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): February 25, 1998
EQUITY MARKETING, INC.
(Exact Name of Registrant as Specified in Charter)
Delaware 0-23346 13-3534145
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
131 S. Rodeo Drive
Beverly Hills, California 90212
(Address of Principal Executive Offices)
(310) 887-4300
(Registrant's Telephone Number)
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ITEM 5. OTHER EVENTS
Reference is made to the press release of Registrant, issued on
February 25, 1998, which contains information meeting the requirements of
this Item 5, and which is incorporated herein by this reference. A copy of
this press release is attached to this Form 8-K as Exhibit 99.1.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
February 26, 1998 EQUITY MARKETING, INC.
By: /s/ Michael J. Welch
-------------------------------------
Michael J. Welch
Executive Vice President and
Chief Financial Officer
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EXHIBIT INDEX
EXHIBITS PAGE NUMBER
99.1 Press Release dated February 25, 1998. 5
<PAGE>
EQUITY MARKETING, INC. REPORTS ALL TIME RECORD FOURTH QUARTER
AND YEAR-END RESULTS
* REVENUES RISE 44% IN THE FOURTH QUARTER, UP 31% FOR THE YEAR
* DILUTED EARNINGS PER SHARE UP 43% IN THE QUARTER, UP 23% FOR THE
YEAR
LOS ANGELES, CA, FEBRUARY 25, 1998 -- Equity Marketing, Inc. (Nasdaq:
EMAK) today announced record financial results for the fourth quarter and
year ended December 31, 1997. Total revenues and diluted earnings per
share for the fourth quarter and year-end were the highest in the company's
history.
Total revenues for the fourth quarter reached $50.6 million,
representing the Company's highest all time quarterly revenues and an
increase of 44% over the fourth quarter of 1996. Net income rose 49% to
$3.6 million for the quarter, or $0.57 per diluted share, compared to $2.4
million, or $0.40 per diluted share, in the fourth quarter of 1996.
Weighted average diluted shares outstanding were 6,318,001 and 6,082,315
for the fourth quarter of 1997 and 1996, respectively.
Total revenues for the year ended December 31, 1997 were $146.5
million, representing another all time record and an increase of 31% over
1996. This marks the Company's fourth consecutive year of revenue growth
in excess of 30%. Net income rose 29% to $9.6 million, or $1.55 per
diluted share, compared to $7.4 million, or $1.26 per diluted share, in
1996. This represents an increase in earnings per diluted share of 23%
with weighted average diluted shares outstanding of 6,216,794 and 5,891,357
for 1997 and 1996, respectively.
Commenting on the results, Donald A. Kurz and Stephen P. Robeck, Co-
Chief Executive Officers, said, "We are extremely pleased with our record
performance for both the fourth quarter and for the year as a whole. Our
outstanding performance reflects consistent pursuit of double-digit growth
through client and distribution channel diversification, increased business
with key clients, and expansion of our international business. At the core
of this success is Equity
-more-
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Equity Marketing, Inc.
Page 2:
Marketing's ability to access the best intellectual property, create low-
cost value added product and distribute product through two mutually
supportive distribution channels: Equity Promotions and Equity Toys.
During the fourth quarter of 1997, revenues were driven by a combination of
promotions related to key entertainment licenses for clients such as Burger
King and Shell Oil, and a mix of our retail toy lines based on properties
such as WISHBONE, THE LAND BEFORE TIME and LOONEY TUNES."
Highlights that impacted 1997 operating results and developments that
will drive growth in the coming year include:
* A 25% increase in revenues in the Equity Promotions division,
led by a record year for the Burger King business, and a 61%
sales increase in the Equity Toys division.
* A consolidation of the Company's other worldwide promotions
sales effort, leading to many new domestic and international
clients. New US clients in 1997 included:
* Choice Hotels, Elmer Candies, Buena Vista Home
Entertainment, Warner Brothers Home Video and Pepperidge
Farm.
On the international front, key revenue contributors in 1997
were:
* Kellogg's, Coca-Cola, Duracell, Aquas Calientes, YPF
Argentina, Nestle, Molinos and Efe.
* Continued growth with Shell Oil Products Company and NASCAR
relationships. This year Equity Marketing secured Shell's
first entertainment promotion, a program tied to Twentieth
Century Fox's ANASTASIA. In February 1998, the Company was named
agency of record by Shell for its motorsports programs, providing
the opportunity for significant growth over the next several
years.
* Significant domestic and international contracts associated with
key entertainment licenses for Hollywood event films released in
1997, including LOST WORLD: JURASSIC PARK, HERCULES, BATMAN &
ROBIN and ANASTASIA.
* A three-year agreement for Equity Toys to act as worldwide
master toy licensee for Universal Studios' BABE: PIG IN THE
CITY.
* A three-year worldwide agreement with Sony Signatures for Equity
Toys to manufacture products based on TriStar Picture's upcoming
monster epic GODZILLA.
