FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 2O549
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission file number 0-26902
NIMBUS CD INTERNATIONAL, INC.
(Exact name of Registrant as specified in its charter)
Delaware 54-1651183
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
State Route 629, Guildford Farm, Ruckersville, Virginia 22968
(Address of principal executive offices)
Registrant's telephone number, including area code: (804) 985-1100
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.01
(Title of Class)
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 ( )
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ( )
As of June 6, 1996, there were 8,925,094 shares of the Registrant's common
stock outstanding and the aggregate market value of such shares (based on the
closing sale price of such shares on the Nasdaq National Market on June 6, 1996)
was approximately $141,685,867. Shares of the Registrant's common stock held by
each executive officer and director and by each entity that owns 5% or more of
the Registrant's common stock have been excluded in that such persons may be
deemed to be affiliates. This determination of affiliate status is not
necessarily a conclusive determination for other purposes.
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
Certain sections of the Registrant's Annual Report to Stockholders for the
year ended March 31, 1996 are incorporated by reference in Parts II and IV of
this Form 10-K to the extent stated herein. In addition, certain sections of the
Registrant's definitive Proxy Statement for the 1996 Annual Meeting of
Stockholders to be held on August 6, 1996 are incorporated by reference in Part
II of this Form 10-K to the extent stated herein.
<PAGE>
PART I
ITEM 1. BUSINESS
Overview
Nimbus CD International, Inc. ("Nimbus" or the "Company") is a leading
independent manufacturer of compact discs ("CDs") for distribution in North
America, the United Kingdom and continental Europe. Having established one of
the first CD manufacturing facilities in the world in 1982, Nimbus was a pioneer
in CD production, and currently serves a broad base of customers from three
manufacturing sites in the United States (Charlottesville, Virginia, Provo, Utah
and Sunnyvale, California) and one in the United Kingdom (Cwmbran, Wales). The
Company has grown rapidly since its entry into CD production, driven initially
by demand for CDs providing storage and playback of pre-recorded music
("CD-Audio"), and more recently by the rapid emergence of "read only memory" CDs
("CD-ROM"), which permit cost efficient storage and retrieval of any combination
of data, text, graphics, audio and video. Nimbus offers more than 1500 customers
an integrated range of services including pre-mastering and mastering, disc
replication and full turnkey services, including packaging design consultation,
materials procurement, packaging assembly and order fulfillment. The Company
focuses its marketing efforts primarily on independent record labels and
multimedia software developers who demand a high level of service. The Company
meets customer expectations by providing high quality product at a competitive
price within a short turnaround time. In addition, Nimbus is able to access
larger CD-ROM customers not otherwise served by the Company through its
strategic alliance with Stream International, Inc. ("Stream"), a majority-owned
subsidiary of R.R. Donnelley & Sons Company ("Donnelley"). The Company intends
to enter into similar strategic alliances with other companies serving the
multimedia market which require CD manufacturing expertise.
The Company was organized in October 1992 as a Delaware corporation by DLJ
Merchant Banking Inc. and certain of its affiliates (the "DLJ Investors"), along
with other investors, for the purpose of acquiring the CD manufacturing
operations of Nimbus Records Limited (the "Predecessor"). The Company's
principal executive office is located at State Route 629, Guildford Farm,
Ruckersville, Virginia 22968, and its telephone number at this location is (804)
985-1100. The Company's Common Stock is traded on the Nasdaq National Market
under the symbol "NMBS". Except as otherwise noted herein, all references to
"Nimbus" or the "Company" shall mean Nimbus CD International, Inc. and its
subsidiaries.
Recent Developments
The Recapitalization
Pursuant to an agreement dated December 8, 1994, affiliates of both McCown
De Leeuw & Co. (the "MDC Entities") and Behrman Capital L.P. ("Behrman Capital")
acquired approximately 54.5% and 23.0%, respectively, of the outstanding Common
Stock of the Company and replaced the DLJ Investors as the Company's majority
stockholders through a series of transactions consummated on March 31, 1995 (the
"Recapitalization"). In connection with the Recapitalization, the Company and
the holders of the Company's Common Stock entered into a Stockholders Agreement
which contained, among other things, restrictions on the transferability of
shares of Common Stock, registration rights with respect to the Company's Common
Stock and matters related to the Company's Board of Directors.
