<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended SEPTEMBER 30, 1998 or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _____________ to ______________
Commission file number: 0-18613
TRIMARK HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 95-4272695
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2644 30TH STREET
SANTA MONICA, CALIFORNIA 90405
(Address of principal executive offices) (Zip code)
(310) 314-2000
(Registrant's telephone number, including area code)
NO CHANGE
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
As of November 11, 1998, 4,169,412 shares of Trimark Holdings, Inc. common
stock were outstanding, excluding shares held by Trimark Holdings, Inc. as
treasury stock.
1
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TRIMARK HOLDINGS, INC.
INDEX
Part I. Financial Information Page No.
Item 1. Financial Statements:
Consolidated Balance Sheets at September
30, 1998 and June 30, 1998 3
Consolidated Statements of Operations -
Three months ended September
30, 1998 and 1997 4
Consolidated Statements of Cash Flows -
Three months ended September
30, 1998 and 1997 5
Notes to Consolidated Financial Statements 6-7
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations 8-15
Item 3. Quantitative and Qualitative
Disclosures about Market Risk 15
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 16
2
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TRIMARK HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands, Except Share Data)
<TABLE>
<CAPTION>
September 30, June 30,
Assets 1998 1998
------
-------------------- ------------
(Unaudited)
<S> <C> <C>
Cash and cash equivalents $ 874 $ 1,159
Accounts receivable, less allowances of
$6,375 and $6,005, respectively 18,034 16,568
Film costs, net (Note 2) 68,365 65,064
Deferred marketing costs 1,392 1,963
Inventories, net 500 1,190
Property and equipment at cost, less accumulated
depreciation of $2,537 and $2,433,respectively 692 741
Due from officers 795 780
Other assets 1,668 1,755
-------------------- ------------
$ 92,320 $ 89,220
-------------------- ------------
-------------------- ------------
Liabilities and Stockholders' Equity
Revolving line of credit $ 61,450 $ 57,250
Accounts payable and accrued expenses 4,725 8,060
Minimum guarantees and royalties payable 9,488 7,623
Deferred income 790 1,100
Income taxes payable 43 43
-------------------- ------------
Total liabilities 76,496 74,076
-------------------- ------------
Commitments and contingencies (Note 3) -- --
-------------------- ------------
Stockholders' equity:
Common stock, $.001 par value. Authorized
20,000,000 shares; 5,134,827 shares issued
at September 30, 1998 and June 30, 1998 5 5
Additional paid in capital 15,588 15,588
Preferred stock, $.01 par value. Authorized
2,000,000 shares; no shares issued and
outstanding -- --
Retained earnings 4,694 3,981
Less treasury shares, at cost - 965,415 shares
and 952,200 shares (4,463) (4,430)
-------------------- ------------
Stockholders' equity 15,824 15,144
-------------------- ------------
$ 92,320 $ 89,220
-------------------- ------------
-------------------- ------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3
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TRIMARK HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except earnings (loss) Per Share)
<TABLE>
<CAPTION>
Three Months Ended September 30,
------------------------------------------------
1998 1997
------------ ------------
(Unaudited)
<S> <C> <C>
Net revenues $ 19,379 $ 14,559
Film costs and distribution expenses 15,243 10,972
------------ ------------
Gross Profit 4,136 3,587
------------ ------------
Operating expenses:
Selling 1,883 1,728
General and administrative 1,169 1,206
Bad debt (484) 126
------------ ------------
2,568 3,060
------------ ------------
Operating earnings 1,568 527
Other (income) expenses:
Interest expense 1,110 942
Interest and investment income (15) (46)
------------ ------------
1,095 896
------------ ------------
Earnings (loss) before income taxes 473 (369)
Income taxes (Note 5) (240) --
------------ ------------
Net earnings (loss) $ 713 $ (369)
------------ ------------
------------ ------------
Weighted average number of common shares
basic and fully diluted (Note 6) 4,181 4,183
------------ ------------
------------ ------------
Net earnings (loss) per common share basic
and fully diluted (Note 6) $ 0.17 $ (0.09)
------------ ------------
------------ ------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4
<PAGE>
TRIMARK HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
