<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 period ended DECEMBER 31, 1997 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 February 9, 1998, 4,182,627 shares of Trimark Holdings, Inc. common stock
were outstanding, excluding shares held by Trimark Holdings, Inc. as treasury
stock.
1
<PAGE>
TRIMARK HOLDINGS, INC.
INDEX
<TABLE>
<CAPTION>
Page No.
<S> <C>
Part I. Financial Information
Item 1. Financial Statements:
Consolidated Balance Sheets at December 31, 3
1997 and June 30, 1997
Consolidated Statements of Operations - Six 4
months and three months ended December 31,
1997 and 1996
Consolidated Statements of Cash Flows - Six 5
months ended December 31, 1997 and 1996
Notes to Consolidated Financial Statements 6-7
Item 2. Management's Discussion and Analysis 8-17
of Financial Condition and Results of
Operations
Item 3. Quantitative and Qualitative not
Disclosures about Market Risk applicable
Part II. Other Information
Item 4. Submission of Matters to a Vote of 18
Security Holders
Item 6. Exhibits and Reports on Form 8-K 18
</TABLE>
2
<PAGE>
TRIMARK HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
----------------------------------------
(Dollars in Thousands, Except Share Data)
<TABLE>
<CAPTION>
December 31, June 30,
Assets 1997 1997
------ ------------ --------
<S> <C> <C>
(Unaudited)
Cash and cash equivalents $ 16 $ 3,665
Accounts receivable, less allowances of
$4,389 and $4,010, respectively 23,310 23,124
Film costs, net (Note 2) 57,382 57,293
Deferred marketing costs 1,586 1,696
Inventories, net 726 650
Property and equipment at cost, less accumulated
depreciation of $2,218 and $2,049, respectively 819 808
Due from officers 1,039 662
Other assets 2,589 2,325
------- -------
$87,467 $90,223
======= =======
Liabilities and Stockholders' Equity
------------------------------------
Revolving line of credit $57,700 $57,700
Accounts payable and accrued expenses 7,639 7,575
Minimum guarantees and royalties payable 5,205 3,391
Deferred income 1,072 1,283
Income taxes payable 56 65
------- -------
Total liabilities 71,672 70,014
------- -------
Commitments and contingencies (Note 3) -- --
------- -------
Stockholders' equity:
Common stock, $.001 par value. Authorized
20,000,000 shares; 5,134,827 shares issued
at December 31, 1997 and 5,099,081 shares
issued at June 30, 1997 5 5
Additional paid in capital 15,588 15,474
Preferred stock, $.01 par value. Authorized
2,000,000 shares; no shares issued and
outstanding -- --
Retained earnings 4,632 9,160
Less treasury shares, at cost - 952,200 shares
and 952,200 shares (4,430) (4,430)
------- -------
Stockholders' equity 15,795 20,209
------- -------
$87,467 $90,223
======= =======
</TABLE>
See accompanying notes to consolidated financial statements
3
<PAGE>
TRIMARK HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
------------------------------------------------------
(Amounts in Thousands, Except Loss Per Share)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
December 31, December 31,
-------------------- -------------------
1997 1996 1997 1996
---------- -------- -------- ---------
(Unaudited)
<S> <C> <C> <C> <C>
Net revenues $37,545 $30,495 $22,986 $16,280
Film costs and distribution expenses 33,916 26,882 22,944 15,954
------- ------- ------- -------
Gross profit 3,629 3,613 42 326
------- ------- ------- -------
Operating expenses:
Selling 3,531 3,219 1,803 1,735
General and administrative 2,467 2,127 1,261 983
Bad debt 148 223 22 122
------- ------- ------- -------
6,146 5,569 3,086 2,840
------- ------- ------- -------
Operating loss (2,517) (1,956) (3,044) (2,514)
Other (income) expenses:
Interest expense 2,091 567 1,149 354