* Continued development of Equity Toys' evergreen lines, such as
THE LAND BEFORE TIME and WISHBONE.
Commenting on the outlook for 1998, Messrs. Kurz and Robeck continued,
"Having just completed our most successful Toy Fair ever and with
outstanding promotional sales opportunities based on a strong slate of all-
family movie releases scheduled for 1998, we expect another year of double
digit sales and earnings growth in 1998. However, a number of these movies
are scheduled to be released in the second half of this year. As a result,
we currently anticipate that revenue in the first half will be
approximately equal to 1997, while earnings per share will be down
significantly, primarily due to the planned build-up in staffing to
accommodate our anticipated growth for the year. In addition, first
quarter EPS, which will likely be $0.08 - $0.10, will be compared to an
exceptional first quarter in 1997 which had an usually profitable mix of
sales, resulting in gross margins that were well above full-year levels."
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Equity Marketing, Inc.
Page 3:
The foregoing paragraphs contain forward-looking statements. The
Company wishes to caution readers that forward-looking statements are based
on assumptions which may or may not prove accurate and accordingly are
necessarily speculative. Readers should not place undue reliance on any
such forward-looking statements, which speak only as of the date made.
Actual results could vary materially from those anticipated for a variety
of reasons, including, without limitation, the potential cancellation
and/or delay of promotions due to delays in release of the theatrical
motion pictures, the failure of the Company to obtain promotions projects
based on these motion pictures at anticipated levels, the success or
failure of a specific motion picture or television property, the loss of
existing licenses or the inability to renew or extend licenses under
favorable terms, consumer demand for its products, the Company's dependence
on a single customer, quarterly fluctuations in financials results and
increases in international tariff rates, which would increase the Company's
cost of sales.
Equity Marketing designs, develops, produces and markets worldwide a
broad range of toys, gifts and other products based on characters from
popular entertainment properties licensed by major television and motion
pictures studios, as well as its own original characters and concepts.
Through its Equity Promotions division, the Company develops and
manufactures promotional toys and other products for a wide range of
consumer-oriented companies. Through Equity Toys, the Company creates and
manufactures products for sale through leading mass-market and specialty
retailers.
###
This news release contains forward-looking statements. The Company
undertakes no obligation to publicly release the results of any revisions
to these forward-looking statements which may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
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Equity Marketing, Inc.
Year End Financial Results
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<TABLE>
<CAPTION>
EQUITY MARKETING, INC.
Condensed Consolidated Statements of Income
(In thousands, except share and per share data)
THREE MONTHS ENDED TWELVE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
----------- -----------
(UNAUDITED)
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues $ 50,595 $ 35,033 $ 146,508 $ 111,747
Cost of sales 39,116 26,672 110,508 83,598
------------ ------------ ------------ ------------
Gross profit 11,479 8,361 36,000 23,149
Operating expenses 5,710 4,573 20,875 16,734
------------ ------------ ------------ ------------
Operating income 5,769 3,788 15,125 11,415
Other income 125 35 522 259
------------ ------------ ------------ ------------
Income before provision for income taxes 5,894 3,823 15,647 11,674
Provision for income taxes 2,269 1,395 6,024 4,231
------------ ------------ ------------ ------------
Net income $ 3,625 $ 2,428 $ 9,623 $ 7,443
============ ============ ============ ============
Basic Income Per Share
Earnings Per Share $ 0.61 $ 0.43 $ 1.63 $ 1.33
============ ============ ============ ============
Weighted Average Shares Outstanding 5,966,398 5,709,731 5,913,313 5,598,268
============ ============ ============ ============
Diluted Income Per Share
Earnings Per Share $ 0.57 $ 0.40 $ 1.55 $ 1.26
============ ============ ============ ============
Weighted Average Shares Outstanding 6,318,001 6,082,315 6,216,794 5,891,357
============ ============ ============ ============
</TABLE>
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Equity Marketing, Inc.
Year End Financial Results
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<TABLE>
<CAPTION>
EQUITY MARKETING, INC.
Condensed Consolidated Balance Sheets
(In thousands)
ASSETS DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Cash and short-term investments $ 8,935 $ 8,502
Account receivable, net 27,773 13,092
Inventory 8,658 4,715
Prepaids and other current assets 3,749 2,797
------------ ------------
CURRENT ASSETS 49,115 29,106
Fixed assets, net 2,550 2,285
Other assets 5,488 5,802
____________ ____________
TOTAL ASSETS $ 57,153 $ 37,193
============ ============
LIABILITIES AND
STOCKHOLDERS' EQUITY DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
Accounts payable $ 14,560 $ 4,884
Accrued expenses 5,322 6,041
Other current liabilities 169 229
------------ ------------
CURRENT LIABILITIES 20,051 11,154
Long-term liabilities 962 1,006
------------ ------------
TOTAL LIABILITIES 21,013 12,160
Stockholders' equity 36,140 25,033
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 57,153 $ 37,193
============ ============
</TABLE>
