- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D)
--- OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
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 0-21824
---------------
HOLLYWOOD ENTERTAINMENT CORPORATION
(Exact name of registrant as specified in charter)
OREGON 93-0981138
(State or other jurisdiction of I.R.S. Employer
incorporation or organization) Identification No.)
25600 S.W. PARKWAY CENTER DRIVE, WILSONVILLE, OREGON 97070
(Address of principal executive office, including zip code)
(503) 570-1600
(Registrant's telephone number, including area code)
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 August 14, 1996, there were 33,914,501 shares of the registrant's
Common Stock outstanding.
- --------------------------------------------------------------------------------
<PAGE>
HOLLYWOOD ENTERTAINMENT CORPORATION
INDEX
PART I. FINANCIAL INFORMATION
PAGE NO.
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS: 3
Consolidated Statements of Operations 3
Three months and six months ended June 30, 1996
and 1995
Consolidated Balance Sheets 4
June 30, 1996 and December 31, 1995
Consolidated Statements of Cash Flows 5
Six months ended June 30, 1996 and 1995
Notes to Consolidated Financial Statements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 7
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 13
SIGNATURES 14
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
HOLLYWOOD ENTERTAINMENT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share and other operating data)
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
1996 1995 1996 1995
---------- ---------- ----------- --------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenue:
Rental revenue $ 54,310 $ 23,862 $ 109,059 $ 46,823
Product sales 9,639 5,248 19,963 9,375
---------- ---------- ----------- --------
63,949 29,110 129,022 56,198
Operating costs and expenses:
Cost of product sales 5,931 2,900 12,176 5,588
Operating and selling 46,517 19,634 92,734 38,268
General and administrative 4,033 1,539 8,489 2,949
Amortization of intangibles 1,483 636 3,007 1,217
---------- ---------- ----------- --------
Operating income 5,985 4,401 12,616 8,176
Nonoperating income (expense):
Interest income 31 61 128 364
Interest expense (1,007) (195) (1,625) (310)
---------- ---------- ----------- --------
Income before income taxes 5,009 4,267 11,119 8,230
Income taxes 2,004 1,572 4,387 3,032
---------- ---------- ----------- --------
Net income $ 3,005 $ 2,695 $ 6,732 $ 5,198
========== ========== =========== =========
Net income per share $ 0.09 $ 0.09 $ 0.19 $ 0.17
========== ========== =========== =========
Weighted average shares 34,804 30,369 34,916 30,250
outstanding
Number of stores at end of 382 160 382 160
period
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
HOLLYWOOD ENTERTAINMENT CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
JUNE 30, DECEMBER 31,
1996 1995
------------ -----------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,697 $ 29,980
Construction and other receivables 11,067 16,154
Merchandise inventories 30,481 26,701
Prepaid expenses and other current assets 2,121 845
------------ -----------
Total current assets 48,366 73,680
Videocassette rental inventory, net 98,147 86,889
Property and equipment, net 84,209 65,958
Excess of cost over net assets acquired, net 101,993 104,679
Deferred income taxes 1,268 1,345
Other assets 2,727 2,109
------------ -----------
Total assets $ 336,710 $ 334,660
============ ===========
LIABILITIES, MANDATORILY REDEEMABLE
COMMON STOCK AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 615 $ 7,616
Accounts payable 34,382 42,778
Accrued liabilities 6,446 5,553
Income taxes payable 1,841 ---
------------ -----------
Total current liabilities 43,284 55,947
Long-term debt, less current portion 68 355
Line of credit 60,000 ---
Deferred rent and other liabilities 4,504 3,369
Deferred income taxes 4,041 2,956
------------ -----------
111,897 62,627
Commitments and contingencies --- ---
------------ -----------
Mandatorily redeemable common stock (Note 2) --- 54,250
------------ -----------
Shareholders' equity
Preferred stock, 25,000,000 shares authorized;
no shares issued and outstanding --- ---
Common stock, no par value, 100,000,000 shares
authorized; 33,914,501 and 36,007,190 shares