Interest and investment income (80) (49) (34) (37)
------- ------- ------- -------
2,011 518 1,115 317
------- ------- ------- -------
Loss before income taxes (4,528) (2,474) (4,159) (2,831)
Income taxes -- -- -- (139)
------- ------- ------- -------
Net loss $(4,528) $(2,474) $(4,159) $(2,692)
======= ======= ======= =======
Net loss per common share $(1.08) $(0.58) $(0.99) $(0.63)
======= ======= ======= =======
Average common and common equivalent shares
outstanding used in computation above 4,183 4,250 4,183 4,251
======= ======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE>
TRIMARK HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------
(Dollars in Thousands)
<TABLE>
<CAPTION>
Six Months Ended
December 31,
-----------------------
1997 1996
-------- --------
(Unaudited)
<S> <C> <C>
Operating activities:
Net loss $ (4,528) $ (2,474)
Adjustments to reconcile net loss to
net cash used by operating activities:
Film amortization 24,328 18,760
Depreciation and other amortization 169 198
Provision for returns and bad debt 379 287
Provision for inventory obsolescence 51 (398)
Change in operating assets and liabilities:
Increase in accounts receivable (565) (1,475)
Additions to film costs (24,417) (26,779)
Decrease in deferred marketing costs 110 201
(Increase) decrease in inventories (127) 204
Increase in notes receivable from officers (377) --
Increase in other assets (264) (1,691)
Increase (decrease) in accounts payable and
accrued expenses 64 (433)
Increase (decrease) in minimum guarantees and
royalties payable 1,814 (1,379)
Decrease in income taxes payable (9) --
Decrease in deferred income (211) (899)
-------- --------
Net cash used by operating activities (3,583) (15,878)
-------- --------
Investing activities:
Acquisition of property and equipment (180) (118)
-------- --------
Net cash used by investing activities (180) (118)
-------- --------
Financing activities:
Net increase in revolving line of credit -- 16,500
Exercise of stock options 114 13
Purchase of treasury stock -- (160)
-------- --------
Net cash provided by financing activities 114 16,353
-------- --------
(Decrease) increase in cash and cash equivalents (3,649) 357
Cash and cash equivalents at beginning of period 3,665 344
-------- --------
Cash and cash equivalents at end of period $ 16 $ 701
======== ========
</TABLE>
See accompanying notes to consolidated financial statements
5
<PAGE>
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 10K for the year
ended June 30, 1997. Significant accounting policies used by the Company are
summarized in Note 2 to the June 30, 1997 financial statements.
In the opinion of management, all adjustments required for a fair presentation
of the financial position as of December 31, 1997 and the results of operations
and cash flows for the periods ended December 31, 1997 and December 31, 1996
have been made and all adjustments were of a normal and recurring nature.
Operating results for the six and three month periods 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>
December 31, June 30,
1997 1997
------------ ---------
(in thousands)
<S> <C> <C>
Released $42,642 $32,159
Completed not released 4,884 7,045
In process and development 9,856 18,089
------- -------
$57,382 $57,293
------- -------
</TABLE>
6
<PAGE>
NOTE 3 - COMMITMENTS & CONTINGENCIES:
- -------------------------------------
The Company has entered into certain agreements which provide for royalty
advances and promotional and advertising commitments totaling $6.1 million. If
the conditions to these agreements are not met by the licensors, the Company may
withdraw from the arrangements. These commitments extend to August 1998.
