SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
Current Report Pursuant to Section 13 or 15 (d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 30, 1998
ALLIANCE ENTERTAINMENT CORP.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-13054 13-3645913
- -------------------------------------------------------------------------------
(State or other (Commission File Number) (I.R.S. Employer
jurisdiction of incorporation) Identification No.)
352 Park Avenue South, New York, New York 10010
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 685-6303
<PAGE>
Item 5. Other Events
On April 30, 1998, Alliance Entertainment Corp. (the "Company") filed
the Trustee's Monthly Reporting Package for the Month Ended March 31, 1998
(the "Trustee's Report"). The Company is required to file this report with the
United States Bankruptcy Court and the United States Trustee pursuant to
Bankruptcy Rule 2015 and the United States Trustee's "Operating Guidelines and
Financial Reporting Requirements." The Trustee's Report contains monthly
unaudited consolidating financial statements of Alliance Entertainment Corp. and
its debtor-in-possession subsidiaries, prepared in accordance with the American
Institute of Certified Public Accountants Statement of Position 90-7: "Financial
Reporting by Entities in Reorganization Under the Bankruptcy Code." for the one
month period reported therein.
On May 1, 1998, Alliance Entertainment Corp. (the "Company") announced its
earnings for the month ended March 31, 1998. The Company reported a consolidated
net loss of $3.2 million on net sales of $25.8 million. The reported loss
includes $2.5 million in interest and reorganization expenses. The Company also
announced that it has requested a two-week extension to approximately May 15,
1998, of its exclusive right to file a plan of reorganization with the
United States Bankruptcy Court.
Certain matters discussed in the Trustee's Report are forward-looking
statements intended to qualify for the safe harbors from liability established
by the Private Securities Litigation Reform Act of 1995. These forward-looking
statements can generally be identified as such because the context of the
statement will include words such as the Company "believes," "expects" or words
of similar import. Similarly, statements that describe the Company's future
plans, objectives, estimates or goals are also forward-looking statements. Such
statements address future events and conditions concerning capital expenditures,
earnings, sales, liquidity and capital resources, and accounting matters. Actual
results in each case could differ materially from those currently anticipated in
such statements, by reason of factors such as future economic conditions,
including changes in customer demand, legislative, regulatory and competitive
developments in markets in which the Company operates; and other circumstances
affecting anticipated revenues and costs.
Item 7. Financial Statements and Exhibits
(c) Exhibits
Exhibit 99.1 Trustee's Monthly Reporting Package for the Month Ended
March 31, 1998
Exhibit 99.2 Press Release dated May 1, 1998
<PAGE>
SIGNATURE
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.
ALLIANCE ENTERTAINMENT CORP.
By:/s/David E. Hawthorne
----------------------------
Name: David E. Hawthorne
Title: Executive Vice President
and Chief Financial Officer
Date: May 04, 1998
<PAGE>
EXHIBIT INDEX
Exhibit 99.1 Trustee's Monthly Reporting Package for the Month
Ended March 31, 1998
Exhibit 99.2 Press Release dated May 1, 1998
TRUSTEE'S MONTHLY REPORTING PACKAGE
FOR THE MONTH ENDED MARCH 31, 1998
ALLIANCE ENTERTAINMENT CORP. et al.
(Name of Debtor)
97 B 44673 through 97 B 44687 (BRL) (Jointly Administered)
(Case Numbers)
Willkie Farr & Gallagher
(Debtors' Attorneys)
/s/ David E. Hawthorne
------------------------------------------------
Signed by:
David E. Hawthorne, Executive Vice President, Chief Financial Officer
(Preparer)
<PAGE>
<TABLE>
<CAPTION>
ALLIANCE ENTERTAINMENT CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (Unaudited)
March 31, 1998
(Amounts in Thousands)
<S> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 3,727
Accounts receivable, net 61,068
Inventory 55,980
Prepaid expenses and advances 3,390
Refundable income taxes 2,112
-------------
Total current assets 126,277
INVESTMENTS 6,459
PROPERTY AND EQUIPMENT 25,887
COPYRIGHTS 3,725
COST IN EXCESS OF NET ASSETS
OF BUSINESSES ACQUIRED 45,366
COVENANTS NOT TO COMPETE 2,945
OTHER ASSETS 5,356
-------------
$ 216,015
=============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Excess of outstanding checks over
bank balance $ 39
Notes payable 23,500
Current maturities of long-term debt 638
Accounts payable and accrued expenses 35,302
-------------
Total current liabilities 59,479
LONG-TERM DEBT 6,585
LIABILITIES SUBJECT TO SETTLEMENT
UNDER THE REORGANIZATION CASE 427,855
STOCKHOLDERS' EQUITY
Common stock 4
Preferred Stock 5
Additional paid-in captial 146,965
Employee notes for stock purchase (52)
Retained earnings (deficit) (424,826)
Foreign Currency translation adjustment
-------------
(277,904)
-------------
$ 216,015
=============
*The following subsidiaries do not have any operating activity: Alliance
Ventures Inc., AEC Americas, Inc., FL Acquisition Corp. and AEC Acquisition
Corp.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANCE ENTERTAINMENT CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
MONTH ENDED March 31, 1998
(Amounts in Thousands)
<S> <C>
Net Sales $ 25,867
Cost of sales 22,260
-------------
Gross profit 3,607
Selling, general and administrative expenses 4,095
Amortization of intangible assets 497
-------------
4,592
-------------
(985)
-------------
Reorganization items 1,122
Other income (expense)
Equity in net income (loss) of unconsolidated
entities 384
Amortization of deferred financing costs (137)
Other income (expense) - net (6)
Interest expense (1,377)
-------------
(1,136)
-------------
Income(loss) before income taxes (3,243)
Provision for income taxes
-------------
Net income (loss) $ (3,243)
=============
*The following subsidiaries do not have any operating activity: Alliance
Ventures Inc., AEC Americas, Inc., FL Acquisition Corp. and AEC Acquisition
