, INC.
dba Duke City Studio
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
7. EMPLOYEE BENEFIT PLAN
The Company sponsors a defined contribution benefit plan covering its employees
who meet the service and age requirements. The Plan allows an eligible employee
to contribute up to 15% of their salary subject to certain limits established by
the Internal Revenue Code. The Company provides a 50% matching contribution of
the employee's eligible contributions. The Company recognized expense under the
plan of $8,586 in 1996.
8. SUBSEQUENT EVENT (UNAUDITED)
Subsequent to year end, the shareholders of the Company approved an agreement to
exchange all of the outstanding shares of the Company's stock for stock of
Matthews Studio Equipment Group. The merger was consummated in May 1997.
12
<PAGE>
ADDENDUM II.
- ------------
Pro forma combined financial data
The following unaudited pro forma combined statements of operations for the year
ended September 30, 1996 (December 31, 1996 for Duke City), and the six months
ended March 31, 1997 give effect to the acquisition of Duke City by the Company.
The pro forma information is based on the historical financial statements of the
Company and Duke City giving effect to the combination under the purchase method
of accounting and the assumptions and adjustments described in the accompanying
notes to the unaudited pro forma financial statements. The following unaudited
pro forma combined balance sheet also gives effect to the combination under the
purchase method of accounting.
The unaudited pro forma statements have been prepared by the management of the
Company and Duke based upon the historical information included herein and other
financial information. These pro forma statements do not purport to be
indicative of the results of operations or financial position which would have
occurred had the acquisition been made at the beginning of the periods or as of
the date indicated or of the financial position or results of operations which
may be obtained in the future.
The Company will account for the transaction under the purchase method of
accounting. Accordingly, the cost to acquire Duke City will be allocated to the
assets acquired and liabilities assumed according to their respective fair
values. The final allocation of the purchase price is dependent upon completion
of certain studies that are not yet complete. Accordingly, the purchase
allocation adjustments are preliminary and have been made solely for the purpose
of preparing such pro forma statements.
<PAGE>
MATTHEWS STUDIO EQUIPMENT GROUP AND SUBSIDIARIES
Pro Forma Condensed Consolidated Statements of Operations
(in thousands, except per share data)
<TABLE>
<CAPTION>
Historical
-----------------------------
Matthews Duke
------------- -----------
For the Year Ended
September 30, December 31, Pro forma Pro forma
1996 1996 Adjustments Combined
------------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
Net product sales $ 16,079 $ 365 $ $ 16,444
Revenues from rental operations 14,125 8,692 22,817
------------- ----------- ----------- ---------
30,204 9,057 39,261
Costs and expenses:
Cost of sales 10,257 172 10,429
Cost of rental operations 8,016 6,986 15,002
Selling, general and administrative 8,849 1,530 82 (1) 10,461
Interest 2,044 1,097 3,141
------------- ----------- ----------- ---------
29,166 9,785 82 39,033
Income (loss) before income taxes 1,038 (728) (82) 228
Provision for income taxes 35 1 36
------------ ----------- ----------- ---------
Net income (loss) $ 1,003 $ (729) $ (82) $ 192
============= =========== =========== =========
Earnings per common share $ 0.10 $ 0.02
============= =========
Weighted average number of
common shares outstanding 10,328 285 (2) 10,613
</TABLE>
See notes to pro forma condensed consolidated statements of operations
See accompanying notes.