NOTE 4 - SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
- -----------------------------------------------------------
Cash paid during the six month period for:
<TABLE>
<CAPTION>
December 31,
1997 1996
---------- ----------
(in thousands)
<S> <C> <C>
Interest $2,424 $875
Income taxes 158 268
</TABLE>
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
NET REVENUES:
<TABLE>
<CAPTION>
Six months ended Three months ended
December 31, December 31,
---------------------------- -----------------------------
1997 1996 1997 1996
------------ ------------ ------------ --------------
(in thousands)
<S> <C> <C> <C> <C>
Domestic:
Home video distribution $21,847 $17,730 $13,030 $ 7,359
Theatrical distribution 5,023 50 4,999 34
Television distribution 4,521 3,410 3,248 2,037
Foreign:
All media 6,154 8,238 1,709 6,689
Interactive:
All media -- 1,067 -- 161
------- ------- ------- -------
$37,545 $30,495 $22,986 $16,280
------- ------- ------- -------
</TABLE>
Net revenues for the six months and quarter ended December 31, 1997 increased
$7.1 million or 23.1% and $6.7 million or 41.2%, respectively, compared with the
same periods in fiscal 1997. The increase for the six month period was primarily
due to increases in net revenues from domestic theatrical, home video and
television distribution of $5.0 million, $4.1 million and $1.1 million,
respectively, partially offset by decreases in net revenues from foreign and
interactive distribution of $2.1 million and $1.1 million, respectively. The
increase in revenues from domestic theatrical distribution was primarily due to
the release of "Eve's Bayou" in October 1997 without any comparable theatrical
release in the six months ended December 31, 1996. The increase in domestic
home video net revenues was primarily due to the initial home video distribution
in October 1997 of the theatrically released film "Sprung" without any
comparable video releases of theatrical films in the six months ended December
31, 1996. The increase in domestic television net revenues was primarily due to
the release in November 1997 of the made for cable television movie "Trucks" on
the USA network. "Trucks," which is based on a short story by Stephen King, was
made in conjunction with the USA Network and is part of the Company's strategic
decision to increase production of made for television product. The comparable
six month period ending December 31, 1996 included the HBO premier of "The
Dentist." The decrease in
8
<PAGE>
ITEM 2: (CONTINUED)
RESULTS OF OPERATIONS
foreign distribution revenues was primarily due to the large advances generated
in the fiscal 1997 period by "Star Kid (aka Warrior of Waverly Street)" without
any film generating comparable advances in the fiscal 1998 period. In the six
months ended December 31, 1997, three (3) motion pictures, "A Kid in Aladdin's
Palace," "Chairman of the Board" and "Eve's Bayou" were initially released into
the foreign market. In the same time period in fiscal 1997 three (3) motion
pictures "Leprechaun 4," "Never Ever (aka Circle of Passion)" and "Star Kid"
were initially released. Interactive revenues decreased due to the Company's
decision to exit the interactive market and related sale in March 1997 of
substantially all assets of Trimark Interactive to an unrelated independent
interactive publisher. The Company does not expect any significant future
interactive revenues.
The increase in net revenues for the quarter ended December 31, 1997 was
primarily due to increases in net revenues from domestic home video, theatrical
and television distribution of $5.7 million, $5.0 million and $1.2 million,
respectively, partially offset by decreases in net revenues from foreign and
interactive distribution of $5.0 million and $161,000, respectively. The
increase in domestic home video net revenues was primarily due to the initial
home video distribution in October 1997 of the theatrically released film
"Sprung" without any comparable video release in the three months ended December
31, 1996. The increase in revenues from domestic theatrical distribution was
primarily due to the release of "Eve's Bayou" in October 1997 without any
comparable theatrical release in the three months ended December 31, 1996. The
increase in domestic television net revenues was primarily due to the release in
November 1997 of the made for cable television movie "Trucks" on the USA
network. The comparable time period in fiscal 1997 included the HBO premier of
"The Dentist." The decrease in foreign distribution revenues was primarily due
to the timing of releases and the large advances generated by "Star Kid" without
any film generating comparable advances in the fiscal 1998 period. In the three
months ended December 31, 1997, there was one (1) motion picture "Eve's Bayou"
initially released into the foreign market, whereas two (2) motion pictures
"Never Ever" and "Star Kid" were released in the same time period in fiscal
1997. Interactive revenues decreased due to the Company's decision to exit the
interactive market as described above.
9
<PAGE>
ITEM 2: (CONTINUED)
RESULTS OF OPERATIONS
Primarily as a result of continuing competition in the domestic home video
market, the Company is focusing its resources on producing and acquiring an
increased number of films with either specialized theatrical potential or that
are made for network and cable television. See "Liquidity and Capital
Resources."
GROSS PROFIT: Gross profit as a percentage of net revenues for the six month
periods ended December 31, 1997 and 1996 were 9.7% and 11.8%, respectively, and
for the quarters ended December 31, 1997 and 1996 were 0.2% and 2.0%,
respectively.