Corp.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANCE ENTERTAINMENT CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
MONTH ENDED March 31, 1998
(Amounts in Thousands)
<S> <C>
Net Income (Loss) $ (3,243)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 893
Equity in net income (loss) of unconsolidated
entities (384)
Reorganization items 1,122
Changes in working capital and other, net 10,246
Net cash provided by (used in) operating -------------
activities before reorganization items 8,634
-------------
Reorganization items:
Chapter 11 professional fees paid (1,122)
-------------
Net cash used by reorganization items (1,222)
-------------
Net cash provided by (used in)
operating activities 7,512
-------------
Cash Flows From Investing Activities
Purchase of property and equipment (330)
(Increase) decrease in investments
(Increase) decrease in copyrights (139)
(Increase) decrease in other assets (366)
Net cash provided by (used in) -------------
Investing Activities (835)
-------------
Cash Flows From Financing Activities
Increase (decrease) in excess of out-
standing checks over bank balance (336)
Net financing proceeds to affiliates 17
Proceeds from Borrowings
Payments on Borrowings (10,016)
Net Cash provided by (used in) -------------
Financing Activities (10,335)
-------------
Net increase (decrease) in cash: 3,658
Cash
Beginning 7,385
-------------
Ending $ 3,727
=============
* The following subsidiaries do not have any operating activity: Alliance
Ventures Inc., AEC Americas, Inc., FL Acquisition Corp. and AEC Acquisition
Corp.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANCE ENTERTAINMENT CORP. AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET (Unaudited)
March 31, 1998
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Alliance
Alliance Eliminations Entertainment
Entertainment AE Land Matrix and Corp. and
Sub-total Corp. Corp Software Execusoft Reclassification Subsidiaries*
---------- ----------- ----------- ---------- ---------- ----------------- --------------
ASSETS
CURRENT ASSETS
Cash and Cash
equivalents $ 1,456 $ 1,916 $ 294 $ 61 $ $ $ 3,727
Accounts receivable,
net 60,974 47 47 61,068
Inventory 55,980 55,980
Prepaid expenses 3,196 167 27 3,390
Due from affiliates 7,531 45,560 1,111 (452) 250 (54,000)
Refundable income taxes 36 2,076 2,112
Deferred income taxes
---------- ----------- ----------- ---------- ---------- ----------------- --------------
Total current assets 129,173 49,719 1,432 (344) 297 (54,000) 126,277
INVESTMENTS, at cost 944 13,190 (7,675) 6,459
PROPERTY AND EQUIPMENT 6,361 35 19,269 222 25,887
COPYRIGHTS 3,725 3,725
COST IN EXCESS OF
NET ASSETS OF
BUSINESS ACQUIRED 45,366 45,366
COVENANTS NOT TO
COMPETE 198 2,747 2,945
DEFERRED INCOME TAXES
OTHER ASSETS 177 4,741 138 300 5,356
---------- ----------- ----------- ---------- ---------- ----------------- --------------
$ 140,578 $ 115,798 $ 20,839 $ 178 $ 297 $ (61,675) $ 216,015
========== =========== =========== ========== ========== ================= ==============
LIABILITIES AND STOCKHOLDERS
EQUITY
CURRENT LIABILITIES
Excess of outstanding
checks over bank
balance $ 39 $ $ $ $ $ $ 39
Notes payable 4,219 18,763 518 23,500
Current maturities of
long-term debt 223 415 638
Accounts payable
and accrued expenses 24,019 11,076 153 54 35,302
Income tax payable
---------- ----------- ----------- ---------- ---------- ----------------- --------------
Total current
liabilities 28,500 29,839 568 572 59,479
LONG-TERM DEBT 720 5,865 6,585
DEFERRED INCOME TAXES
LIABILITIES SUBJECT
TO SETTLEMENT UNDER
THE REORGANIZATION 181,971 262,184 14,479 3,182 538 (34,499) 427,855
STOCKHOLDERS' EQUITY
Common Stock 3,123 4 1 13 (3,137) 4
Preferred Stock 5 5
Additional paid-in
capital 26,300 146,965 (26,300) 146,965
Employee notes for
stock purchase (52) (52)
Retained earnings
(deficit) (100,036) (323,147) (73) (3,577) (254) 2,261 (424,826)
Foreign currency
translation adjustment
---------- ----------- ----------- ---------- ---------- ----------------- --------------
(70,613) (176,225) (73) (3,576) (241) (27,176) (277,904)
---------- ----------- ----------- ---------- ---------- ----------------- --------------
$ 140,578 $ 115,798 $ 20,839 $ 178 $ 297 $ (61,675) $ 216,015
========== =========== =========== ========== ========== ================= ==============
*The following subsidiaries do not have any operating activity: Alliance
Ventures, Inc. AEC Americas, Inc., FL Acquisition Corp. and AEC Acquisition
Corp.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANCE ENTERTAINMENT CORP. AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET (Unaudited)
March 31, 1998
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Independent Passport Passport Castle AEC
National Music Music Concord Communications One Way One Stop
Distributors Distribution Worldwide Records (U.S.) Records Group Sub-total
------------ ----------- ----------- ---------- ------------- -------- ----------- ----------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 6 $ $ $ $ $ 34 $ 1,416 $ 1,456
Accounts receivable, net 2,180 2,865 1,306 (496) 6,339 48,780 60,974
Inventory 3,849 1,673 4,317 46,141 55,980
Prepaid expenses and
advances 26 2,377 462 331 3,196
Due from Affiliates (2,081) 8,834 698 1,374 (887) 126 (533) 7,531
Refundable income taxes 36 36
Deferred income taxes
------------- ------------ ------------ ------------ -------------- ---------- ------------ ----------
Total current assets 3,954 11,725 698 6,766 (1,383) 11,278 96,135 129,173
INVESTMENTS, at cost 542 402 944
PROPERTY AND EQUIPMENT 218 670 5,473 6,361
COPYRIGHTS 3,725 3,725
COST IN EXCESS OF NET ASSETS
OF BUSINESSES ACQUIRED
COVENANTS NOT TO COMPETE 198 198
DEFERRED INCOME TAXES
OTHER ASSETS 16 12 19 43 87 177
------------- ------------ ------------ ------------ -------------- ---------- ------------ ----------
$ 3,970 $ 11,737 $ 698 $ 11,270 $ (1,383) $ 11,991 $ 102,295 $ 140,578
============= ============ ============ ============ ============== ========== ============ ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Excess of outstanding
checks over bank balance $ $ 5 $ $ 34 $ $ $ $ 39
Notes payable 2,949 3,595 602 (510) (2,417) 4,219
