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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 7, 1999
Commission File Number: 000-23000
THE HARVEY ENTERTAINMENT COMPANY
(Name of Small Business Issuer in its Charter)
CALIFORNIA 95-4217605
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
1999 AVENUE OF THE STARS, SUITE 2050
LOS ANGELES, CALIFORNIA 90067
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (310) 789-1999
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ITEM 5. OTHER EVENTS
Attached hereto as Exhibit 99.1 is a Press Release announcing
that on April 7, 1999, The Harvey Entertainment Company (the "Company"), entered
into a definitive Stock Purchase Agreement with Roger A. Burlage, Michael R.
Burns, Ken Slutsky and The Kushner-Locke Company.
Attached hereto as Exhibit 99.2 is a Press Release announcing
the Company's earnings for the fiscal year ended December 31, 1998.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
The exhibits listed below are filed as part of this Current Report.
<TABLE>
<CAPTION>
Exhibit Number Description of Exhibit
- -------------- ----------------------
<S> <C>
99.1 Press Release of the Company dated April 7, 1999
99.2 Press Release of the Company dated April 7, 1999
</TABLE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, the Company has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
Dated: April 15, 1999 THE HARVEY ENTERTAINMENT COMPANY
By: /s/ MICHAEL S. HOPE
---------------------------------------
Michael S. Hope, Interim Chief
Financial Officer
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EXHIBIT INDEX
The exhibits listed below are filed as part of this Current Report.
<TABLE>
<CAPTION>
Exhibit Number Description of Exhibit
<S> <C>
99.1 Press Release of the Company dated April 7, 1999
99.2 Press Release of the Company dated April 7, 1999
</TABLE>
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EXHIBIT 99.1
FOR IMMEDIATE RELEASE
HARVEY ENTERTAINMENT APPROVES $17 MILLION FINANCING
AND PERMANENT MANAGEMENT TEAM LED BY ROGER A. BURLAGE
LOS ANGELES, CA (April 8, 1999) - The Harvey Entertainment Company (NASDAQ:HRVY)
announced today that it has entered into a definitive Stock Purchase Agreement
with Roger A. Burlage, Michael R. Burns and Paul Guez, Ken Slutsky and The
Kushner-Locke Company (NASDAQ:KLOC) pursuant to which (i) Harvey will receive
$11.5 million in cash and $5.5 million in common stock of Kushner-Locke in
consideration for newly-issued shares of Harvey's Series A Convertible Preferred
Stock and (ii) Roger A. Burlage, a senior entertainment industry executive with
over 20 years experience, will join Harvey to lead a new permanent management
team. Mr. Burlage is the former Chairman and Chief Executive Officer of LIVE
Entertainment Inc. which at the time was a public company with $150 million in
revenues, specializing in the production, marketing and distribution of filmed
entertainment in worldwide markets. Separately, Harvey reported today its
financial results for the fourth-quarter and year-ended December 31, 1998.
The shares of preferred stock to be issued pursuant to the transaction will bear
dividends at 7% per annum, payable in cash or in kind at the Company's option,
and will be convertible into Harvey common stock at a conversion price of $6.75
per share, subject to customary anti-dilution provisions. In addition, warrants
have been granted to purchase Harvey common stock in three separate
800,000-share tranches, exercisable at $9.00, $11.00 and $12.00 per share,
respectively. The warrants will be divided between the members of the investment
group and Mr. Burlage and the new management team. The holders of the preferred
stock will have the right as a separate class to elect two members of an
expanded five-person Harvey Board of Directors. Joining current Board members
Michael Doherty and Gary Gray will be the new CEO Roger Burlage and another
party to be designated by the investor group.
The Board of Directors of Harvey has approved the transaction and determined
that the transaction is in the best interests of the Company and its
shareholders. In reaching this conclusion, The Board of Directors relied, in
part, upon the opinion of Donaldson, Lufkin & Jenrette Securities Corporation,
Harvey's financial advisors, that the consideration to be paid to Harvey is fair
from a financial point of view.
The completion of the transaction, which is expected as promptly as practicable
after April 19, 1999, remains subject to satisfaction or waiver of a number of
conditions, including obtaining an exception to any applicable shareholder
approval requirements under the Nasdaq Stock Market listing rules and various
customary conditions. Prior to closing, it is contemplated that the principal
investors will arrange for additional investors to participate in the
transaction. The principal investors have deposited $750,000 in escrow which
Harvey will retain as liquidated
4
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damages in the event the principal investors do not deliver the entire financing
or otherwise breach their obligations under the Stock Purchase Agreement.
Commenting on the investment and his future management role at the Company,
Roger A. Burlage, stated, "We were attracted to Harvey Entertainment because of
its significant portfolio of world-renown character assets which have achieved
very impressive sales and box-office performance in several entertainment
outlets. Beyond its core activities, we also envision using Harvey as a platform
for expanding into other entertainment opportunities. Given the broadening scope
of entertainment, new media and licensing opportunities, the investor group and
I are quite confident in the future prospects for Harvey Entertainment, as
evidenced by our investment and its terms."