issued and outstanding, respectively 202,161 202,005
Retained earnings 25,094 18,362
Intangible assets, net (2,442) (2,584)
------------ -----------
Total shareholders' equity 224,813 217,783
------------ -----------
Total liabilities, mandatorily redeemable $ 336,710 $ 334,660
common stock and shareholders' equity ============ ===========
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
HOLLYWOOD ENTERTAINMENT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
SIX MONTHS
ENDED JUNE 30,
-----------------------------
1996 1995
---------- ----------
(Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 6,732 $ 5,198
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 39,411 17,548
Deferred rent and other liabilities 1,135 396
Deferred income taxes 1,162 1,141
Changes in operating assets and liabilities:
Merchandise inventories (3,780) (654)
Prepaid expenses and other current assets (1,276) (1,500)
Accounts payable (8,396) (4,722)
Accrued liabilities 893 (2,499)
Income taxes payable 1,841 (747)
---------- ----------
Cash provided by operating activities 37,722 14,161
---------- ----------
INVESTING ACTIVITIES:
Construction and other receivables 5,087 (2,963)
Purchases of videocassette rental inventory, net (41,724) (27,696)
Purchase of property and equipment, net (24,368) (18,758)
Investment in businesses acquired --- (6,810)
Other (618) (1,255)
---------- ----------
Cash used in investing activities (61,623) (57,482)
FINANCING ACTIVITIES:
Proceeds from the issuance of common stock, net --- ---
Proceeds from long-term debt --- 23,500
Repayments of long-term debt (7,288) (11,043)
Tax benefit from exercise of stock options (8) 490
Proceeds from exercise of stock options 164 599
Repurchase of mandatorily redeemable stock (54,250) ---
Borrowings under line of credit 60,000 ---
---------- ----------
Cash (used) provided by financing activities (1,382) 13,546
---------- ----------
Decrease in cash and cash equivalents (25,283) (29,775)
Cash and cash equivalents:
Beginning of period 29,980 39,017
---------- ----------
End of period $ 4,697 $ 9,242
========== ==========
</TABLE>
5
<PAGE>
HOLLYWOOD ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. FINANCIAL STATEMENT PRESENTATION:
The consolidated financial statements as of June 30, 1996 and for the
periods ended June 30, 1996 and June 30, 1995 are unaudited and have been
prepared by Hollywood Entertainment Corporation ("the Company") pursuant to
the rules and regulations of the Securities and Exchange Commission.
Certain information and disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been omitted pursuant to such rules and regulations,
although the Company believes that the disclosures are adequate to make the
information presented not misleading. It is recommended that these
financial statements be read in conjunction with the consolidated financial
statements and notes thereto included in the Company's annual report on
Form 10-K for the year ended December 31, 1995.
The accompanying interim consolidated financial statements reflect all
adjustments which are, in the opinion of management, necessary to present
fairly the financial position as of June 30, 1996 and the results of
operations and cash flows for the six months ended June 30, 1996 and June
30, 1995. All such adjustments are of a normal and recurring nature.
Certain amounts as of December 31, 1995 and June 30, 1995 have been
reclassified to conform with the presentation used as of June 30, 1996. The
results of operations for the interim periods presented are not necessarily
indicative of the results to be expected for the full year.
2. ACQUISITION OF VIDEO WATCH
In August 1995, the Company acquired, in two separate transactions,
the assets of 42 video retail superstores operating under the name of Video
Watch. The aggregate purchase price was approximately $60.3 million,
including 2,127,452 shares of the Company's common stock. The Company
granted the sellers an option to sell any of the shares issued in
connection with the Video Watch acquisition to the Company on January 27,
1996 at the original issuance price of $25.50 per share, for a maximum
repurchase obligation of $54.3 million. Consequently, the common shares
issued in connection with the Video Watch acquisitions are classified as
"Mandatorily Redeemable Common Stock" at December 31, 1995.
