SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
Commission File Number 1-11976
UNAPIX ENTERTAINMENT, INC.
--------------------------
(Exact name of small business issuer
as specified in charter)
Delaware 95-4404537
-------- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification number)
200 Madison Avenue
New York, NY 10016
------------------
(Address of principal executive offices)
212-252-7600
(Issuer's Telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 May 12, 2000 there were 10,295,575 shares of the Company's common stock
outstanding.
<PAGE>
UNAPIX ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
<TABLE>
<S> <C> <C>
March 31,
Assets 2000 December 31,
(UNAUDITED) 1999
------ -------
Cash and cash equivalents $ 301 $ 301
Accounts receivable, net of allowances 18,527 17,921
Film costs, net 48,920 47,074
Product inventory 4,238 3,917
Property and equipment, net 1,038 997
Other assets 1,671 1,617
Deferred loan cost 1,799 1,895
Excess of cost over fair value of net
assets acquired, net of amortization 3,035 3,084
-------- --------
Total Assets $ 79,529 $ 76,806
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued expenses $ 7,252 $ 6,218
Deferred income taxes 1,386 1,259
Royalty payable 2,222 2,384
Revolving credit 32,222 30,641
Variable rate senior subordinated notes 704 701
10% convertible subordinated notes 4,596 4,586
-------- --------
Total Liabilities $ 48,382 45,789
-------- --------
Stockholders' Equity:
Preferred stock; $.01 par value; 3,000,000 authorized
Cumulative convertible Series A 8% preferred stock;
488,000 issued and outstanding (aggregate
liquidation preference of $1,464) 5 5
Non-voting convertible Series B 6% preferred stock;
300 shares issued and outstanding, (aggregate
liquidation reference of $3,000) - -
Cumulative Convertible Series C 8% preferred stock;
1,175 shares issued and outstanding (aggregate
liquidation preference of $1,175) - -
Common stock $.01 par value per share;
40,000,000 authorized; 10,257,000 and
10,243,000 shares issued and outstanding 103 103
Additional paid-in capital 34,968 34,923
Notes receivable from equity sales (2,703) (2,683)
Retained earnings (accumulated deficit) (1,226) (1,331)
-------- --------
Total Stockholders' Equity 31,147 31,017
-------- --------
Total Liabilities and Stockholders' Equity $ 79,529 $ 76,806
======== ========
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
UNAPIX ENTERTAINMENT, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(In thousands, except per share amounts)
(UNAUDITED)
<TABLE>
<S> <C> <C>
For the Three Months Ended March 31
2000 1999
---- ----
Revenues:
Licensing and distribution $ 4,099 $ 3,355
Home video 5,037 6,479
------ ------
9,136 9,834
------ ------
Operating costs:
Licensing and distribution 2,309 1,623
Home video 2,934 4,309
General and administrative expenses 3,053 2,687
------ ------
8,296 8,619
------ ------
Income from operations 840 1,215
Interest expense and financing expense, net (563) (552)
------ ------
Income before taxes 277 663
Provision for income taxes 127 282
------ ------
Net income $ 150 $ 381
====== ======
Net income per basic common share $ .01 $ .04
====== ======
Net income per diluted common share $ .01 $ .04
====== ======
Average number of basic common shares outstanding 10,243 7,533
====== ======
Average number of diluted common shares outstanding 10,243 7,574
====== ======
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
UNAPIX ENTERTAINMENT, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
(UNAUDITED)
<TABLE>
<S> <C> <C>
For the Three Months Ended March 31,
2000 1999
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 150 $ 381
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization and depreciation 3,010 2,718
Deferred income taxes 127 268
Accretion of debentures discount 14 39
Decrease (increase) in accounts receivable, net (605) (1,806)
(Increase) decrease in product inventory (321) (554)
Increase in other assets - (622)
Increase in accounts payable and accrued expenses 1,033 2,239
Increase (decrease) in royalties payable (161) (820)
------ ------
Total cash flows provided by operating activities 3,247 1,843
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Film cost expenditures (4,686) (4,291)
Purchase of property and equipment (123) (24)
------ ------
Total cash flows used by investing activities (4,809) (4,315)
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under bank line of credit 1,582 610
Advances from affiliates - 525
Other (20) (13)
------ ------
Total cash flows from financing activities $ 1,562 $ 1,122
------ ------
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
UNAPIX ENTERTAINMENT, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (continued)
(In thousands)
(UNAUDITED)
<TABLE>
<S> <C> <C>
For the Three Months Ended March 31
2000 1999
---- ----
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS $ - $ (1,350)
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 301 1,707
------ ------
CASH AND EQUIVALENTS AT END OF PERIOD $ 301 $ 357
====== ======
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Preferred dividend paid in common stock $ 45 $ 45
====== ======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 860 $ 222
====== ======
Cash paid for taxes $ 16 $ 35
====== ======
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
UNAPIX ENTERTAINMENT, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2000
1. Basis of Presentation
The accompanying unaudited consolidated financial statements of Unapix
Entertainment, Inc. (the "Company") have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with instructions to Form 10-Q. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the three-month
period ended March 31, 2000 are not necessarily indicative of the results that
may be expected for the year ended December 31, 2000. For further information,
refer to the consolidated financial statements and footnotes thereto included
in the Company's Form 10-K for the year ended December 31, 1999.