The Offerings
On October 16, 1995, the Company declared a 3.76049 for one stock split
which was distributed to stockholders on October 18, 1995. Thereafter, on
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October 30, 1995, the Company completed an initial public offering of 6,350,000
shares of the Company's Common Stock at an initial offering price of $7.00 per
share. Of the 6,350,000 shares of Common Stock offered for sale by the Company,
5,080,000 shares were purchased and offered for sale to the public by
underwriters in the United States (the "U.S. Offering"), with the remaining
1,270,000 shares being purchased and offered for sale to the public by foreign
underwriters (the "International Offering", together with the U.S. Offering, the
"Offerings"). Contemporaneously with the Offerings, the Company sold an
additional 500,000 shares of the Company's Common Stock in a private placement
transaction to Behrman Capital, a principal stockholder of the Company, at a
price per share of $6.55 which was equal to the initial public offering price
less the underwriting discount (the "Private Placement"). The net proceeds to
the Company from the Offerings and the Private Placement, after deducting
underwriting discounts, commissions and expenses payable by the Company, were
$43.7 million. The Company used $41.7 million of the net proceeds to reduce
outstanding indebtedness and $2.0 million for general corporate purposes.
In addition, following consummation of the Offerings, the Company and the
MDC Entities entered into a registration rights agreement (the "Registration
Rights Agreement"), pursuant to which the Company granted the MDC Entities
certain rights to have their shares of Common Stock registered. The completion
of the Offerings terminated all of the provisions of the Stockholders Agreement
except for the registration rights granted thereunder to Behrman Capital, the
DLJ Investors and Chase Manhattan Investment Holdings, Inc.
The New Credit Agreement
Upon consummation of the Offerings, the Company amended and restated its
existing credit agreement with The Chase Manhattan Bank, N.A., as agent, and the
lenders party thereto (the "New Credit Agreement"). The New Credit Agreement
provides for a term loan of $25.0 million and a revolving credit facility the
aggregate principal amount of which shall not exceed $25.0 million outstanding
at any time. Borrowers under the New Credit Agreement are Nimbus Manufacturing
Inc. ("NMI") and Nimbus Manufacturing (UK) Limited ("Nimbus UK"), which are,
respectively, the Company's United States and United Kingdom operating
subsidiaries. A portion of the revolving loan commitment is available to be
utilized for letters of credit, a swingline facility available to NMI and an
overdraft facility available to Nimbus UK. The New Credit Agreement has a dual
currency option, which permits NMI to borrow in U.S. dollars and Nimbus UK to
borrow in pounds sterling. Loans under the revolving credit facility may be
repaid and reborrowed, subject to a schedule of mandatory repayments and
commitment reductions. The New Credit Agreement terminates on October 30, 2000.
Amendment to the Donnelley CD-ROM Agreement
In April 1994, the Company entered into a strategic alliance with
Donnelley (the "Donnelley CD-ROM Agreement"), pursuant to which the Company
established a multi-line CD manufacturing facility in Provo, Utah, and Donnelley
purchased 286,128 shares of the Company's Common Stock for an aggregate purchase
price of $1.0 million. In April 1995, as permitted by the Donnelley CD-ROM
Agreement, Donnelley assigned substantially all of its rights in, and
obligations under, the Donnelley CD-ROM Agreement (as assigned, the "Stream
CD-ROM Agreement") and transferred its shares of Nimbus Common Stock to Stream,
Donnelley's majority-owned subsidiary. The Stream CD-ROM Agreement, as amended
and restated on April 1, 1995, requires Stream, for a period of six years, to
purchase 23 million discs in fiscal 1996 and 24 million discs annually
thereafter for a fixed price per disc which is subject to possible reductions
based upon changes in the cost of manufacturing CD-ROM discs, and to use all
commercially reasonable efforts to promote and sell CD-ROM products manufactured
by the Company. During fiscal 1996, Stream purchased discs from the Company for
an aggregate purchase price of $20.1 million which accounted for 17% of the
Company's revenues.
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Acquisition of HLS Duplication, Inc.
As part of its strategy to broaden its customer services and to establish
a presence on the West Coast of the United States, the Company acquired
substantially all of the assets of HLS Duplication, Inc. ("HLS") on August 31,
1995, for a purchase price of approximately $5.15 million in cash and the
assumption of certain liabilities. HLS is a Sunnyvale, California-based supplier
of turnkey services to CD-ROM customers. HLS also offers fulfillment services,
such as pick, pack and ship services, in addition to drop shipments and has the
capability to offer electronic order intake, either directly from the customer
or via the Internet and inbound telemarketing.