-------------------------------------------
1998 1997
------------- ------------
(Unaudited)
<S> <C> <C>
Operating activities:
Net earnings (loss) $ 713 $ (369)
Adjustments to reconcile net earnings (loss) to
Net cash used by operating activities:
Film amortization 9,287 6,566
Depreciation and other amortization 104 91
Provision for inventory obsolescence -- 32
Change in operating assets and liabilities:
(Increase) decrease in accounts receivable (1,466) 4,304
Additions to film costs (12,588) (7,776)
Decrease in deferred marketing costs 571 326
Decrease (increase) in inventories 690 (54)
(Increase) in notes receivable from officers (15) (363)
Decrease (Increase) in other assets 87 (146)
Decrease in accounts payable and
accrued expenses (3,335) (4,393)
Increase in minimum guarantees and
royalties payable 1,865 156
(Decrease) in income taxes payable -- (9)
(Decrease) in deferred income (310) (293)
------------- ------------
Net cash used by operating activities (4,397) (1,928)
------------- ------------
Investing activities:
Acquisition of property and equipment (55) (80)
------------- ------------
Net cash used by investing activities (55) (80)
------------- ------------
Financing activities:
Net increase (decrease) in revolving line of credit 4,200 (1,300)
Exercise of stock options -- 114
Purchase of treasury stock (33) --
------------- ------------
Net cash provided (used) by financing activities 4,167 (1,186)
------------- ------------
Decrease in cash and cash equivalents (285) (3,194)
Cash and cash equivalents at beginning of period 1,159 3,665
------------- ------------
Cash and cash equivalents at end of period $ 874 $ 471
------------- ------------
------------- ------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5
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TRIMARK HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - THE COMPANY:
The consolidated financial statements of Trimark Holdings, Inc. and
subsidiaries (the "Company") have been prepared in accordance with generally
accepted accounting principles for interim financial information.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. The accompanying financial statements should be read in
conjunction with the more detailed financial statements and related footnotes
filed with the Form 10-K for the year ended June 30, 1998. Significant
accounting policies used by the Company are summarized in Note 2 to the June
30, 1998 financial statements.
In the opinion of management, all adjustments required for a fair
presentation of the financial position as of September 30, 1998 and the
results of operations and cash flows for the periods ended September 30, 1998
and September 30, 1997 have been made and all adjustments were of a normal
and recurring nature. Operating results for the three month period are not
necessarily indicative of the operating results for a full year.
NOTE 2 - FILM COSTS:
Film costs, net of amortization, consist of the following:
<TABLE>
<CAPTION>
September 30, June 30,
1998 1998
-------------------------- ------------------------
(in thousands)
<S> <C> <C>
Released $ 51,275 $ 50,541
Completed not released 4,216 3,419
In process and development 12,874 11,104
-------------------------- -------------------------
$ 68,365 $ 65,064
-------------------------- -------------------------
</TABLE>
6
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NOTE 3 - COMMITMENTS & CONTINGENCIES:
The Company has entered into certain agreements which provide for royalty
advances and promotional and advertising commitments totaling $8.4 million.
If the conditions to these agreements are not met by the licensors, the
Company may withdraw from the arrangements. These commitments extend to March
1999.
NOTE 4 - SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the three month period for:
<TABLE>
<CAPTION>
September 30,
1998 1997
-------------------- --------------------
(in thousands)
<S> <C> <C>
Interest $1,245 $1,254
Income taxes 82 86
</TABLE>
NOTE 5 - INCOME TAXES
The $240,000 tax benefit represents a tax receivable from a prior year return.
NOTE 6 - NET (LOSS) EARNINGS PER COMMON SHARE:
Basic earnings (loss) per common share amounts are based on the weighted
average number of common shares outstanding during the respective periods.
Diluted earnings per common share amounts are based on the weighted average
common shares outstanding during the period and shares assumed issued upon
conversion of stock options when the effect of such conversions would have
been dilutive to net earnings (loss).