2. Film costs
<TABLE>
<S> <C> <C>
The Company's film costs include: March 31, December 31,
2000 1999
-------- -----------
(In thousands)
Films released $113,695 $108,909
Accumulated amortization (71,390) (68,550)
------- -------
42,305 40,359
Films in process 6,615 6,715
------- -------
$ 48,920 $ 47,074
======= =======
</TABLE>
<PAGE>
UNAPIX ENTERTAINMENT, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2000
3. Net income (loss) per common share
Net income (loss) per basic common share ("EPS") is computed by dividing the
net income available to common shareholders by the weighted average number of
common shares outstanding.
Net income per diluted share is computed by dividing the net income available
to common shareholders, adjusted on an as if converted basis, by the weighted
average number of common shares outstanding plus potential dilutive securities.
<TABLE>
<S> <C> <C>
Three Months Ended March 31,
----------------------------
2000 1999
---- ----
Weighted average basic shares outstanding 10,243 7,533
Effect of dilutive securities:
Options - 41
Warrants - -
------ ------
Weighted average dilutive shares outstanding 10,243 7,574
====== ======
</TABLE>
<TABLE>
<S> <C> <C>
Three Months Ended March 31,
----------------------------
2000 1999
---- ----
Net income as reported $ 150 $ 381
Preferred stock dividends (97) (90)
------ ------
Total income used for earnings per share $ 53 $ 291
====== ======
</TABLE>
<PAGE>
UNAPIX ENTERTAINMENT, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Three Months Ended March 31, 2000 Compared with Three Months Ended March 31,
1999
Revenues for the three months ended March 31, 2000 decreased by 7% to
$9,136,000 from $9,834,000 in the same three month period in 1999. This
decrease in revenues is largely the result of the decrease in Home Video
revenues of 22% to $5,037,000, as compared to $6,479,000 in 1999. There was
some weakness in the video sell-through area as certain special interest titles
underperformed. The Company is shifting to genres that it anticipates will have
stronger results for the balance of the year.
Operating costs were $8,296,000 for the three months ended March 31, 2000, a
decrease of $323,000 (4%) compared to $8,619,000 in the same three month period
in 1999. This decrease was a result of decreased film expenses directly related
to decreased revenues in the three month period offset by an increase in
general and administrative expenses which resulted primarily from costs for new
business activities.
Income from operations in the three month period ended March 31, 2000 decreased
by $375,000 (31%) to $840,000 down from $1,215,000 in 1999 due to the decreased
revenues offset by decreased operating expenses as discussed above.
Interest expense increased by $11,000 (2%) in the three months ending March 31,
2000 to $563,000 from $552,000 in 1999 due to increased borrowings under the
revolving line of credit offset by reduced interest on variable rate notes and
10% convertible notes as a result of the extinguishment of debt in September,
1999.
The Company has income before taxes of $277,000 for the three months ended
March 31, 2000 compared to $663,000 in the same period in 1999.
Income taxes of $127,000 were provided in the three months ended March 31, 2000
compared to $282,000 in the same period in 1999.