Pursuant to the option described above, in January 1996 the Company
repurchased all of the shares issued in connection with the Video Watch
acquisition. Of the aggregate purchase price of $54.3 million, $50.0
million was provided by borrowings under the Company's revolving credit
line, and the remainder was provided by then-existing cash balances.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, (1) selected
income statement data expressed as a percentage of total revenue and (ii)
the number of stores open at the end of each period:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ---------------------
1996 1995 1996 1995
-------- ------- -------- -------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenue:
Rental revenue 84.9% 82.0% 84.5% 83.3%
Product sales 15.1 18.0 15.5 16.7
---- ---- ---- ----
100.0 100.0 100.0 100.0
Operating costs and expenses:
Cost of product sales 9.3 10.0 9.4 9.9
Operating and selling 72.7 67.4 71.9 68.1
General and administrative 6.3 5.3 6.6 5.2
Amortization of intangibles 2.3 2.2 2.3 2.2
--- --- --- ---
90.6 84.9 90.2 85.5
Operating income 9.4 15.1 9.8 14.5
Nonoperating income (expense), (1.6) (0.5) (1.2) 0.1
----- ----- ----- ---
net
Income before income taxes 7.8 14.7 8.6 14.6
Income taxes 3.1 5.4 3.4 5.4
--- --- ---
Net income 4.7% 9.3% 5.2% 9.2%
==== ==== ==== ====
Number of stores 382 160 382 160
</TABLE>
THREE MONTHS ENDED JUNE 30, 1996 COMPARED TO THREE MONTHS ENDED JUNE 30, 1995
REVENUE
Revenue increased $34.8 million, or 120%, to $63.9 million for the three
months ended June 30, 1996, compared to $29.1 million in the second quarter
of the prior year. Comparable store revenue increased 6%. During the three
months ended June 30, 1996, the Company opened a total of 58 new stores, of
which 3 were relocations. The company also closed 3 stores, ending the
period with 382 superstores compared to 160 superstores at the end of the
corresponding period in 1995.
7
<PAGE>
Product sales as a percentage of total revenue decreased to 15.1% for the
second quarter of 1996 compared to 18.0% for the second quarter of 1995.
The decrease in product sales as a percentage of revenue reflects stronger
product offerings in the second quarter of 1995 and the Company's increased
emphasis on the rental business.
The Company's pricing of videocassette rentals and merchandise for sale has
not changed significantly compared to the second quarter of 1995.
OPERATING COSTS AND EXPENSES:
COST OF PRODUCT SALES
The cost of product sales decreased slightly to 9.3% of total revenue for
the second quarter of 1996 compared to 10.0% for the second quarter of 1995
due to the decreased sales of product as a percentage of total revenue. The
cost of product sales as a percentage of product sales increased from 55.3%
to 61.5% for the three months ended June 30, 1995 and 1996, respectively.
The gross margin on product sales decreased due to fewer merchandise
offerings that carry higher gross margins in 1996 compared to 1995.
OPERATING AND SELLING
Operating expenses, which principally consist of all store expenses
including payroll, occupancy, advertising, depreciation and rental revenue
sharing, increased as a percentage of total revenue to 72.7% for the second
quarter of 1996, compared to 67.4% for the same period last year. The
increase was primarily due to higher store payroll and occupancy expenses
as a percentage of total revenue, due to lower average revenue per store,
resulting primarily from the addition of a large number of new stores, which
have lower revenue per store than mature Hollywood Video stores, during the
last seven months of 1995 and the first six months of 1996.
Depreciation expense combined with rental revenue sharing costs was 29.0%
of total revenue for the second quarter of 1996 compared to 29.4% for the
same period in 1995. The combined decrease was primarily due to lower
revenue sharing expense and the implementation of tighter budget procedures
in the purchase of new releases for existing stores.
GENERAL AND ADMINISTRATIVE
General and administrative expenses increased from $1.5 million, or 5.3% of
total revenue, for the three months ended June 30, 1995 to $4.0 million, or
6.3% of total revenue, for the three months ended June 30, 1996. The
increase is primarily attributable to increased investment in the Company's
infrastructure by decentralizing and delegating many of the current
corporate headquarter functions to zone offices.
8
<PAGE>
As a result of the Company's rapid growth and its plans to increase its
pace of new store openings, it announced that it is dividing its field
operations into four zones headed by four new Senior Vice Presidents. Each
Senior Vice President will have direct line responsibility over store
operations, marketing, real estate and construction while the corporate
offices in Portland, OR, will function as a support center to the zones.