Current maturities of
long-term debtm 223 223
Accounts payable and
accrued expenses 1,310 1,320 32 1,467 19,890 24,019
Income Tax Payable
------------- ------------ ------------ ------------ -------------- ---------- ------------ ----------
Total current liabilities 4,259 5 4,949 634 957 17,696 28,500
LONG-TERM DEBT 720 720
DEFERRED INCOME TAXES
LIABILITIES SUBJECT
TO SETTLEMENT UNDER
REORGANIZATION CASE 71,904 13,827 1,392 6,464 7,333 13,098 67,953 181,971
STOCKHOLDERS' EQUITY
Common Stock 1,000 5 22 2,095 1 3,123
Preferred Stock
Additional paid-in capital 16,117 7 27 10,149 26,300
Employee notes for stock
purchase
Retained earnings (deficit) (89,310) (2,107) (694) (192) (9,350) (4,159) 5,776 (100,036)
Foreign Currentcy
Translation Adjustment
------------- ------------ ------------ ------------ -------------- ---------- ------------ ----------
(72,193) (2,095) (694) (143) (9,350) (2,064) 15,926 (70,613)
------------- ------------ ------------ ------------ -------------- ---------- ------------ ----------
$ 3,970 $ 11,737 $ 698 $ 11,270 $ (1,383) $ 11,991 $ 102,295 $ 140,578
============= ============ ============ ============ ============== ========== ============ ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANCE ENTERTAINMENT CORP. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS (Unaudited)
MONTHS ENDED March 31, 1998
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Alliance
Alliance Eliminations Entertainment
Entertainment AE Land Matrix and Corp. and
Sub-total Corp. Corp Software Execusoft Reclassifications Subsidiaries*
---------- ------------- ---------- ---------- ---------- ----------------- --------------
Net sales $ 25,771 $ $ $ 96 $ $ $ 25,867
Cost of sales 22,255 5 22,260
---------- ------------- ---------- ---------- ---------- ----------------- --------------
Gross Profit 3,516 91 3,607
Selling, general
and administrative
expenses 3,769 414 (40) (48) 4,095
Amortization of
intangible assets 15 482 497
---------- ------------- ---------- ---------- ---------- ----------------- --------------
3,784 896 (40) (48) 4,592
---------- ------------- ---------- ---------- ---------- ----------------- --------------
(268) (896) 40 139 (985)
---------- ------------- ---------- ---------- ---------- ----------------- --------------
Reorganization items 1,122 1,122
Other income
(expense)
Equity in net income
(loss) of unconsolidated
entities 384 384
Amortization of
deferred financing
costs (135) (2) (137)
Other income (expense)
- net (3) (3) (6)
Interest expense (593) (742) (38) (4) (1,377)
---------- ------------- ---------- ---------- ---------- ----------------- -------------
(596) (496) (40) (4) (1,136)
---------- ------------- ---------- ---------- ---------- ----------------- -------------
Income before
income taxes (864) (2,514) 135 3,243
Provision for
income taxes ---------- ------------- ---------- ---------- ---------- ----------------- -------------
Net income (loss) $ (864) $ (2,514) $ $ 135 $ $ $ (3,243)
========== ============= ========== ========== ========== ================= =============
*The following subsidiaries do not have any operating activity: Alliance
Ventures, Inc., AEC Americas, Inc., FL Acquisition Corp. and AEC Acquisition
Corp.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANCE ENTERTAINMENT CORP. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS (Unaudited)
MONTH ENDED March 31, 1998
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Independent Passport Passport Castle AEC
National Music Music Concord Communications One Way One Stop
Distributors Distribution Worldwide Records (U.S.) Records Group Sub-total
------------ ----------- ----------- ---------- ------------- -------- ---------- ------------
Net sales $ $ $ $ 613 $ $ 1,064 $ 24,094 $ 25,771
Cost of sales 289 601 21,365 22,255
------------- ----------- ----------- ----------- ------------- -------- ---------- ------------
Gross Profit 324 463 2,729 3,516
Selling, general and
administrative expenses 168 252 511 2,838 3,769
Amortization of
intangible assets 15 15
------------ ----------- ----------- ----------- ------------- -------- ---------- -----------
168 267 511 2,838 3,784
------------ ----------- ----------- ----------- ------------- -------- ---------- -----------
(168) 57 (48) (109) (268)
------------ ----------- ----------- ----------- ------------- -------- ---------- -----------
Reorganization items
Other income (expense)
Equity in net income
(loss) of unconsolidated
entities
Amortization of deferred
financing costs
Other income (expense)
- net (3) (3)
Interest expense (410) (69) (50) (47) (17) (593)
------------ ----------- ----------- ----------- ------------- -------- ---------- -----------
(410) (69) (53) (47) (17) (596)
------------ ----------- ----------- ----------- ------------- -------- ---------- -----------
Income (loss) before
income taxes (578) (12) (53) (95) (126) (864)
Provision for
income taxes
------------ ----------- ----------- ----------- ------------- -------- ---------- -----------
Net income (loss) $ (578) $ $ $ (12) $ (53) $ (95) $ (126) $ (864)
============ =========== =========== =========== ============= ======== ========== ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANCE ENTERTAINMENT CORP. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF CASH FLOWS (Unaudited)
MONTH ENDED March 31, 1998
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Alliance
Alliance Eliminations Entertainment
Entertainment AE Land Matrix and Corp. and
Sub-total Corp. Corp Software Execusoft Reclassifications Subsidiaries*
---------- ------------ ---------- ----------- ---------- ------------------ ---------------
Net Income (loss) $ (864) $ (2,514) $ $ 135 $ $ $ (3,243)
Adjustments to reconcile
net income (loss) to net
cash provided by
operating activities:
Depreciation and
amortization 111 618 155 9 893
Equity in net income (loss)
of unconsolidated entities (384) (384)
Reorganization items 1,122 1,122
Changes in working
capital and other, net 9,351 826 36 33 10,246
---------- ------------ ---------- ----------- ---------- ------------------ ---------------
Net cash provided by
(used in) operating
activities before