<PAGE>
MATTHEWS STUDIO EQUIPMENT GROUP AND SUBSIDIARIES
Pro Forma Condensed Consolidated Statements of Operations
For the Six Months Ended March 31, 1997
(in thousands, except per share data)
<TABLE>
<CAPTION>
Historical Pro forma Pro forma
-----------------------------
Matthews Duke Adjustments Combined
------------ ----------- ----------- ---------
<S> <C> <C> <C> <C>
Net product sales $ 8,703 $ 309 $ $ 9,012
Revenues from rental operations 11,394 3,902 15,296
------------ -------- ---------- ---------
20,097 4,211 24,308
Costs and expenses:
Cost of sales 5,869 83 5,952
Cost of rental operations 6,380 3,680 10,060
Selling, general and administrative 5,235 797 41 (1) 6,073
Interest 1,130 673 1,803
------------ -------- ----------- ---------
18,614 5,233 41 23,888
Income (loss) before income taxes 1,483 (1,022) (41) 420
Provision for income taxes 593 1 594
------------ -------- ----------- ---------
Net income (loss) $ 890 $ (1,023) $ (41) $ (174)
============ ======== =========== =========
Earnings per common share $ 0.09 $ (0.02)
============ =========
Weighted average number of
common shares outstanding 10,333 285 (2) 10,618
See notes to pro forma condensed consolidated statements of operations
</TABLE>
<PAGE>
MATTHEWS STUDIO EQUIPMENT GROUP AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
1. To record the estimated goodwill attributable to the transaction which is
amortized over a period of twenty five years.
2. To give effect to the issuance of Matthews restricted common stock in
connection with the acquisition.
3. The three month period ended December 31, 1996 for Duke City is included in
both the pro forma condensed statements of operations for the twelve month
period ended December 31, 1996 and the six month period ended March 31, 1997.
<PAGE>
<TABLE>
<CAPTION>
MATTHEWS STUDIO EQUIPMENT GROUP AND SUBSIDIARIES
Pro Forma Condensed Consolidated Balance Sheets
March 31, 1997
($ in thousands)
Historical Pro forma Pro forma
----------------------------
Matthews Duke Adjustments Combined
------------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 685 $ 145 $ $ 830
Accounts receivable 6,242 1,187 7,429
Current portion of net investment in leases 771 771
Inventories 6,363 6,363
Prepaid expenses and other current assets 1,124 339 1,463
------------- ----------- ----------- ---------
Total current assets 15,185 1,671 16,856
Property, plant and equipment 39,469 19,093 58,562
Less accumulated depreciation (18,537) (9,815) (28,352)
------------- ----------- ----------- ---------
Net property, plant and equipment 20,932 9,278 30,210
Investment in leases, less current portion 660 660
Other assets 1,431 2,052 (2) 3,483
------------- ------------ ----------- ---------
Total assets $ 38,208 $ 10,948 $ 2,052 $ 51,208
============= ============ =========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 2,814 $ 819 $ $ 3,633
Accrued liabilities 2,302 571 2,873
Current portion of long-term debt and
capital lease obligations 165 3,622 3,787
Income taxes payable 158 158
------------- ------------ ----------- --------
Total current liabilities 5,439 5,012 10,451
Long-term debt and capital leases 20,658 7,525 28,183
Deferred income taxes 2,142 2,142
Shareholders' equity:
Preferred stock
Common stock 5,589 205 81 (1) 5,875
Retained earnings (deficit) 4,380 (1,794) 1,971 (1) 4,557
------------- ------------ ----------- --------
Total shareholders' equity 9,969 (1,589) 2,052 10,432
------------- ------------ ----------- --------
Total liabilities and shareholders' equity $ 38,208 $ 10,948 $ 2,052 $ 51,208
============= ============ =========== ========
See notes to pro forma condensed consolidated balance sheets
</TABLE>
5
<PAGE>
MATTHEWS STUDIO EQUIPMENT GROUP AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS
1. To record the acquisition of Duke City in exchange for 285,715 shares of the
Company's common stock.
2. To record as unallocated assets, the net effect of pro forma adjustments for
the excess purchase price over the fair value of net assets acquired which is
estimated at $2,052,000.
<PAGE>
Exhibit 23.
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-8 No. 333-3446) pertaining to the 1994 Stock
Option Plan and 1994 Stock Option Plan for Directors of Matthews Studio
Equipment Group and to the incorporation by reference therein of our report
dated March 28, 1997, with respect to the financial statements of Duke City
Video, Inc. dba Duke City Studio for the year ended December 31, 1996, included
in the Form 8-K/A of Matthews Studio Equipment Group, filed with the Securities
and Exchange Commission.
S/Ernst & Young LLP
Los Angeles, California
July 7, 1997