Prior period amounts have been restated to conform to SFAS No. 128. The table
below presents a reconciliation of weighted average shares used in the
calculation of basic and diluted net earnings per common share:
<TABLE>
<CAPTION>
Three months ended
September 30,
1998 1997
-------------------------- -------------------------
(in thousands)
<S> <C> <C>
Basic shares weighted average
of common shares outstanding 4,181 4,183
Additional shares assuming
conversions of stock options -- --
-------------------------- -------------------------
Diluted shares 4,181 4,183
-------------------------- -------------------------
</TABLE>
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
NET REVENUES:
<TABLE>
<CAPTION>
Three months ended
September 30,
-----------------------------------
1998 1997
--------------- ----------------
(in thousands)
<S> <C> <C>
Domestic:
Home video distribution $13,644 $8,817
Theatrical distribution 542 24
Television distribution 1,271 1,273
Foreign:
All media 3,922 4,445
--------------- ----------------
$19,379 $14,559
--------------- ----------------
</TABLE>
The increase in net revenues for the quarter ended September 30, 1998 was
primarily due to increases in net revenues from domestic home video, and
domestic theatrical distribution of $4.8 million and $518,000, respectively,
partially offset by a decrease in net revenues from foreign all media of
$523,000. The increase in domestic home video net revenues was primarily due
to the initial home video distribution in June 1998 of the theatrically
released film "Chairman of the Board" and the straight to video sell through
title "Kid in Aladdin's Palace" without any comparable video release in the
three months ended September 30, 1997. The increase was also a result of the
release of twelve DVD titles in the quarter ended September 30, 1998. In
contrast, no DVD titles were released during the same period in fiscal year
1998. The decrease in foreign revenue was primarily a result of the quality
of films released in the quarter ended September 30, 1998 as compared to the
similar quarter in fiscal year 1998. In the quarter ended September 30, 1997,
"Kid in Aladdin's Palace", "Chairman of the Board", and "Eve's Bayou" were
all released in the foreign markets; in contrast no comparable titles were
released in the quarter ended September 30, 1998.
The Company continues to focus its resources on producing and acquiring films
with specialized theatrical potential and those that are made for initial
release on network and cable television. See "Liquidity and Capital
Resources."
The Company anticipates that the domestic home video market will continue to
be extremely competitive.
GROSS PROFIT: The Company's gross profit for the three months ended
September 30, 1998 increased $549,000 or 15.3% compared with the same period
in the fiscal year 1998.
SELLING EXPENSES: Selling expenses as a percentage of net revenues for the
quarter ended September 30, 1998 and 1997 were 9.7% and 11.9%, respectively.
For the three months ended September 30, 1998
8
<PAGE>
ITEM 2: (CONTINUED)
RESULTS OF OPERATIONS
selling expenses increased $155,000 or 9.0% compared with the same period in
fiscal 1998. The increase reflects the sales of DVD titles released in the
quarter ended September 30, 1998; in contrast, no sales were made in the
same period in fiscal year 1998.
GENERAL AND ADMINISTRATIVE EXPENSES: For the three months ended September 30,
1998 general and administrative expenses decreased $37,000 or 3.0% compared
with the same period in fiscal 1998.
BAD DEBT EXPENSE: Bad debt expense for the three months ended September 30,
1998 decreased $610,000 or 484.1% compared with the same period in fiscal
1998. Bad debt expense primarily represents reserves taken against domestic
video and foreign sales. The decrease was primarily due to $355,000 in
collections on past due video receipts and the remaining balance in
collections on international receipts which were all previously reserved for.
INTEREST EXPENSE: Interest expense for the quarter ended September 30, 1998
increased $168,000 or 18% compared with the same period in fiscal 1998. The
increases in interest expense were primarily due to higher levels of
borrowing under the Company's credit facility for purposes of funding the
costs associated with the acquisition and distribution of theatrical motion
pictures. As of September 30, 1998, there was $61.5 million outstanding under
the credit facility. The Company expects to use excess cash flow generated by
theatrical and library product to decrease current debt levels. See
"Liquidity and Capital Resources."