reorganization items 8,598 (332) 191 177 8,634
---------- ------------ ---------- ----------- ---------- ------------------ ---------------
Reorganization Items:
Chapter 11 professional
fees paid (1,122) (1,122)
---------- ------------ ---------- ----------- ---------- ------------------ ---------------
Net cash used by
reorganization items (1,122) (1,122)
---------- ------------ ---------- ----------- ---------- ------------------ ---------------
Net cash provided by
(used in) operating
activities 8,598 (1,454) 191 177 7,512
---------- ------------ ---------- ----------- ---------- ------------------ ---------------
Cash Flows From Investing Activities
Purchase of property
and equipment (307) (6) (17) (330)
(Increase) Decrease in
Investments
Investments
(Increase) Decrease in
Copyrights (139) (139)
Increase in other assets (1) (65) (300) (366)
Net cash provided by
(used in) ---------- ------------ ---------- ----------- ---------- ------------------ ---------------
Investing Activities (447) (65) (6) (317) (835)
---------- ------------ ---------- ----------- ---------- ------------------ ---------------
Cash Flows From Financing Activities
Increase (decrease) in
excess of outstanding
checks over bank balance (336) (336)
Net financing proceeds
to affiliates (10,242) 10,290 (151) 120 17
Proceeds from issuance
of stock
Proceeds for redemption
of stock
Proceeds from Borrowings
Payments on Borrowings (16) (10,000) (10,016)
Net Cash provided by
(used in) ---------- ------------ ---------- ----------- ---------- ------------------ ---------------
Financing Activities (10,594) 290 (151) 120 (10,335)
---------- ------------ ---------- ----------- ---------- ------------------ ---------------
Effect of foreign
currency translation
Net increase (decrease)
in cash: (2,443) (1,229) 34 (20) (3,658)
Cash
Beginning 3,899 3,145 260 81 7,385
========== ============ ========== =========== ========== ================== ===============
Ending $ 1,456 $ 1,916 $ 294 $ 61 $ $ $ 3,727
========== ============ ========== =========== ========== ================== ===============
*The following subsidiaries do not have any operating activity: Alliance
Ventures Inc., AEC Americas, Inc., FL Acquisition Corp. and AEC Acquisition
Corp.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANCE ENTERTAINMENT CORP. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF CASH FLOWS (Unaudited)
MONTH ENDED March 31, 1998
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Independent Passport Passport Castle AEC
National Music Music Concord Communications One Way One Stop
Distributors Distribution Worldwide Records (U.S.) Records Group Sub-total
---------------- -------------- --------- --------- --------------- -------- --------- -----------
Net Income (loss) $ (578) $ $ $ (12) $ (53) $ (95) $ (126) $ (864)
Adjustments to reconcile net
income (loss) to net cash
provided by operating activities:
Depreciation and amortization 20 16 75 111
Equity in net income (loss)
of unconsolidated entities
Reorganization items
Changes in working capital
and other, net 664 (155) (39) 938 7,943 9,351
Net cash provided by (used
in) operating activities ---------------- -------------- --------- --------- --------------- -------- --------- ----------
before reorganization items 86 (147) (92) 859 7,892 8,598
---------------- -------------- --------- --------- --------------- -------- --------- ----------
Reorganization items:
Chapter 11 professional
fees paid
---------------- -------------- --------- --------- --------------- -------- --------- ----------
Net cash used by
reorganization items
---------------- -------------- --------- --------- --------------- -------- --------- ----------
Net cash provided by (used in)
operating activities 86 (147) (92) 859 7,892 8,598
---------------- -------------- --------- --------- --------------- -------- -------- ----------
Cash Flows From Investing
Activities
(Purchase) disposal of property
(Increase) decrease
in investments (307) (307)
(Increase) decrease
in copyrights (139) (139)
(Increase) decrease
in other assets (1) (1)
Net cash provided by
(used in)
---------------- -------------- --------- --------- --------------- -------- -------- ----------
Investing Activities (139) (308) (447)
---------------- -------------- --------- --------- --------------- -------- -------- ----------
Cash Flows From Financing
Activities
Increase (decrease) in excess
of outstanding checks
over bank balance (23) (136) (177) (336)
Net financing proceeds to
affiliates (57) 422 92 (648) (10,051) (10,242)
Proceeds from issuance of stock
Payments for redemption of stock
Proceeds from Borrowings
Payments on Borrowings (16) (16)
Payments on Borrowings
Net Cash provided by
(used in) ---------------- -------------- --------- --------- --------------- -------- -------- ----------
Financing Activities (80) 286 92 (825) (10,067) (10,594)
---------------- -------------- --------- --------- --------------- -------- -------- ----------
Effect of foreign currency
translation
Net increase (decrease) in
cash: 6 34 (2,483) (2,443)
Cash
Beginning 3,899 3,899
================ ============== ========= ========= =============== ======== ======== ==========
Ending $ 6 $ $ $ $ $ 34 $ 1,416 $ 1,456
================ ============== ========= ========= =============== ======== ======== =========
</TABLE>
<PAGE>
ALLIANCE ENTERTAINMENT CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATING FINANCIAL STATEMENTS
Unaudited Interim Financial Information
The unaudited consolidating financial statements of Alliance Entertainment
Corp. and subsidiaries (the "Company"), have been prepared in accordance with
the American Institute of Certified Public Accountants Statement of Position
90-7: "Financial Reporting by Entities in Reorganization Under the Bankruptcy
Code" ("SOP 90-7") and generally accepted accounting principles applicable to a
going concern, which principles, except as otherwise disclosed, assume that
assets will be realized and liabilities will be discharged in the normal course
of business. The Company filed petitions for relief under Chapter 11 of the
United States Bankruptcy Code ("Chapter 11") on July 14, 1997 (the "Filing").