The Company's gross profits for the six months ended December 31, 1997 increased
$16,000 or 0.4% compared with the same period in fiscal 1997. The Company's
gross profit for the three months ended December 31, 1997 decreased $284,000 or
87.1% compared with the same period in fiscal 1997. The gross profit for the
quarter ended December 31, 1997 included approximately $4.2 million in write
downs to net realizable value of film inventory. These write downs primarily
related to a charge associated with the lower than anticipated performance of
the January 1998 theatrical release of "Star Kid" and a write down associated
with management's decision not to release "Chairman of the Board" with a wide
theatrical release, but rather to have a selected market theatrical release.
The decision to limit the "Chairman of the Board" theatrical release was made to
mitigate the risks associated with the higher print and advertising expenses
required for wide release pictures. The gross profit for the quarter ended
December 31, 1996 included a $3.0 million charge associated with the January
1997 theatrical release of "Meet Wally Sparks" partially offset by a reduction
of the inventory obsolescence reserve due to the salability of inventory. The
Company anticipates that the domestic home video market will continue to be
extremely competitive.
10
<PAGE>
ITEM 2: (CONTINUED)
RESULTS OF OPERATIONS
SELLING EXPENSES: Selling expenses as a percentage of net revenues for the six
month periods ended December 31, 1997 and 1996 were 9.4% and 10.6%,
respectively, and for the quarters ended December 31, 1997 and 1996 were 7.8%
and 10.7%, respectively.
The Company's selling expenses for the six months ended December 31, 1997
increased $312,000 or 9.7% compared with the same period in fiscal 1997. For
the three months ended December 31, 1997 selling expenses increased $68,000 or
3.9% compared with the same period in fiscal 1997. The increases reflect the
increase in theatrical operations partially offset by the decrease in
interactive operations. During the quarter ended March 31, 1997, the Company
sold substantially all assets of Trimark Interactive.
GENERAL AND ADMINISTRATIVE EXPENSES: General and administrative expenses for
the six months ended December 31, 1997 increased $340,000 or 16.0% compared with
the same period in fiscal 1997. For the three months ended December 31, 1997
general and administrative expenses increased $278,000 or 28.3% compared with
the same period in fiscal 1997. The increases were primarily due to the costs
associated with setting up three regional theatrical sales offices and increased
consulting charges.
BAD DEBT EXPENSE: Bad debt expense for the six months ended December 31, 1997
decreased $75,000 or 33.6% compared with the same period in fiscal 1997. Bad
debt expense for the three months ended December 31, 1997 decreased $100,000 or
82.0% compared with the same period in fiscal 1997. Bad debt expense primarily
represents reserves taken against domestic video and foreign sales. The
decreases primarily represent decreases in general reserves based on foreign
sales for the periods partially offset by specific reserves taken for certain
international customers.
11
<PAGE>
ITEM 2: (CONTINUED)
RESULTS OF OPERATIONS
INTEREST EXPENSE: Interest expense for the six months ended December 31, 1997
increased $1.5 million or 268.8% compared with the same period in fiscal 1997.
Interest expense for the three months ended December 31, 1997 increased $795,000
or 224.6% compared with the same period in fiscal 1997. 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 December 31,
1997, there was $57.7 million outstanding under the credit facility. See
"Liquidity and Capital Resources."
INTEREST AND INVESTMENT INCOME: Interest and investment income for the six
months ended December 31, 1997 increased $31,000 or 63.3% compared with the same
period in fiscal 1997. The increase was primarily due to interest income from
loans to officers in the fiscal 1998 period without any similar income in the
fiscal 1997 period.
NET LOSS: The Company's net loss for the six months ended December 31, 1997
increased $2.1 million or 83.0% compared with the same period in fiscal 1997.