INTEREST AND INVESTMENT INCOME: Interest and investment income for the three
months ended September 30, 1998 decreased $31,000 or 55.0% compared with the
same period in fiscal 1998. The decrease was primarily due to the reduction
in the outstanding balance from loans to officers in the three months ended
September 30, 1998 as compared to the same period in fiscal 1998.
NET EARNINGS (LOSS): The Company's net earnings for the three months ended
September 30, 1998 increased $1.1 million or 293% compared with the same
period in fiscal 1998. The increase in earnings is primarily due to the
increase in gross profits, the decrease in bad debt expense, and the income
tax refund from a prior year partially offset by the increase in interest and
selling expenses.
9
<PAGE>
ITEM 2: (continued)
LIQUIDITY AND CAPITAL RESOURCES
The Company relies on cash generated by operations and borrowings under its
credit facility to finance its operations. The Company's cash flows from
operating, investing and financing activities for the three months ended
September 30, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
Three Months Ended
September 30,
------------------------------------------
1998 1997
------------------ -------------------
(in thousands)
<S> <C> <C>
Net cash used by operating activities ($ 4,397) ($ 1,928)
Net cash used by investing activities (55) (80)
Net cash provided (used) by financing activities 4,167 (1,186)
</TABLE>
Cash used by operations increased by $2.5 million for the three month period
ended September 30, 1998 compared to the same period in fiscal 1998
principally as the result of an increase in the change to additions to film
costs of $4.8 million and an increase in the change in accounts receivable of
$6.5 million, offset by an increase in earnings by $1.1 million, an increase
in the change in film amortization by $2.7 million, a decrease in the change
in inventories of $744,000 and an increase in the change in minimum
guarantees and royalties payable of $1.7 million. The $12.6 million addition
to film costs was primarily used for the production and acquisition of new
product with approximately $2.0 million dollars used for prints and
advertising costs on the specialized theatrical releases of "Billy's First
Hollywood Screen Kiss" and "Cube".
Two principal factors have increased the length of time from investment in
film costs to recoupment, which has increased the Company's cash
requirements. The first factor is the terms of the Company's current credit
facility entered into in December 1996. Under the current credit facility,
described below, the Company directly pays production costs that generally
were previously paid by off balance sheet production company financing. This
change in financing has accelerated certain film acquisition payments that
were previously made at the time of film delivery and are now made
periodically throughout the production process. The production process often
takes from nine months to a year or more. Commitments to purchase films from
production companies upon delivery are included in contingent contractual
obligations. The second factor that has increased the length of time from
investment in film costs to recoupment is increased theatrical distribution
activity. Theatrical films generally require
10
<PAGE>
ITEM 2: (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES
significant marketing expenditures for prints and advertising which are
capitalized as film costs. Theatrical marketing campaigns begin well in
advance of the theatrical release to generate the maximum level of awareness
for the film. The opening date must be carefully selected and is often
changed to address competition, screen availability and other factors. In
addition, the decision to release a film theatrically is often not made until
a theatrical test is conducted which can take several months. The home video
release and other ancillary market revenues are also not realized for several
months to years after the theatrical release. For further information see
"Results of Operations."
Investing activities for the three months ended September 30, 1998 and 1997
have primarily consisted of expenditures on production equipment improvements.
Financing activities, consisting primarily of borrowings under the Company's
credit facility, were greater in the three months ended September 30, 1998
than for the three months ended September 30, 1997, primarily as the result
of motion picture production, acquisition and distribution expenditures
exceeding operating cash inflows. The Company's cash requirements vary in
part with the size and timing of production advances and minimum guarantee
payments along with the timing of its theatrical, home video, television and
international releases. In the three months ended September 30, 1998 and 1997
the principal sources of funds have been provided by the Company's credit
facility and available cash.