The Company is presently operating its business as a debtor-in-possession
subject to the jurisdiction of the United States Bankruptcy Court for the
Southern District of New York (the "Bankruptcy Court").
Except as set forth, the unaudited consolidating balance sheet as of March
31, 1998, and the unaudited consolidating statements of operations and cash
flows for the month ended March 31, 1998 (interim financial information), have
generally been prepared on the same basis as the audited financial statements
except that the unaudited financial statements. The financial statements include
all adjustments believed by management to be necessary to fairly reflect the
Company's financial position and results of operations in accordance with
generally accepted accounting principles. The preparation of these financial
statements has required the development by management of a number of significant
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements. Significant estimates
inherent in the preparation of the accompanying financial statements include
management's estimate of future cash flows used as a basis to assess the
recoverability of long-lived assets, adjustments to reduce the carrying value of
inventory and accounts receivable to net realizable value and estimates of cost
incurred in connection with restructuring and related activities. These
accounting estimates are subject to material change in the near term. In
addition, the accompanying financial statements are unaudited and, upon
completion of the annual financial statement audit by the Company's independent
accountants for the year ended December 31, 1998 may require further
adjustments. Excluded from the Filing were the following non-debtor subsidiaries
of the Company's Proprietary Products Group, including: Castle Communications
plc (and its related affiliates); The St. Clair Entertainment Group, Inc.; and
Red Ant Entertainment LLC ("Red Ant") (and its related affiliates). Accordingly,
the accompanying financial statements have been prepared excluding their
financial position, results of operations and cash flows. The results of
operations of those businesses and the Company's underlying equity therein have
been presented under the equity method of accounting. In the opinion of the
Company, the interim financial information is considered preliminary and may not
include all adjustments, necessary for a fair statement of the results of the
interim period.
Certain information and footnote disclosure normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted from the interim financial information. These
statements should be read in conjunction with the Company's financial statements
for the year ended December 31, 1997. The results of operations for
the month ended March 31, 1998, may not be indicative of the operating
results for the full year or any future interim period.
The Company experienced significant operating losses in 1996 and 1997 and
continued to post a year-to-date operating loss in 1998. The Company's ability
to continue as a going concern is dependent upon the confirmation of a plan of
reorganization by the Bankruptcy Court, the ability to maintain compliance with
debt covenants under the Revolving Credit and Guaranty Agreement, as amended,
("DIP Financing Agreement"), achievement of profitable operations, and the
resolution of the uncertainties of the reorganization case discussed below.
<PAGE>
Restructuring and Other Charges
During the month ended March 31, 1998, approximately $0.4 million was paid
and charged against liabilities established by the Company at December 31, 1997
for restructuring and other non-recurring charges relating to its consolidation
plans. As of March 31, 1998, approximately $8.9 million remains to be paid in
future periods.
Reorganization under Chapter 11; Pre-Petition Credit Agreement
On June 30, 1997, the Company failed to make the full amortization payment
of $1.5 million on its senior secured credit facility (the "Pre-petition Credit
Agreement") and additionally failed to satisfy a financial covenant requiring
the Company raise $35 million of equity prior to July 1, 1997 and as a result
was in default under the provisions of its Pre-petition Credit Agreement. Under
the terms of its Pre-petition Credit Agreement and as a result of the existing
defaults, the Company's banks had the right to accelerate the maturity of
approximately $187 million of outstanding indebtedness.
Additionally, as a result of the defaults under the Pre-petition Credit
Agreement, the Company was unable to make a July 15, 1997 interest payment due
and payable on the Company's $125 million of 11.25% Senior Subordinated Notes
due 2005.
On July 14, 1997, as a result of the defaults under the Pre-petition Credit
Agreement, the pending payment default on the Company's Senior Subordinated
Notes and an overall inability to operate the Company's business under the
existing liquidity restraints, the Company and fourteen of its wholly-owned
subsidiaries filed voluntarily under Chapter 11 of the Bankruptcy Code in order
to facilitate the reorganization of the Company's core businesses and the
restructuring of the Company's long-term debt, revolving credit and trade and
other obligations. The Company continues to operate with its existing directors
and officers as a debtor-in-possession subject to the Bankruptcy Court's
supervision and orders. Excluded from the filing were certain businesses in the
Company's Proprietary Products Group, including: Castle Communications plc (and
its related affiliates); The St. Clair Entertainment Group, Inc.; and Red Ant
Entertainment LLC ("Red Ant") (and its related affiliates). The filing was made
in the U.S. District Court for the Southern District of New York in Manhattan.
The filing of the petition under Chapter 11 of the Bankruptcy Code resulted
in the occurrence of an Event of Default under the Company's: (i) Indenture
relating to its 11.25% Senior Subordinated Notes due 2005; (ii) Credit
Agreement; (iii) 6% Exchangeable Notes; and (iv) Mortgage Bond for its
distribution facility in Coral Springs, Florida.
Pursuant to the provisions of the Bankruptcy Code, all of the Company's
liabilities as of July 14, 1997, were automatically stayed upon the Company's
filing of its petition for reorganization. In addition, absent approval from the
Bankruptcy Court, the Company is prohibited from paying any pre-petition
obligations. In hearings held on July 14 and 16, 1997, the Bankruptcy Court
approved the Company's request for payment of certain pre-petition wages and
benefits, use of the Company's cash management system and retention of legal and
financial professionals.
<PAGE>
In the Company's Chapter 11 case, substantially all liabilities as of the
date of the Filing are subject to settlement under a plan of reorganization to
be voted upon by the Company's creditors and stockholders and confirmed by the
Bankruptcy Court. Schedules have been filed by the Company with the Bankruptcy
Court setting forth the assets and liabilities of the Company as of the date of
the Filing as shown by the Company's accounting records. Differences between
amounts shown by the Company and claims filed by creditors are being
investigated and resolved. The ultimate amount and settlement terms for
pre-petition liabilities are subject to a plan of reorganization, and
accordingly, are not presently determinable.