Gary Gray, Chairman of the Board of the Company, stated, "After a full and
complete review of strategic alternatives over the last six months, we are
pleased to have reached agreement to bring Roger Burlage and his management team
on board, backed by a substantial equity infusion. Mr. Burlage and his team
share our excitement in the opportunities to exploit Harvey's proprietary
characters and are committed to help the Company achieve its potential as a
significant independent entertainment company."
In addition to his tenure at LIVE Entertainment, Inc., Mr. Burlage also served
as President and Chief Executive Officer for entertainment distribution and home
video company, Trimark Holdings, Inc., where he oversaw a nearly three-fold
revenue increase over a four-year period. He also was a founding executive and
served for five years as President and Chief Operating Officer of New World
Entertainment. While at New World, sales rose from $8 million in the first nine
months to approximately $400 million, five years later.
The Harvey Entertainment Company is engaged in the management and exploitation
of its proprietary branded characters through merchandising and filmed
entertainment, which includes theatrical, home video and television. The Harvey
Classic Characters Brands include Casper, the Friendly Ghost, Fatso, Stinkie and
Stretch (the Ghost Trio), Richie Rich, Baby Huey, Hot Stuff, Little Audrey,
Wendy the Good Little Witch and many others. For more information on The Harvey
Entertainment Company, visit the Company's website at http://www.harvey.com.
The press release contains forward-looking statements that involve risks and
uncertainties, including, but not limited to, the risk that the agreed upon
transaction will not be consummated, the need for permanent senior management,
the need to secure financing for the Company's existing production activities as
well as to implement the proposed business plan, the success of the Company's
expansion strategy and risks of the Company's merchandising, home video, and
filmed entertainment activities, the management of growth, fluctuations in
quarterly and annual operating results, the release of filmed entertainment
products, the risk that the pursuit by the Company of strategic alternatives
will not be successful and other risks most recently outlined in the Company's
filings with the Securities and Exchange Commission. Actual results may differ
materially from management expectations.
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# # #
<TABLE>
<S> <C>
CONTACT: David Collins
Michael Doherty Jaffoni & Collins Incorporated
The Harvey Entertainment Company 212/835-8500 or [email protected]
310/395-5960
</TABLE>
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EXHIBIT 99.2
FOR IMMEDIATE RELEASE
THE HARVEY ENTERTAINMENT COMPANY REPORTS
FOURTH QUARTER AND YEAR-END RESULTS
LOS ANGELES, CA (April 8, 1999) - The Harvey Entertainment Company (Nasdaq:
HRVY) today reported results for the fourth quarter and year-ended December 31,
1998. Separately, the Company also announced today that it has entered into an
agreement whereby a new permanent management team, led by Roger A. Burlage,
would assume operating control of the company in conjunction with a $17 million
cash and stock investment in Harvey. Harvey Entertainment also reported that
City National Bank has agreed to extend the maturity date of its $2.5 million
revolving credit facility to April 30, 1999 (during which time the agreed-upon
equity infusion is expected to close) as well as modify the credit facility's
minimum net worth requirement for which Harvey is presently not in compliance.
Net operating revenues for the fourth quarter of 1998 were a negative
$(1,728,000) compared to revenues of $3,616,000 in the comparable period of
1997. The 1998 fourth quarter results reflect the recognition of a $3,000,000
charge based on preliminary estimates of the lifetime revenues and costs
associated with the direct-to-video feature, Baby Huey's Great Easter
Adventures, released in March 1999. The period also reflects the write-off of
the remaining $1,675,000 in receivables relating to the Casper, A Spirited
Beginning direct-to-video. Harvey has determined that the only overages to be
recorded on this project are likely to be those, if any, that are supported
during the course of a future participation audit of the books and records of
the distributor.
Harvey Entertainment reported a 1998 fourth quarter net loss of $(5,869,000), or
$(1.40) per basic share, compared to net income of $627,000, or $0.15 per
diluted share, in the fourth quarter of 1997. The weighted average number of
shares outstanding in the 1998 fourth quarter was 4,187,000 basic shares,
compared to 4,059,000 diluted shares outstanding in the year-ago period.
Net operating revenues for the year-ended 1998 were a negative $(1,569,000),
compared to revenues of $15,404,000 in of 1997. Revenues for 1998 reflect a
limited scope of operations related to working capital constraints, the ongoing
strategic review process and negative $(3,991,000) adjustment to reduce the
Company's estimate, based on actual shipment data, of the lifetime profitability
of the 1997 Casper, A Spirted Beginning direct-to-video feature. Revenues in
1997 reflect revenues based on initial shipments of Casper, A Spirited Beginning
as well as a $3.3 million advance for Casper Meets Wendy. The Company does not
expect to recognize further revenues for Casper Meets Wendy, which was released
in September 1998, until such time, if at all, that actual shipment data
indicate the Company's profit participation will exceed the advance.