On December 20, 1996, the Company's principal operating subsidiaries, Trimark
Pictures, Inc. and Trimark Television, Inc., entered into a $75 million
revolving credit facility with a consortium of banks agented and arranged by
The Chase Manhattan Bank which replaced a $25 million revolving credit
facility with Bank of America NT & SA and Westdeustche Landesbank. The credit
facility expires December 19, 2000. Under the credit agreement, the Company
may borrow for various corporate purposes provided that the aggregate
borrowings do not exceed the Borrowing Base which is derived from specified
percentages of approved accounts receivable and film library. The credit
agreement is guaranteed by the Company and certain of its subsidiaries and is
secured by substantially all of the assets of the Company and its significant
subsidiaries. Loans outstanding under the credit facility bear interest at
the rate of 1.25% above Chase Manhattan's prime rate or 2.25% above Chase
Manhattan's London Interbank Market for Eurodollars for the loan term
specified. An unused commitment fee is payable on the average unused
availability under the credit
11
<PAGE>
ITEM 2: (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES
facility, at the rate of 0.375% per annum. As of September 30, 1998 there was
$61.5 million outstanding under the credit facility. The Company expects to
use excess cash flow generated by theatrical and library product to decrease
current borrowing levels. The credit agreement contains various financial and
other covenants to which the Company must adhere. These covenants, among
other things, require the maintenance of minimum net worth and various
financial ratios which are reported to the bank on a quarterly basis and
include limitations on additional indebtedness, liens, investments,
disposition of assets, guarantees, affiliate transactions and the use of
proceeds. The Company is in compliance with all debt covenants as of
September 30, 1998 and believes that its existing capital, funds from
operations, and other available sources of capital (including funds obtained
through pre-sales and gap financing) will be sufficient to enable the Company
to fund its presently planned productions, acquisitions, distribution and
overhead expenditures. In the event that the motion pictures released or
distributed by the Company do not meet with sufficiently positive distributor
and audience response or sales and licensing of distribution rights to films
in the Company's film library and films which the Company plans to release
during such period are less than anticipated, the Company will likely need to
significantly reduce its currently planned level of productions,
acquisitions, distribution activities and overhead as described below and
will likely need to obtain additional sources of capital. The Company is
currently exploring obtaining additional sources of capital (including equity
and debt financing). There can be no assurance, however, that such additional
capital will be available or available on terms advantageous to the Company.
Management of the Company conducted a strategic review of the Company's
theatrical operations in fiscal 1998. This strategic review focused on the
increase in the theatrical exhibition of specialized films, with which the
Company has demonstrated past successes including "Eve's Bayou" and "Kama
Sutra: A Tale of Love," and a reduction in the distribution of wide
mainstream features with wide releases to greater than 1,000 screens and
which require substantial print and advertising commitments. The Company does
not plan to release any additional wide theatrical releases in fiscal 1999.
In the domestic specialized theatrical market the Company plans to release
five (5) to seven (7) motion pictures in fiscal 1999(of which two were
released in the first three months of fiscal 1999).
12
<PAGE>
ITEM 2: (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES
Furthermore, the Company plans to release approximately thirty-five (35)
motion pictures into the domestic home video rental market (of which nine (9)
were released in the first three months of fiscal 1999) and to continue to
expand distribution in the sell-thru market. The Company intends to sell four
(4) to six (6) films and "movies of the week" which will premier on major
cable networks or broadcast stations. Also in fiscal 1999 the Company plans
to release approximately seven (7) to nine (9) motion pictures initially into
international distribution (of which three (3) were released in the first
three months of the fiscal year).
Technicolor Videocassette, Inc. currently serves as the Company's video
cassette duplicator and fulfillment contractor. Technicolor Videocassette,
Inc. has a general lien on all of the Company's materials and products in its
possession.
The Company is currently authorized to spend up to $150,000 in fiscal 1999 to
purchase shares of its outstanding common stock in the open market or
otherwise. During the first quarter of the fiscal year, the Company purchased
13,215 shares at an average price of $2.39 per share.