Under the Bankruptcy Code, the Company may elect to assume or reject real
estates leases, employment contracts, personal property leases, service
contracts and other executory pre-petition leases and contracts, subject to
Bankruptcy Court approval. The Company cannot presently determine or reasonably
estimate the ultimate liability which may result from the filing of claims for
any rejected contracts or from leases which may be rejected at a future date.
The principal categories of claims classified as "Liabilities subject to
settlement under the reorganization case" are identified below. All amounts
presented below may be subject to future adjustments depending on Bankruptcy
Court actions, further developments with respect to disputed claims,
determination as to the security of certain claims, the value of any collateral
securing such claims, or other events.
<TABLE>
<CAPTION>
Liabilities Subject to Settlement (000's)
-------
Under the Reorganization Case March 31, 1998
- ----------------------------- ---------------------
<S> <C>
Accounts payable and accrued expenses $146,476
Pre-Petition Credit Agreement 144,100
11.25% Senior Subordinated Notes due 2005 125,000
6% Exchangeable Notes 10,805
Other Promissory Notes 1,395
Obligations under capital leases 4
Accounts payable Non-Debtor Subsidiaries 75
--------
$427,855
========
</TABLE>
Alliance intends to present a plan of reorganization to the Bankruptcy
Court to reorganize the Company's core business and restructure the Company's
long-term debt, revolving credit and trade obligations. Under provisions of the
Bankruptcy Code, the Company has the exclusive right to file a plan at any time
prior to April 30, 1998 and to solicit acceptance of a plan of reorganization
until June 30, 1998, each subject to possible extension as approved by the
Bankruptcy Court.
In the event that a plan of reorganization is approved by the Bankruptcy
Court, continuation of the business after reorganization will be dependent upon
the success of future operations and the Company's ability to meet its
obligations as they become due. In the event that such a plan of reorganization
is not approved by the Bankruptcy Court and a Restructuring Plan is not
consummated, the ability of the Company to continue as a going concern depends
on the success of future operations and the ability of the Company to generate
sufficient cash from operations and financing sources to meet its obligations as
they become due and to finance its operations. The accompanying financial
statements have been prepared on a going concern basis, which, except as
disclosed, contemplates continuity of operations, realization of assets and
discharge of liabilities in the ordinary course of business. As a result of the
Chapter 11 filing, the Company may have to sell or otherwise dispose of assets
and discharge or settle liabilities for amounts other than those reflected in
the financial statements. Further, a plan of reorganization could materially
change the amounts currently recorded in the financial statements. The financial
statements do not give effect to all adjustments to the carrying value of
assets, or amounts and classification of liabilities that might be necessary as
a consequence of the proceeding. The appropriateness of using the going concern
basis is dependent upon, among other things, confirmation of a plan of
reorganization, success of future operations and the ability to generate
sufficient cash from operations and financing sources to meet obligations.
<PAGE>
In addition, valuation methods used in Chapter 11 reorganization cases vary
depending on the purpose for which they are prepared and used and are rarely
based on generally accepted accounting principles, the basis on which the
accompanying financial statements are prepared. Accordingly, the values set
forth in the accompanying financial statements are not likely to be indicative
of the values presented to or used by the Bankruptcy Court. As a result,
valuations of the Company based on the accompanying financial statements may be
significantly higher than valuations used by the Company in determining the
amounts to be received, if any, by each class of creditors under a plan of
reorganization.
DIP Financing
In connection with the Company's Chapter 11 filing, on July 16, 1997, the
Company entered into a DIP Financing Agreement with Chase Manhattan Bank
providing for a maximum of $50 million of debtor-in-possession ("DIP") financing
subject to approval by the Bankruptcy Court. The DIP Financing Agreement is
intended to address the Company's immediate working capital needs and to support
the Company's operations during its Chapter 11 proceedings. The Company's use of
the full DIP Financing Agreement was approved by the Court.
The DIP Financing Agreement provides for borrowings under a revolving
credit and a letter of credit facility. Loans under the revolving credit
facility bear interest at either the Alternate Base Rate (as defined in the DIP
Financing Agreement) plus 1.5% or at the Adjusted LIBOR Rate (as defined in the
DIP Financing Agreement) plus 2.75%. Loans under the letter of credit facility
bear interest at the Alternate Base Rate plus 1.5%. The terms of the DIP
Financing Agreement contain certain restrictive covenants including: limitations
on the incurrence of additional guarantees, liens and indebtedness; limitations
on the sale of assets and the making of capital expenditures. The DIP Financing
Agreement also requires that the Company meet certain minimum earnings before
taxes and other expenses as defined through the end of 1998.
Under the DIP Financing Agreement, Chase Manhattan Bank has been given a
perfected first priority lien on all property and assets of the Company and its
fourteen wholly-owned debtor-in-possession subsidiaries. The banks who are
parties to the Pre-Petition Credit Agreement, as well as certain other secured
creditors of the Company, have been granted replacement liens on the Company's
assets (junior to the lien granted under the DIP Financing Agreement) to
adequately protect such creditors' secured claims against the Company prior to
its Chapter 11 filing.
The DIP Financing Agreement expires on January 31, 1999, or earlier upon
the occurrence of certain events, including confirmation of a plan of
reorganization by the Bankruptcy Court, a sale of substantially all of the
assets of the Company, or failure by the Company to receive a final order
confirming a plan of reorganization.
On March 18, 1998, the Company and Chase Manhattan agreed to an amendment
to the DIP Financing Agreement. The terms of the amendment modify certain
covenants related to (1) permitted capital expenditures, (2) minimum earnings
before interest, taxes, depreciation and amortization, as defined, (3) minimum
carrying value of inventories, and (4) the amount of permitted selling, general
and administrative expenses relating to certain non core operations. The
amendments were approved by the bankruptcy court on April 1, 1998.
<PAGE>
Indebtedness
As a result of the Filing, substantially all debt outstanding at July 14,
1997, was classified as liabilities subject to settlement. No principal or
interest payments are made on any pre-petition debt (excluding interest payments
on the Pre-petition Credit Agreement with Chase Manhattan Bank) without
Bankruptcy Court approval or until a reorganization plan defining the repayment
terms has been approved.