Liquidity and Capital Resources
For the three months ended March 31, 2000, operating activities provided cash
of $3,247,000. The Company used $4,809,000 in investing activities which
consisted primarily of $4,686,000 incurred in acquiring and producing new
properties for the home video rental and the licensing and distribution
markets. The additional cash requirements of $1,562,000 were met principally
from borrowings.
In the normal course of business the Company makes certain guarantees to
producers and other third parties as to the minimum amount such parties will
receive from the Company's distribution of their products. The Company has
committed to pay film acquisition advances and guarantees of approximately
$4,112,000 as of March 31, 2000, which amounts are payable upon delivery of the
films. The Company also expects to incur significant additional cash flow needs
relating to its continued expansion. In order to meet its future funding needs
<PAGE>
UNAPIX ENTERTAINMENT, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
the Company will utilize cash on-hand, operating cash flows, its line of credit
and other potential financing.
The Company has a borrowing facility which provides for borrowings of up to
$40,000,000, $26,000,000 secured by the Company's library of films and other
entertainment programming and $14,000,000 secured by accounts receivable. At
March 31, 2000, the Company has borrowed $32,222,000 and had remaining
availability of $2,700,000. Mandatory repayments of the library credit are due
on a quarterly basis beginning September 1, 2000.
The feature film and television licensing and distribution industries require
significant expenditures of funds to establish and expand a library of films
and programs from which revenues may be generated. The Company could be
dependent upon future financings to continue its long term plans of expansion
and growth. As its asset base grows, the Company may be able to secure an
increased working capital line of credit as well as explore other film
acquisition financing arrangements. The Company may also have additional debt
or equity financings.
Year 2000
The Company completed the year 2000 compliance program including testing by
December 31, 1999. The Company did not experience any disruptions to normal
operations as a result of any year 2000 rollover efforts to January 1, 2000
and will continue to monitor key dates throughout 2000 but has no expectation
that related issues will arise in the current year.
Except for the historical information contained herein, the matters discussed
are forward-looking statements that are subject to risks and uncertainties,
including the inherent unpredictability of the entertainment industry in which
a success of a product depends upon factors such as competition and audience
acceptance, which may bear little or no correlation to the Company's
production or other costs, as well as the other factors described in "FACTORS
WHICH MAY AFFECT RESULTS" contained in the Company's Annual Report on Form 10-
K for the year ended December 31, 1999 (which has been filed with the
Securities and Exchange Commission). The highlighted risks should not be
assumed to be the only things to affect the Company's future performance.
<PAGE>
Item 3. Quantitative and Qualitative Disclosure
About Market Risk
The Company has a borrowing facility on which it incurs interest equal to
1.25% per annum above the Index Rate which was 9% at March 31, 2000. A 1%
change in the benchmark rate applied to the outstanding borrowings at March
31, 2000 ($32,222,000) would result in an increase or decrease in interest
expense of $322,000 per year.
Receivables from sales to foreign customers are generally denominated in U.S.
dollars. The Company has no significant foreign exchange gains or losses.
PART II - OTHER INFORMATION
Items 1, 2, 3, 4 and 5 are not applicable.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
Financial Data Schedule
b) Reports on Form 8-K not applicable.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
UNAPIX ENTERTAINMENT, INC.
/s/ Cheryl Freeman May 12, 2000
- --------------------------------------
Cheryl Freeman, Chief Financial Officer
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Exhibit Number Description
- -------------- -----------
<S> <C>
27 Financial Data
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 301
<SECURITIES> 0
<RECEIVABLES> 18,527
<ALLOWANCES> 0
<INVENTORY> 4,238
<CURRENT-ASSETS> 0
<PP&E> 1,038
<DEPRECIATION> 0
<TOTAL-ASSETS> 79,529
<CURRENT-LIABILITIES> 0
<BONDS> 4,596
0
5
<COMMON> 103
<OTHER-SE> 31,039
<TOTAL-LIABILITY-AND-EQUITY> 79,529
<SALES> 0
<TOTAL-REVENUES> 9,136
<CGS> 0
<TOTAL-COSTS> 8,296
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 563
<INCOME-PRETAX> 277
<INCOME-TAX> 127
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 150
<EPS-BASIC> .01
<EPS-DILUTED> .01
</TABLE>