As previously announced by the Company, a hearing was held on October 16,
1998 with a panel authorized by the National Association of Securities
Dealers Inc. Board of Governors regarding the public float requirements of
the Company's common stock and its continued listing on the NASDAQ National
Market. No decision by the Panel has yet been made. However, the Company
believes that the Panel will either allow the common stock to be continued to
be listed on the National Market, grant the Company additional time to regain
compliance with the public float test, or allow the common stock to be listed
on The NASDAQ Small Cap Market if the Company meets the continued listing
requirements of the Small Cap Market at such time. The Company believes that
it currently meets such continued listing requirements.
In July 1997, the Company announced that it had retained the investment
banking firm, Societe Generale Bannon, to advise the Company on various
strategic alternatives to help enhance shareholder value. In keeping with its
revised business plan and as the Company's review of strategic alternatives
has been completed, the Company has recently announced that it is no longer
retaining Societe Generale Bannon.
IMPACT OF YEAR 2000. The Company is currently working to resolve the
potential impact of the year 2000 on the processing of time-sensitive
information by computerized information systems. Year
13
<PAGE>
ITEM 2: (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES
2000 issues may arise if computer programs have been written using two digits
(rather than four) to define the applicable year. In such case, programs that
have time-sensitive logic may recognize a date using "00" as the year 1900
rather than the year 2000, which could result in miscalculations or system
failures. Management is in the process of completing a review of significant
software and equipment used in the Company's operations and, to the extent
practicable, in the operations of its key business partners, in order to
determine if any year 2000 risks exist that may be material to the Company as
a whole. The Company estimates that repairing all time sensitive hardware and
software will cost the Company approximately $240,000. These costs will be
expensed as incurred. No material costs were incurred during the quarter
ended September 30, 1998. This process includes an assessment of year 2000
risks on an ongoing basis to alter, validate, or replace time sensitive
software. The costs associated with this process include independent
verification and validation of the systems during the testing and
implementation phases. If the Company, its customers or vendors are unable to
resolve such processing issues in a timely manner, it could result in a
material financial risk. Accordingly, management plans to devote the
resources it concludes are appropriate to resolve all significant year 2000
issues in a timely manner; and as such, the Company has not developed a year
2000 contingency plan.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Except for the historical information contained herein, the matters discussed
in "Management's Discussion and Analysis of Financial Condition and Results
of Operations" are forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievement of the
Company, or industry results, to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. Such factors include, among others, the
following: Changes in public tastes, industry trends and demographic changes,
which may influence the distribution and exhibition of films in certain
areas; public reaction to and acceptance of the Company's video, theatrical
and television product, which will impact the Company's revenues;
competition, including competition from major motion picture studios, which
may affect the Company's ability to generate
14
<PAGE>
ITEM 2: (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES
revenues; reliance on management and key personnel; consolidation in the
retail video industry; whether the Company's current strategy which includes
theatrical releases of only specialized films and production and acquisition
of made for television product is successful; new methods of distributing
motion pictures; whether the Company will be able to maintain listing on the
NASDAQ National Market; the costs and risks associated with the year 2000
issue; and other factors referenced in this Form 10-Q and the Company's other
filings with the Securities and Exchange Commission.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
The Company does not consider that the potential loss of future earnings
which could be caused by interest rate volatility would have a material
impact on its financial position.
15
<PAGE>
PART II. OTHER INFORMATION
PART II. OTHER INFORMATION (CONTINUED)
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit No Description
- ---------- --------------------------------------------------------------
10.86 Employment agreement dated January 30, 1997 between Trimark
Pictures, Inc., and Cami Winikoff.
27 Financial Data Schedule.
(b) Reports on Form 8-K:
None.
16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
TRIMARK HOLDINGS, INC.
By: /s/ Jeff Gonzalez
----------------------------------
Jeff Gonzalez
Chief Financial Officer
(Principal Financial
Officer and authorized to sign
on behalf of the Registrant)
Date: November 16, 1998
-----------------
17
<PAGE>
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
Exhibit No Description Method of Filing
- ---------- ---------------------------------- ----------------
<S> <C> <C>
10.86 Employment agreement dated January filed herewith
30, 1997 between Trimark Pictures, electronically
Inc., and Cami Winikoff.