The loss for the six months ended December 31, 1997 was $4.5 million compared to
a loss of $2.5 million in the comparable fiscal 1997 period. The Company's net
loss for the three months ended December 31, 1997 increased $1.5 million or
54.5% compared with the same period in fiscal 1997. The loss for the three
months ended December 31, 1997 was $4.2 million compared to a loss of $2.7
million in the comparable fiscal 1997 period. The fiscal 1998 losses were
primarily due to approximately $4.2 million in write downs to net realizable
value of film inventory. These write downs primarily related to a charge
associated with the lower than anticipated performance of the January 1998
theatrical release of "Star Kid" and a write down associated with management's
decision not to release "Chairman of the Board" with a wide theatrical release,
but rather to have a selected market theatrical release. The prior year losses
were primarily due to a $3.0 million write down associated with the January 1997
theatrical release of "Meet Wally Sparks."
12
<PAGE>
ITEM 2: (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES
The Company has traditionally relied 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 six months
ended December 31, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
Six Months Ended
December 31,
----------------------------------
1997 1996
-------------- ---------------
(in thousands)
<S> <C> <C>
Net cash used by operating activities $(3,583) $(15,878)
Net cash used by investing activities (180) (118)
Net cash provided by financing activities 114 16,353
</TABLE>
Cash used by operations decreased by $12.3 million from $15.9 million used in
the six months ended December 31, 1996 to $3.6 million used in the six months
ended December 31, 1997 principally as the result of increased film amortization
of $4.8 million, a decrease in additions to film costs of $2.4 million, a
decrease in the change in other assets of $1.4 million and an increase in the
change in minimum guarantees and royalties payable of $3.2 million, which were
partially offset by an increased net loss of $1.3 million. During the first six
months of fiscal 1998 the Company continued to make significant investments in
film costs. The Company invested $24.4 million in additions to film inventory.
The additions were primarily incurred to release theatrically the film "Eve's
Bayou" and to produce and acquire new films.
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 six months to a year or more.
Commitments to purchase films from production companies upon delivery are
included in contingent contractual obligations. The
13
<PAGE>
ITEM 2: (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES
Company's contingent contractual obligations as of December 31, 1997 were $6.1
million, a decrease of $14.6 million compared to the balance as of December 31,
1996. 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 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 six months ended December 31, 1997 and 1996 have
primarily consisted of expenditures on equipment and leasehold improvements
related to the expansion of theatrical operations.
Financing activities, consisting primarily of borrowings under the Company's
credit facility, were greater in the six months ended December 31, 1996 than for
the six months ended December 31, 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 six months ended December 31, 1997 and 1996 the principal sources of
funds have been provided by the Company's credit facility and available cash.
The Company's principal operating subsidiaries, Trimark Pictures, Inc. and
Trimark Television, Inc., on December 20, 1996 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
14
<PAGE>
ITEM 2: (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES
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 facility, at the rate of 0.375% per annum. As of December 31, 1997 there
was $57.7 million outstanding under the credit facility.
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. As of December 31, 1997, the Company was
out of compliance with certain financial covenants primarily as a result of the
non-cash write downs of "Star Kid" and "Chairman of the Board" to net realizable
value. The Company is presently in discussions with the Administrative Agent
Bank for an amendment as of December 31, 1997 to the credit agreement with
respect to such covenants. The Company believes that a satisfactory amendment
will be entered into.
Subject to entering into a satisfactory amendment, the Company believes that its
present sources of working capital will be sufficient to maintain its current
level of operations in accordance with the anticipated release schedule, as
described below. In the event that the Company is unable to finalize a
satisfactory amendment of its credit facility, the Company would seek to
restructure its obligations under the facility. This could have a significant
adverse effect on the Company's operations.
15
<PAGE>
ITEM 2: (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES
Management of the Company is conducting a strategic review of the Company's
theatrical operations. This strategic review includes the possibility of an
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 1998. "Chairman of the Board,"
which was previously scheduled for wide release, is scheduled for release in
selected markets in March 1998. In the domestic specialized theatrical market
the Company plans to release approximately four (4) to six (6) motion pictures
in fiscal 1998. In the six months ended December 31, 1997 the Company released
two (2) specialized theatrical films "Box of Moonlight" and "Eve's Bayou."
During fiscal 1998 the Company plans to release approximately thirty-six (36)
motion pictures into the domestic home video rental market (of which nineteen
(19) were released in the first six months of fiscal 1998) and to continue to
expand distribution in the sell-thru market. Also in fiscal 1998 the Company
plans to release approximately nine (9) to twelve (12) motion pictures initially
into international distribution (of which three (3) were released in the first
six 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.
