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UNITED STATES
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 April 24, 2000
earliest event reported)
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Equity Marketing, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 23346 13-3534145
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(State or other (Commission File Number) (IRS Employer
jurisdiction of Identification No.)
incorporation)
6330 San Vicente Boulevard, Los Angeles, California 90048
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(Address of principal executive offices) (Zip Code)
Registrant's telephone
number, including area code (323) 932-4300
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(Former name or former address, if changed since last report.)
INFORMATION TO BE INCLUDED IN THE REPORT
ITEM 5. OTHER EVENTS.
Reference is made to the press release of the registrant, issued on
April 20, 2000, 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.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(A) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
None.
(B) PRO FORMA FINANCIAL INFORMATION.
None.
(C) EXHIBITS.
EXHIBIT NO. DESCRIPTION
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Exhibit 99.1 Press Release of Equity Marketing, Inc. issued on April
20, 2000.
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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.
EQUITY MARKETING, INC.
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(Registrant)
Date April 24, 2000 /s/ Leland P. Smith
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(Signature)
Leland P. Smith
Senior Vice President, General
Counsel and Secretary
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
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Exhibit 99.1 Press Release of Equity Marketing, Inc. issued on April
20, 2000.
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CONTACT: RIA MARIE CARLSON
VP, PUBLIC & INVESTOR RELATIONS
(323) 932-4096
FOR IMMEDIATE RELEASE
EQUITY MARKETING REPORTS RECORD
FIRST QUARTER REVENUES AND EARNINGS
LOS ANGELES, April 20, 2000 - Equity Marketing, Inc. (Nasdaq: EMAK)
announced today that revenues, income and earnings per share for the first
quarter ended March 31, 2000 were higher than any previous first quarter in the
company's history.
Revenues for the three-month period were $43.5 million, a 58 percent
increase over the $27.5 million in revenues posted in the first quarter of 1999.
Net income for the quarter was $1.3 million, or $0.20 per diluted share, versus
a loss of $265,000 (or a loss of $0.04 per diluted share) posted in the first
quarter of 1999.
Earnings before interest, taxes, depreciation and amortization (EBITDA)
for the first quarter increased 488 percent, to $2.7 million, or $0.42 per
diluted share, compared to $462,000, or $0.07 per diluted share, in 1999. EBITDA
will be an important measure of Equity's earnings performance going forward, as
the company pursues the growth initiatives funded by the private equity
investment from Crown Capital Group, according to Equity's Chairman and Chief
Executive Officer Don Kurz.
"This is the seventh consecutive quarter of record-breaking revenues,
and I'm pleased to see the momentum continue as all business units are
performing well," Mr. Kurz said. "Driving the results this quarter was a 65
percent increase in sales from our promotions business, which represented 92
percent of total revenues, coupled with our continued management of expenses.
Expenses for the quarter consumed 19 percent of revenues, compared to 26 percent
a year ago."
Net income for the quarter includes a net charge of $227,000 (net of
tax effects), or $0.04 per diluted share, to reflect a discount for the time
value of money relating to the sale of January 2000 receivables owed to the
company by AmeriServe Food Distribution, Inc., which filed a voluntary petition
under Chapter 11 of the United States Bankruptcy Code on January 31, 2000. As
announced on February 24, 2000, the company sold all of its pre-petition
AmeriServe receivables in exchange for a two-year, non-interest-bearing note and
the assumption of certain contractual obligations owed by Equity.
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FUTURE OUTLOOK
"Looking ahead," continued Mr. Kurz, "our objective is to be a global
leader in the $85 billion, high-growth marketing services business. We believe
our growth initiatives, fueled by organic expansion and acquisitions, will lead
to more diversified earnings and a powerful portfolio of sales and
brand-building services."
Mr. Kurz added: "We are in discussions with several companies in the
marketing services and Internet marketing industries and plan to announce an
acquisition before the end of the third quarter. We are targeting companies with
20 percent historical revenue growth, positive cash flow, complementary skills
and an established clientele. Our overriding goal is to diversify our revenue
and earnings mix and build shareholder value by investing in businesses that
generate high cash returns."
As announced on March 29, 2000, Crown Capital Group will invest up to
$40 million in the company in exchange for convertible preferred stock and
warrants to purchase convertible preferred stock. The preferred shares and
warrants, when converted into common stock at $14.75, $16.00 and $18.00 per
share, represent approximately a 24 percent ownership in the company after
giving effect to the assumed future exercise of all currently outstanding
employees' and directors' stock options. The company intends to use the Crown
investment to fund growth initiatives. Depending on the use of proceeds and
other factors, the Crown investment may be dilutive to earnings per share in
2000 because of an estimated higher share count.
Equity Marketing, Inc. is a leading marketing services company,
providing a wide range of custom promotional programs that build sales and brand
awareness for retailers, restaurant chains and consumer goods companies such as
Burger King Corporation, The Coca-Cola Company, Exxon / Mobil, Sunoco, Inc.,
CVS/pharmacy and others. The company is also a developer and marketer of
distinctive, branded consumer products that complement its core promotions
business and are based on trademarks it owns or classic licensed properties.