Generally, interest on pre-petition debt ceases accruing upon the filing of
a petition under the Bankruptcy Code. However, if debt is collateralized by an
interest in property whose value (minus the cost of preserving such property)
exceeds the amount of the debt, post-petition interest may be payable. Other
than those noted above, no other determinations have yet been made regarding the
value of the property interests which collateralize various debts. Although
interest may be paid pursuant to an order of the Bankruptcy Court, other than
interest on the Pre-petition Credit Agreement, it is uncertain whether any other
post-petition interest will be payable or paid. The Company believes at this
time that it is unlikely that such interest will be paid. Contractual interest
expense not recorded on certain pre-petition debt (11.25% Senior Subordinated
Notes due 2005, 6% Exchangeable Notes and other promissory notes) totaled
approximately $1.3 million for the month ended March 31, 1998.
Income Taxes
Based upon current operations of the Company and other factors, an income
tax benefit was not recorded for the Company and its fourteen wholly owned
subsidiaries which filed under Chapter 11 for the month ended March 31, 1998.
The Company anticipates that pre-tax losses, if any, which may be realized
during the fiscal year ending December 31, 1998, will not result in the
recording of any additional tax benefit by the Company. Further, any net
operating loss carry forwards prior to, and subsequent to the filing date, may
be severely reduced by the bankruptcy case.
<PAGE>
Reorganization Items
The Company recorded the following expense and income items during the
month ended March 31, 1998, directly associated with the Chapter 11
reorganization proceedings and the resulting restructuring of its operations:
(000's)
Month Ended
March 31, 1998
-------------------
Professional fees $1,122
Professional fees represent estimates of expenses incurred, primarily for legal,
consulting and accounting services provided to the Company and the creditors
committee (which are required to be paid by the Company while in Chapter 11).
Interest income represents interest earned on cash invested during the Chapter
11 proceeding.
<PAGE>
ALLIANCE ENTERTAINMENT CORP.
Trade Payables and Insurance
March 31, 1998
To the best of the Company's knowledge, all post-petition trade payables
are current and all insurance policies, including all applicable workers'
compensation and disability insurance policies, are fully paid as of March 31,
1998.
<PAGE>
ALLIANCE ENTERTAINMENT CORP.
(Debtor-In-Possession)
Court Reporting Schedules - Tax Payments and Collections
Month ended March 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C>
Gross Wages Paid $1,871,213.28 Schedule I
Payroll Taxes Withheld 454,602.30 Schedule II
Payroll Taxes Incurred 183,542.27 Schedule III
Gross Taxable Sales 68,169.44 Schedule IV
Sales Tax Collected 4,636.78 Schedule IV
Payment of Payroll Taxes - Schedule V
Payment of Tax Payments 265,279.72 Schedule VI
</TABLE>
<PAGE>
ALLIANCE ENTERTAINMENT CORP.
(Debtor-In-Possession)
Schedule I
Court Reporting Schedules for Payroll Tax Payments and Collections
Two week periods ended March 6 and March 20
GROSS WAGES PAID
<TABLE>
<CAPTION>
<S> <C>
Two Week Period Ended
Date Gross Wages
- --------------------- --------------
March 6, 1998 $ 1,002,499.05
March 20, 1998 868,714.23
--------------
Total $1,871,213.28
==============
</TABLE>
<PAGE>
ALLIANCE ENTERTAINMENT CORP.
(Debtor-In-Possession)
Schedule II
Court Reporting Schedules for Payroll Tax Payments and Collections
Two week periods ended March 6 and March 20
PAYROLL TAXES WITHHELD
<TABLE>
<CAPTION>
<S> <C> <C>
Two Week Periods Ended Payroll Tax
Date Tax Type Withheld
- --------------------- ------------------ -----------
March 6, 1998 Federal Income Tax $152,038.53
FICA & MEDI w/h 76,691.24
State w/h 16,449.16
Local w/h 2,844.60
March 20, 1998 Federal Income Tax 128,391.81
FICA & MEDI w/h 65,512.95
State w/h 11,331.09
Local w/h 1,342.92
-------------
TOTAL $454,602.30
=============
</TABLE>
<PAGE>
ALLIANCE ENTERTAINMENT CORP.
(Debtor-In-Possession)
Schedule III
Court Reporting Schedules for Payroll Tax Payments and Collections
Two week periods ended March 6 and March 20
PAYROLL TAXES INCURRED
<TABLE>
<CAPTION>
<S> <C> <C>
Two Week Period Ended Employer Payroll Amount
Date Tax Contributions Incurred
- --------------------- --------------------- -----------
March 6, 1998 FICA & MEDI Expenses $76,691.18
FUTA 3,770.24
Disability/SUI 15,757.63
March 20, 1998 FICA & MEDI Expenses 65,512.86
FUTA 3,029.88
Disability/SUI 18,780.48
-----------
TOTAL $183,542.27
===========
</TABLE>
<PAGE>
ALLIANCE ENTERTAINMENT CORP.
(Debtor-In-Possession)
Schedule IV
Schedules of Sales and Meals Tax Collected
Month Ended March 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C>
Sales Tax Gross Taxable
Taxing Jurisdiction Collected Sales
- -----------------------------------------
Florida Department of Revenue $1,975.32 $32,922.00
State Board of Equalization - California 1,309.12 17,292.25
New York Department of Revenue 618.21 7,677.06
New York Department of Revenue 7.31 91.41
New Jersey Department of Revenue 98.08 1,634.72
State of Michigan - Department of Treasury 204.85 3,414.00
State of Board of Equalization - California 423.89 5,138.00
--------- ----------
$4,636.78 $68,169.44
========= ==========
</TABLE>
<PAGE>
ALLIANCE ENTERTAINMENT CORP.
(Debtor-In-Possession)
Schedule V
Court Reporting Schedules for Payroll Tax Payments and Collections
Two week periods ended March 6 and March 20
PAYMENT OF TAXES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Tax Period Tax Type Taxing Jurisdiction Date Paid Amount Paid
- ----------- -------- ------------------- --------- -----------
</TABLE>
The Company's payroll is processed by a third party payroll service.