AMORTIZATION OF INTANGIBLES
Amortization of intangibles increased from $0.6 million, or 2.2% of total
revenue, for the three months ended June 30, 1995 to $1.5 million, or 2.3%
of total revenue, for the three months ended June 30, 1996. The dollar
increase was primarily attributable to the amortization of intangible
assets arising from the Video Watch acquisition in 1995.
NONOPERATING INCOME (EXPENSE), NET
Net nonoperating income (expense) decreased from $0.1 million for the three
months ended June 30, 1995 to ($1.0) million for the three months ended
June 30, 1996. This change was primarily attributable to the Company's
higher level of borrowing under its revolving line of credit for the second
three months of 1996 compared to the second three months of 1995.
INCOME TAXES
The Company's effective tax rate increased from 36.8% of income before
income taxes for the three months ended June 30, 1995 to 40.0% for the
three months ended June 30, 1996 due to higher state tax rates in 1996
compared to 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal capital requirements are for opening new stores,
the purchase of rental inventory and the possible acquisition of existing
stores. The Company has funded its operations primarily through cash
generated from operations, the proceeds of four public equity offerings,
loans under the Company's revolving bank line of credit, trade credit and
equipment leases.
The Company ended the period with $4.7 million in cash and cash
equivalents. Working capital as of June 30, 1996 totaled $5.1 million
compared to $17.7 million at December 31, 1995. Videocassette rental
inventories are accounted for as noncurrent assets under generally accepted
accounting principles because they are not assets which are reasonably
expected to be completely realized in cash or sold in the normal business
cycle. Although the rental of this inventory generates a substantial
portion of the Company's revenue, the classification of these assets as
noncurrent excludes them from the computation of working capital. The
acquisition cost of videocassette rental inventories, however, is reported
as a current liability until paid and, accordingly, included in the
computation of working
9
<PAGE>
capital. Consequently, the Company believes working capital is not as
significant a measure of financial condition for companies in the video
retail industry as it is for companies in other industries. Because of the
accounting treatment of videocassette rental inventory as a noncurrent
asset, the Company may, from time to time, operate with a working capital
deficit.
Net cash provided by operating activities was $37.7 million during the six
months ended June 30, 1996 compared to $14.2 million for the same period
last year. The increase in cash provided by operations was primarily due to
higher income from operations and higher depreciation and amortization
expenses partially offset by a decrease in accounts payable.
Cash used in investing activities was $61.6 million for the six months
ended June 30, 1996 compared to $57.5 million for the same period last
year. During the six months ended June 30, 1996, cash used in investing
activities consisted primarily of purchases of videocassette rental
inventory for new and existing stores totaling $41.7 million, capital
expenditures totaling $24.4 million offset by a reduction in construction
and other receivables totaling $5.1 million. Capital expenditures included
the costs to open new stores, remodel certain existing stores and enhance
information systems.
Cash used by financing activities for the six months ended June 30, 1996
totaled $1.4 million and included the repurchase of all of the shares
issued in connection with the Video Watch acquisition for aggregate
consideration of $54.3 million. In addition, the Company repaid $7.3
million of long-term debt. Borrowings under the Company's revolving credit
line were $60.0 million at the end of the period.
Future capital requirements, other than normal operating expenses, consist
primarily of financing the addition of new retail stores and converting
certain acquired stores to the Hollywood Video name and store design. The
Company anticipates opening at least 127 additional new stores during the
final six months of 1996 and at least 200 new stores in 1997. Total capital
requirements to open 127 additional stores, including rental inventory for
new stores, are estimated to aggregate approximately $63 million for the
last six months of 1996.