More information about Equity Marketing is available on the company's web site
at www.equity-marketing.com.
CERTAIN EXPECTATIONS AND PROJECTIONS REGARDING THE FUTURE PERFORMANCE
OF EQUITY MARKETING, INC. DISCUSSED IN THIS NEWS RELEASE ARE FORWARD-LOOKING AND
ARE MADE UNDER THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995. THESE EXPECTATIONS AND PROJECTIONS ARE BASED ON CURRENTLY
AVAILABLE COMPETITIVE, FINANCIAL AND ECONOMIC DATA ALONG WITH THE COMPANY'S
OPERATING PLANS AND ARE SUBJECT TO FUTURE EVENTS AND UNCERTAINTIES. MANAGEMENT
CAUTIONS THE READER THAT THE FOLLOWING FACTORS, AMONG OTHERS, COULD CAUSE THE
COMPANY'S ACTUAL CONSOLIDATED RESULTS OF OPERATIONS AND FINANCIAL POSITION IN
2000 AND THEREAFTER TO DIFFER SIGNIFICANTLY FROM THOSE EXPRESSED IN
FORWARD-LOOKING STATEMENTS: THE COMPANY'S DEPENDENCE ON A SINGLE CUSTOMER; THE
SIGNIFICANT QUARTER-TO-QUARTER VARIABILITY IN THE COMPANY'S REVENUES AND NET
INCOME; THE COMPANY'S DEPENDENCE ON THE POPULARITY OF LICENSED ENTERTAINMENT
PROPERTIES AND THE ABILITY TO LICENSE, DEVELOP AND MARKET NEW PRODUCTS; THE
COMPANY'S DEPENDENCE ON FOREIGN MANUFACTURERS; THE COMPANY'S NEED FOR ADDITIONAL
WORKING CAPITAL; AND THE POTENTIAL NEGATIVE IMPACT OF FUTURE ACQUISITIONS. THE
COMPANY UNDERTAKES NO OBLIGATION TO PUBLICLY
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RELEASE THE RESULTS OF ANY REVISIONS TO FORWARD-LOOKING STATEMENTS, WHICH MAY
BE MADE TO REFLECT EVENTS OR CIRCUMSTANCES AFTER THE DATE HEREOF OR TO
REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS. THE RISKS HIGHLIGHTED HEREIN
SHOULD NOT BE ASSUMED TO BE THE ONLY ITEMS THAT COULD AFFECT THE FUTURE
PERFORMANCE OF THE COMPANY.
WHILE MANY IN THE FINANCIAL COMMUNITY CONSIDER EBITDA TO BE AN
IMPORTANT MEASURE OF COMPARATIVE OPERATING PERFORMANCE, IT SHOULD BE CONSIDERED
IN ADDITION TO, BUT NOT AS A SUBSTITUTE FOR OR SUPERIOR TO, OPERATING INCOME,
NET EARNINGS, CASH FLOW AND OTHER MEASURES OF FINANCIAL PERFORMANCE PREPARED IN
ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES.
(tables follow)
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EQUITY MARKETING, INC.
Condensed Consolidated Statements of Income
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
(UNAUDITED)
2000 1999
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<S> <C> <C>
Revenues $ 43,477 $ 27,457
Cost of sales 33,203 20,545
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Gross profit 10,274 6,912
Operating expenses:
Salaries, wages and benefits 3,401 3,471
Selling, general and administrative 4,819 3,660
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Total operating expenses 8,220 7,131
Income (loss) from operations 2,054 (219)
Other income (expense) 85 (222)
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Income (loss) before provision for income taxes 2,139 (441)
Provision (benefit) for income taxes 845 (176)
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Net income (loss) $ 1,294 $ (265)
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Basic income (loss) per share
Earnings (loss) per share $ 0.21 $ (0.04)
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Weighted average shares outstanding 6,236,718 6,210,497
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Diluted income (loss) per share
Earnings (loss) per share $ 0.20 $ (0.04)
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Weighted average shares outstanding 6,473,471 6,210,497
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EQUITY MARKETING, INC.
Condensed Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 2000 1999
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(UNAUDITED)
<S> <C> <C>
Cash and cash equivalents $ 1,169 $ 7,131
Accounts receivable, net 26,883 37,385
Note receivable, current portion 7,780 5,024
Inventory 21,326 8,742
Prepaids and other current assets 6,323 5,696
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CURRENT ASSETS 63,481 63,978
Fixed assets, net 4,667 4,907
Intangibles assets, net 21,892 21,846
Note receivable, long-term portion 6,311 5,491
Other assets 956 1,022
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TOTAL ASSETS $ 97,307 $ 97,244
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<CAPTION>
LIABILITIES AND March 31, December 31,
STOCKHOLDERS' EQUITY 2000 1999
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<S> <C> <C>
Short-term debt $ 4,500 $ 12,500
Accounts payable 24,516 21,726
Accrued liabilities 11,818 18,707
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CURRENT LIABILITIES 40,834 52,933
Long-term liabilities 2,214 2,286
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TOTAL LIABILITIES 43,048 55,219
Mandatory redeemable preferred stock 8,942 --
Stockholders' equity 45,317 42,025
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 97,307 $ 97,244
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