27 Financial Data Schedule. filed herewith
electronically
</TABLE>
18
<PAGE>
EXHIBIT 10.86
EMPLOYMENT CONTRACT
January 30, 1997
Cami Winikoff
3331 Wade Street
Los Angeles, CA 90066
Dear Cami:
This contract is to confirm the terms of your employment with Trimark Pictures,
Inc.
TITLE: Senior Vice President
BASE SALARY: Increase of your base salary to $100,000 annually effective from
January 13, 1997, $115,000 annually effective January 13, 1998, and $125,000
effective January 13, 1999.
BONUS: Your will receive a $50,000 bonus at the start of each year of your
contract. In addition, you are eligible to receive an additional yearly bonus
based on Trimark's profitability and at management's discretion.
STOCK OPTIONS: Trimark will request that the Option Committee authorize 30,000
SHARES of company stock to vest over a three (3) year period.
BENEFITS: You will be eligible for all Employee Benefits, Medical, Dental,
Vision, Life and 401(k) per Trimark's standard benefit program.
TERM: Three years. From January 13, 1997 to January 12, 2000.
RENEWAL: You agree that for the period commencing 920 days prior to the
conclusion of the above mentioned term and ending 60 days prior, at Trimark's
request, you will enter into exclusive negotiations regarding the renewal of
this agreement. If at the end of the above mentioned term you and Trimark are
unable to reach an agreement regarding the renewal of your employment with
Trimark, your employment with Trimark shall continue on a month to month basis
at the same terms contained in this agreement unless terminated by Trimark or
you upon 60 days prior written notice.
NOTE: If you are terminated by Trimark Pictures, Inc. for any reason other
than cause, a severance amount equal to 50% of the balance of the contract
at the time of termination will be paid to you by Trimark which will
relieve each party of any
19
<PAGE>
obligations to each other. Notwithstanding the foregoing, if control
changes by acquisition or merger and you are terminated for any reason
other that cause you will receive a severance amount equal to 100% of
the balance of the contract at the time of termination.
You hereby expressly agree that while employed by Trimark Pictures you will not
disclose any confidential matters of Trimark prior to, during or after your
employment including the specifics of this contract. In addition, you agree that
Trimark shall own all rights of every kind and character throughout the
universe, in perpetuity to any material and/or idea suggested or submitted by
you or suggested or submitted to you by a third party. You agree also that
Trimark shall own all other results and proceeds of your services during your
employment.
This agreement shall by binding and supersedes any and all other agreements,
either oral or in writing. Any modification of this agreement will be effective
only if signed by Trimark and you.
Sincerely,
Mark Amin
Chairman
If the above meets will your approval, please countersign this letter and return
the fully executed letter to me.
AGREED AND ACCEPTED BY:
- --------------------------------------------
Cami Winikoff Date
20
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED THE CONSOLIDATED
BALANCE SHEET AS OF SEPTEMBER 30, 1998 AND THE CONSOLIDATED STATEMENTS OF
OPERATIONS FOR THE PERIOD ENDED SPTEMBER 30, 1998 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 874
<SECURITIES> 0
<RECEIVABLES> 24,409
<ALLOWANCES> 6,375
<INVENTORY> 500
<CURRENT-ASSETS> 0<F1>
<PP&E> 3,229
<DEPRECIATION> 2,537
<TOTAL-ASSETS> 92,320
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 61,450
0
0
<COMMON> 5
<OTHER-SE> 15,819
<TOTAL-LIABILITY-AND-EQUITY> 92,320
<SALES> 19,379
<TOTAL-REVENUES> 19,379
<CGS> 15,243
<TOTAL-COSTS> 15,243
<OTHER-EXPENSES> 3,052
<LOSS-PROVISION> (484)
<INTEREST-EXPENSE> 1,110
<INCOME-PRETAX> 473
<INCOME-TAX> (240)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 713
<EPS-PRIMARY> 0.17
<EPS-DILUTED> 0.17
<FN>
<F1>IN ACCORDANCE WITH INDUSTRY PRACTICE, THE COMPANY PREPARES AN UNCLASSIFIED
BALANCE SHEET.
</FN>
</TABLE>