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HARVEY ENTERTAINMENT REPORTS FOURTH QUARTER AND YEAR-END RESULTS, 4/8/99
Revenues for 1997 also reflect the payment of a $600,000 non-refundable advance
related to an agreement with Universal Studios, Inc. to produce a theatrical
motion picture sequel to the 1995 feature, Casper. In 1997, the Company also
received a $900,000 non-refundable advance against the Company's profit
participation from the 1995 Casper movie.
The Company reported a net loss of $(11,238,000), or $(2.77) per basic share,
for the year ended December 31, 1998, compared to net income of $3,178,000, or
$0.80 per diluted share, in the comparable year-ago period. In addition to the
charges and write-offs reflected in the fourth quarter which are discussed
above, the 1998 net loss included bad debts of $940,000 and the write-off of
$500,000 in previously capitalized product development costs in the first
quarter of 1998. Also included in the net loss for 1998 is a charge of $581,000,
net of tax benefits, representing the value of previously disclosed warrants and
options granted in the first three quarters of 1998 to Global Media for
management services and the value of extending previously granted warrants to
the Company's former investment banker. Such warrant and option charges, which
have no impact on cash or stockholders' equity, will be reflected in restated
losses for the first three quarterly periods of the year. The weighted average
number of shares outstanding for 1998 was $4,059,000 basic shares compared to
3,964,000 diluted shares for the year ending 1997.
The Harvey Entertainment Company is engaged in the management and exploitation
of its proprietary branded characters through merchandising and filmed
entertainment, which includes theatrical, home video and television. The Harvey
Classic Characters Brands include Casper, the Friendly Ghost, Fatso, Stinkie and
Stretch (the Ghostly Trio), Richie Rich, Baby Huey, Hot Stuff, Little Audrey,
Wendy the Good Little Witch and many others. For more information on The Harvey
Entertainment Company, visit the Company's website at http://www.harvey.com.
This press release contains forward-looking statements that involve risks and
uncertainties, including, but not limited to, the need for permanent senior
management, the need to secure financing for the Company's existing production
activities as well as to implement the Company's business plan, the success of
the Company's expansion strategy and risks of the Company's merchandising, home
video, and filmed entertainment activities, the management of growth,
fluctuations in quarterly and annual operating results, the release of filmed
entertainment products, the risk that the pursuit by the Company of strategic
alternatives will not be successful and other risks most recently outlined in
the Company's filings with the Securities and Exchange Commission. Actual
results may differ materially from management expectations.
(table follows)
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THE HARVEY ENTERTAINMENT COMPANY
Consolidated Statement of Operations
<TABLE>
<CAPTION>
Fourth Quarter Ended Year Ended
December 31, December 31,
1998 1997 1998 1997
------------ ------------ ------------ ------------
(Unaudited) (Audited)
<S> <C> <C> <C> <C>
OPERATING REVENUES:
Filmed Entertainment $ (1,652,000) $ 2,101,000 $ (3,842,000) $ 10,565,000
Merchandising (166,000) 1,515,000 2,183,000 4,839,000
Publishing 90,000 -- 90,000 --
------------ ------------ ------------ ------------
Net operating revenues (1,728,000) 3,616,000 (1,569,000) 15,404,000
------------ ------------ ------------ ------------
OPERATING EXPENSES:
Cost of sales 63,000 1,156,000 1,056,000 3,900,000
Selling, general and
administrative expenses 1,714,000 1,577,000 9,334,000 5,801,000
Amortization of film library,
goodwill, trademarks,
copyrights and other 3,031,000 176,000 3,707,000 703,000
Depreciation expenses 59,000 18,000 161,000 97,000
------------ ------------ ------------ ------------
Total operating expenses 4,867,000 2,927,000 14,258,000 10,501,000
------------ ------------ ------------ ------------
LOSSES FROM OPERATIONS (6,595,000) 689,000 (15,827,000) 4,903,000
OTHER INCOME 69,000 77,000 390,000 255,000
------------ ------------ ------------ ------------
LOSS BEFORE INCOME
TAX BENEFIT (6,526,000) 766,000 (15,437,000) 5,158,000
INCOME TAX BENEFIT, NET
OF VALUATION
ALLOWANCE 657,000 (139,000) 4,199,000 (1,980,000)
------------ ------------ ------------ ------------
NET LOSS $ (5,869,000) $ 627,000 $(11,238,000) $ 3,178,000
============ ============ ============ ============
NET LOSS PER SHARE
Basic $ (1.40) $ 0.18 $ (2.77) $ 0.89
============ ============ ============ ============
Diluted $ (1.40) $ 0.15 $ (2.77) $ 0.80
============ ============ ============ ============
WEIGHTED AVERAGE
SHARES OUTSTANDING
Basic $ 4,187,000 $ 3,573,000 $ 4,059,000 $ 3,555,000
============ ============ ============ ============
Diluted $ 4,187,000 $ 4,059,000 $ 4,059,000 $ 3,964,000
============ ============ ============ ============
</TABLE>
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# # #
<TABLE>
<S> <C>
CONTACT: David Collins
Michael Doherty Jaffoni & Collins Incorporated
The Harvey Entertainment Company 212/835-8500 or [email protected]
310/395-5960
</TABLE>
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