In December 1995, the Company entered into a new revolving credit agreement
with its principal bank and a syndicate of banks to provide for a working
capital line of $75 million. Further, the Company finalized an expansion to
the bank credit facility on July 18, 1996, bringing its borrowing capacity
to $100 million. The additional $25 million is provided by Union Bank of
California and Key Bank of Washington. The agreement provides that funds
borrowed will bear interest, at the Company's option, at either LIBOR or
the bank's base rate plus approximately 1.25%, depending on the amount of
borrowings. The Company must also pay a fee of 1/5% per annum on the
available and unused portion of the credit facility. Amounts outstanding
under the credit line are collaterized by substantially all the assets of
the Company. The credit facility expires on December 28, 1998. As of June
30, 1996, $60.0 million was outstanding under the line, which amount was
borrowed to partially fund the share repurchase described above. The
availability of
10
<PAGE>
borrowings under the revolving credit agreement is based on the level of
eligible inventory, the Company's financial performance and compliance with
certain covenants and financial ratios.
The Company believes that its borrowing capacity and projected cash flow
from operations provide the necessary capital to fund its previously
announced plan of opening at least 210 new video retail superstores in
1996.
The Company continually reviews its financing options and, although it
currently believes that its borrowing capacity, projected cash flow from
operations, cash on hand and equipment leases and trade credit provide the
necessary capital to fund its previously announced plan of opening at least
210 new video retail superstores in 1996, alternative financing will be
considered if market conditions make it financially attractive, if the
Company's need for funds is greater than expected, if certain of the
sources identified above are unavailable or not available to the extent
anticipated or if 1996 new store expansion exceeds 210 new stores. Failure
to obtain financing to fund the Company's expansion plans or for other
purposes could have a material adverse effect on the Company's results of
operations.
FORWARD-LOOKING STATEMENTS
Certain of the information set forth above under the caption "Liquidity and
Capital Resources" includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933 and is subject to the safe
harbor created by that section. Certain factors that could cause results to
differ materially from those projected in the forward-looking statements
are set forth under that caption, below and in the following locations in
the Company's Annual Report on Form 10-K for the year ended December 31,
1995: in Item 1 - Business under the captions "Expansion Strategy,"
"Competition," and "Legal Proceedings" and in Item 7 - "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
under the captions "Liquidity and Capital Resources" and "General Economic
Trends, Quarterly Results and Seasonality."
The level of planned new store expansion represents a substantial increase
over prior periods, and the Company does not yet have signed leases for
most of these anticipated new stores. The Company's expansion is dependent
on a number of factors, including its ability to hire, train and assimilate
management and store-level employees, the adequacy of the Company's
financial resources and the Company's ability to identify new markets in
which it can successfully compete, to locate suitable store sites and
negotiate acceptable lease terms and to adapt its purchasing, management
information and other systems to accommodate expanded operations. The
Company's expansion is also dependent on the timely fulfillment by
landlords and others of their contractual obligations to the Company, the
maintenance of construction schedules and the speed at which local zoning
and constriction permits can be obtained.
11
<PAGE>
GENERAL ECONOMIC TRENDS, QUARTERLY RESULTS AND SEASONALITY
The Company anticipates that its business will be affected by general
economic conditions and other consumer trends. Future operating results may
be affected by various factors, including variations in the number and
timing of new store openings, the quality and number of new release titles
available for rental and sale, the expense associated with the acquisition
of new release titles, additional and existing competition, marketing
programs, weather, special or unusual events and other factors that may
affect retailers in general.
Any concentration of new store openings and the related new store
pre-opening costs near the end of a fiscal quarter could have an adverse
effect on the financial results for that quarter and could, in certain
circumstances, lead to fluctuations in quarterly financial results.
The video retail industry generally experiences relative revenue declines
in April and May, due in part to the change to Daylight Savings Time and to
improved weather, and in September and October, due in part to the start of
school and introduction of new television programs. The Company believes
these seasonal trends will continue.
12
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In January 1995 Viacom, Inc. filed a lawsuit against the Company in the
U.S. District Court for the District of Oregon alleging unfair competition,
misappropriation of trade secrets and intentional interference with
contracts in connection with the hiring by the Company in 1994 of five
former employees of the Blockbuster Entertainment division of Viacom, Inc.,
three of whom are officers of the Company. In addition, Viacom filed a
separate lawsuit against two of the employees, both of whom are officers of
the Company, in a Florida state court alleging breach of employment
agreements and misappropriation of trade secrets. Viacom sought an
injunction prohibiting the employees from working for the Company in their
current capacities and the payment of money damages by the employees.