Accordingly, at each payroll period the Company transfers funds to the payroll
service who in turn makes payments directly to the appropriate taxing
jurisdiction on the Company's behalf.
<PAGE>
ALLIANCE ENTERTAINMENT CORP.
(Debtor-In-Possession)
Schedule VI
Schedules of Tax Payments
Month Ended March 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Tax Jurisdiction Tax Type Amount Paid Date Paid
- -------------------------------------------- ---------------------------- ---------------- --------------------
Florida Department of Revenue Florida Sales and Use Tax $ 1,945.32 March 20, 1998
State Board of Equalization - California California Sales and Use Tax 381.00 March 20, 1998
New York Department of Revenue Sales and Use Tax 981.59 March 23, 1998
New York Department of Revenue Sales and Use Tax 290.79 March 19, 1998
City of Albany, New York Property Tax 3,972.00 March 1, 1998
City of Albany, New York Property Tax 18,546.59 March 10, 1998
Georgia Income Tax Division Income Tax 500.00 March 16, 1998
Massachussetts Department of Revenue Income Tax 456.00 March 16, 1998
Tennessee Department of Revenue Franchise Tax 10.00 March 25, 1998
Tennessee Department of Revenue Franchise Tax 10.00 March 25, 1998
Tennessee Department of Revenue Franchise Tax 10.00 March 25, 1998
Tennessee Department of Revenue Franchise Tax 10.00 March 25, 1998
Tennessee Department of Revenue Franchise Tax 10.00 March 25, 1998
Tennessee Department of Revenue Franchise Tax 10.00 March 25, 1998
Broward County Revenue Collection Property Tax 235,849.19 March 25, 1998
Broward County Revenue Collection Property Tax 2,297.24 March 25, 1998
-------------
TOTAL $265,279.72
=============
</TABLE>
<PAGE>
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
- ------------------------------------------------x
In re :
: Chapter 11
ALLIANCE ENTERTAINMENT CORP., et al, : Case No. 97 B 44673
: through 97 B 44687 (BRL)
Debtors. :
: (Jointly Administered)
- ------------------------------------------------x
Verification Under Penalty of Perjury
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
David Hawthorne, being duly sworn, deposes and says:
1. I am Executive Vice President, Chief Financial Officer of Alliance
Entertainment Corp. The foregoing operating statements of Alliance Entertainment
Corp. and subsidiaries were prepared under my direction.
2. The foregoing operating statements are true and correct to the best of
my knowledge, information and belief.
/s/ David E. Hawthorne
--------------------------------
David E. Hawthorne
Sworn to before me this
1st day of May, 1998
/s/ Maryann Vertucci
- ---------------------------
ALLIANCE ENTERTAINMENT CORP. RESULTS IMPROVE AGAIN IN MARCH; COMPANY
SAYS IT IS CLOSE TO NEGOTIATING TERMS OF REORGANIZATION PLAN,
REQUESTS TWO-WEEK EXTENSION OF EXCLUSIVITY
NEW YORK -- May 1, 1998 -- Alliance Entertainment Corp. (OTC: AETTQ) has
filed its monthly operating report, and announced that the Company continues to
see significant progress in meeting its performance goals and reducing expenses.
In its report filed with the Office of the United States Trustee, the Company
reported a consolidated net loss of $3.2 million on net sales of $25.8 million.
The loss includes $2.5 million in interest and reorganization expenses. This
compares with a consolidated net loss of $4.5 million on net sales of $22.8
million, and $2.2 million in interest and reorganization expenses for the
February reporting period. At the same time, the Company said that it has asked
for a two-week extension to approximately May 15, 1998, of its exclusive right
to file a plan of reorganization with the Court. The Company said it had
presented a proposed draft plan to its major creditor constitutencies in early
April, and that "active" negotiations relative to the final plan are continuing.
"I am very pleased with the results for March," said Eric Weisman,
Alliance's president and chief executive officer. "For the first time since the
filing, the core operations reported a positive operating cash flow, which is
attributable to both management's personal commitment to the business and the
successful implementation of various operational initiatives."
"We are extremely confident that negotiations among the various creditor
groups and the Company are at a stage where they will shortly lead to a
successful reorganization of this complex case," Mr. Weisman said. "Now that a
solid foundation in the day-to-day operations has been established, over the
next several months, the Company will be focusing on new business opportunities,
such as the new Internet commerce."
Mr. Weisman said that he expected the plan of reorganization to provide for
the distribution of equity in the newly reorganized Alliance Entertainment Corp.
to the Company's current creditors, and that under the plan of reorganization,
current stock in the Company will be canceled.
The Company said that it has made progress in the sale of its Castle
Communications subsidiary, and that the Court recently approved certain bidding
procedures and a model purchase agreement for the sale of Alliance's U.K.
subsidiary. The filing of Alliance's plan of reorganization is not contingent on
the Castle sale. However, Mr. Weisman said, the procedures approved by the Court
"are calculated to protect the interests of all creditors while permitting the
Company the necessary leeway to maximize recoveries to the estate."
Alliance Entertainment Corp. is the largest wholesaler of prerecorded music
and related products. In addition, Alliance through its Concord and Castle
subsidiaries, is a developer and marketer of catalog content in several genres.
The Company currently employs approximately 800 people in the United States,
Canada and the United Kingdom and maintains headquarters in Coral Springs,
Fla. Alliance Entertainment Corp. and certain of its subsidiaries filed to
reorganize under Chapter 11 on July 14, 1997.
Forward-looking statements herein are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. These
forward-looking statements can generally be identified as such because the
context of the statement will include words such as the Company "believes,"
"expects," "anticipates," or words of similar import. Similarly, statements that
describe the Company's future plans, objectives, estimates or goals are
forward-looking statements. There are certain important factors that could cause
results to differ materially from those anticipated by forward-looking
statements made herein. Investors are cautioned that all forward-looking
statements involve risks and uncertainty.