On February 21, 1997, the Company announced a stock repurchase program pursuant
to which it could spend up to $1,500,000, $750,000 per fiscal year, to purchase
shares of its outstanding common stock in the open market. During fiscal 1998,
the Company has made no expenditures under the repurchase program.
As a result of recent merger and acquisition activity in the entertainment
industry, the Company, as a leading independent distributor of specialized
theatrical, television and video product, received certain unsolicited inquires
from interested parties. Accordingly, on July 21, 1997, the Company announced
that it had retained the investment banking firm, Societe Generale
16
<PAGE>
ITEM 2: (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES
Bannon, to advise the Company on various strategic alternatives to help enhance
shareholder value.
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 revenues; reliance
on management and key personnel; consolidation in the retail video industry;
whether the Company's shift in strategy to an increase in the theatrical
exhibition of specialized films and a reduction in the distribution of wide
mainstream features is successful; new methods of distributing motion pictures;
whether the Company will be able to effect any strategic alternatives that may
help enhance shareholder value; whether the Company is able to finalize a
satisfactory amendment of its credit facility; and other factors referenced in
this Form 10-Q and the Form 10-K filed for the year ended June 30, 1997.
17
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
The 1997 annual meeting of stockholders of the Registrant occurred on November
21, 1997. The following matters were voted upon at the meeting: the election
as directors of the Registrant of each of Mark Amin, Gordon Stulberg, Matthew H.
Saver and Tofigh Shirazi; and the ratification of the appointment of Price
Waterhouse LLP as independent accountants of the Registrant. The results of the
voting were as follows:
<TABLE>
<CAPTION> BROKER
VOTES -----------
MATTER VOTED VOTES FOR AGAINST ABSTAINED NON-VOTES
- ------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Election of 2,431,887 7,900 -- --
Mark Amin
Election of 2,431,887 7,900 -- --
Gordon Stulberg
Election of 2,431,887 7,900 -- --
Matthew H. Saver
Election of 2,431,887 7,900 -- --
Tofigh Shirazi
Ratification of 2,431,837 5,900 2,050 --
Price Waterhouse
LLP
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit No Description
- ---------- ----------------------------------------------------------
27 Financial Data Schedule.
(b) Reports on Form 8-K:
None.
18
<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/ James E. Keegan
------------------------------------
James E. Keegan
Executive Vice President -
Finance and Chief Financial
Officer (Principal Financial
Officer and authorized to sign
on behalf of the Registrant)
Date: February 13, 1998
-----------------
19
<PAGE>
INDEX TO EXHIBITS
Exhibit No Description Method of Filing
- ------------- ------------------------------------- ------------------
27 Financial Data Schedule. filed herewith
electronically
20
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1997 AND THE CONSOLIDATED
STATEMENTS OF OPERATIONS FOR THE PERIOD ENDED DECEMBER 31, 1997.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 16
<SECURITIES> 0
<RECEIVABLES> 27,699
<ALLOWANCES> 4,389
<INVENTORY> 726
<CURRENT-ASSETS> 0<F1>
<PP&E> 3,037
<DEPRECIATION> 2,218
<TOTAL-ASSETS> 87,467
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 57,700
0
0
<COMMON> 5
<OTHER-SE> 15,790
<TOTAL-LIABILITY-AND-EQUITY> 87,467
<SALES> 37,545
<TOTAL-REVENUES> 37,545
<CGS> 33,916
<TOTAL-COSTS> 33,916
<OTHER-EXPENSES> 5,998
<LOSS-PROVISION> 148
<INTEREST-EXPENSE> 2,091
<INCOME-PRETAX> (4,528)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,528)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,528)
<EPS-PRIMARY> (1.08)
<EPS-DILUTED> (1.08)
<FN>
<F1>IN ACCORDANCE WITH INDUSTRY PRACTICE, THE COMPANY PREPARES AN UNCLASSIFIED
BALANCE SHEET.
</FN>
</TABLE>