In April 1996, the Company and its affected employees settled the
litigation described above. Although the settlement requires the Company
and Blockbuster to keep the terms confidential, the Company believes the
settlement will not adversely affect its operations and will not have a
material adverse effect on its financial condition or results of
operations.
In December 1995, three complaints were filed against the Company, certain
of the Company's directors and officers and certain other parties were
consolidated in a single action entitled MURPHY V. HOLLYWOOD ENTERTAINMENT
ET AL., case no. C95-1926-MA, United States District Court for the District
of Oregon. The consolidated complaint purports to be a class action
encompassing persons who purchased common stock of the Company between June
20 and December 6, 1995. The complaint alleges violation of certain federal
securities laws with respect to statements made to the public and losses
allegedly suffered by plaintiffs resulting from the decline in the trading
price of the Company's stock. In May 1996, the court certified the class
but dismissed the claims of plaintiffs based on violations of sections 11,
12(2), and 15 of the Securities Act of 1933. The remaining claims deal with
alleged violations of the Securities Exchange Act of 1934. The Company
believes this suit is without merit and will vigorously defend the
litigation. The Company does not believe that the ultimate outcome of the
litigation will have a material adverse effect on the Company's financial
condition, cash flows or results of operations.
13
<PAGE>
Part II - Other Information
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 28, 1996 at the Company's Annual Meeting of shareholders, the
holders of the Company's outstanding Common Stock took the actions
described below. As of the record date for the Annual Meeting, 33,879,738
shares of Common Stock were eligible to vote on the matters presented.
1. The shareholders elected each of Mark J. Wattles, Donald J. Ekman,
James N. Cutler, Jr., and Richard A. Galanti, by the votes indicated below,
to serve on the Company's Board of Directors for the ensuing year:
<TABLE>
<CAPTION>
Shares Against
Shares in Favor or Withheld Abstentions
--------------- ----------- -----------
<S> <C> <C> <C>
Mark J. Wattles 29,292,592 109,991 0
Donald J. Ekman 29,289,822 112,761 0
James N. Cutler, Jr. 29,291,694 110,889 0
Richard A. Galanti 29,287,601 114,982 0
Total Shares Eligible 33,879,738
Total Shares Present 29,402,583
</TABLE>
2. The shareholders voted to amend the Company's 1993 Stock Incentive
Plan to modify provisions relating to automatic option grants to
nonemployee directors by the following vote:
24,310,211 shares in favor
4,526,289 shares against or withheld
79,248 abstentions
146,127 broker nonvotes
Total Shares Eligible 33,879,738
Total Shares Present 29,061,875
14
<PAGE>
HOLLYWOOD ENTERTAINMENT CORPORATION
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.
HOLLYWOOD ENTERTAINMENT CORPORATION
(Registrant)
August 14, 1996 MARK J. WATTLES
- -------------------- -----------------------------------------------
(Date) Mark J. Wattles
Chairman of the Board, President
and Chief Executive Officer
(Principal executive officer of the registrant)
August 14, 1996 DOUGLAS A. GORDON
- -------------------- -----------------------------------------------
(Date) Douglas A. Gordon
Senior Vice President-Finance
(Principal financial and accounting officer
of the registrant)
15
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 4,697
<SECURITIES> 0
<RECEIVABLES> 11,067
<ALLOWANCES> 0
<INVENTORY> 30,481
<CURRENT-ASSETS> 48,366
<PP&E> 84,209
<DEPRECIATION> 19,824
<TOTAL-ASSETS> 336,710
<CURRENT-LIABILITIES> 43,254
<BONDS> 0
0
0
<COMMON> 202,161
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 336,710
<SALES> 19,963
<TOTAL-REVENUES> 129,022
<CGS> 12,176
<TOTAL-COSTS> 116,406
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,625
<INCOME-PRETAX> 11,119
<INCOME-TAX> 4,387
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,732
<EPS-PRIMARY> 0.19
<EPS-DILUTED> 0.19
</TABLE>