Marketing 3-D id(TM) Technology
In June 1995, the Company and Applied Holographics PLC ("Applied
Holographics") entered into joint venture arrangements in both the U.S. and the
United Kingdom to market patented technology to imprint holograms onto CDs in
order to provide customers with an effective piracy deterrent without loss of
data capacity or playing time. This technology is marketed under the name 3-D
id (TM) and allows for a holographic image to be either (i) mastered on those
areas of a CD that do not contain data including the inner mirror band or unused
outer portions of the disc (the "Security Band Process") or (ii) embossed over
the entire surface of a CD using specially designed embossing machinery (the
"Edge-to-Edge Process"). The Company believes that the Edge-to-Edge Process
cannot be duplicated without the embossing machinery and the Company has
received patents for certain mechanical aspects of that machinery. The joint
ventures are preparing to license 3-D id (TM) technology to other CD
manufacturers. The joint ventures will collect a royalty fee for each CD
produced by other manufacturers using 3-D id (TM) technology with all royalty
revenues split equally between the Company and Applied Holographics.
Industry Overview
Since its introduction in 1982, CD technology has evolved from serving a
narrow set of applications to becoming the preferred medium for the storage of
digital information. On a cost per megabyte basis, CDs continue to compare
favorably to available alternatives for high-capacity applications such as
floppy disks, magnetic tape and hard drives. As a result, CD technology is the
dominant format in the audio market and is a leading technology in data storage
and retrieval markets. The video market is the next logical extension of CD
technology.
CD-Audio Market. The established market for pre-recorded music represented
the first major application of CD technology. In the six years ended 1995,
worldwide sales of full length pre-recorded music (CD-Audio, LPs, audio
cassettes) grew from approximately 2.7 billion to 3.5 billion units, a compound
annual growth rate of 5.3%. Over the same period, full length CD-Audio sales
more than doubled from approximately 900 million to 2.0 billion units and
short-play CD singles contributed approximately 300 million additional units in
1995, up from 90 million units six years earlier.
Consumer acceptance of CD-Audio has been driven by its superiority over
other formats in terms of sound quality, random accessing and indexing of data
and by the market penetration of CD players. CD-Audio has become the standard
for home audio systems and significant market expansion has resulted from
increased sales of in-car and portable players, which grew by approximately 600%
in the United States between 1991 and 1995. In the United States and Europe, the
major world markets in which the Company participates, approximately 250 million
CD-Audio players were in use in 1995, representing household penetration
(including multiple ownership by individual households) of approximately 98%. By
the year 2000, the Company estimates that 415 million CD-Audio players will be
in use, representing household penetration (including multiple ownership by
individual households) of more than 150%.
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CD-Audio manufacturing is dominated by manufacturing organizations
affiliated with the five major international music companies: Sony, PolyGram,
Warner, BMG and EMI. Collectively, the CD manufacturers affiliated with these
five organizations (the "Music Company Manufacturers") produced approximately
54% of the 1995 world output of CD-Audio, primarily to meet the needs of their
affiliated record labels. The independent record labels accounted for
approximately 28% of 1995 CD-Audio unit sales. These companies are generally
serviced by "non-affiliated" or independent CD manufacturers, including the
Company, because of their smaller average unit runs and their greater need for a
broad range of services, such as pre-mastering and mastering, disc replication,
packaging and shipping, in addition to short turnaround times. The five largest
independent CD manufacturers, including the Company, produced approximately 14%
of worldwide CD-Audio output in 1995. In 1995, the Company believes it was the
fourth among the five largest independent CD-Audio manufacturers.
CD-ROM Market. CD-ROM is an extension of CD technology which provides
storage and retrieval of any combination of data, text, graphics, audio and
video. CD-ROM is ideally suited to applications involving storage of large
amounts of stable information in a form which can be distributed to a diverse
user population. CD-ROM was introduced in the late 1980's and was initially
limited to business and professional applications such as library references and
parts catalogs. Increasingly widespread presence of personal computers and
CD-ROM drives has created a consumer marketplace for applications created by
software developers, game developers, data base publishers, multimedia
publishers and developers of "edutainment" products.
Worldwide CD-ROM demand was estimated to be 30 million units in 1992 and
grew to 525 million units in 1995, a compound annual growth rate of 160%, and
the Company expects it to grow to approximately 1.15 billion units in 1997. The
market for business-oriented applications is large and growing as a result of
the demand for software and other database products. The consumer market has
emerged within the last two years and is expected to demonstrate continued
substantial growth. This market has two primary segments: proprietary CD-ROM
game players such as "Sega Saturn," "Sony Playstation" and "3DO" and home
applications for personal computers equipped with CD-ROM drives. In the United
States and Europe, the markets served by the Company, the Company expects the
installed base of CD-ROM drives to grow from 29 million in 1995 to 110 million
by 1999.
The Music Company Manufacturers collectively produced in excess of 28% of
the 1995 worldwide output of CD-ROM units. The five largest independent CD
manufacturers, including the Company, collectively produced approximately 27% of
the 1995 worldwide output of CD-ROM. The remaining 1995 CD-ROM worldwide output
was produced by approximately 150 small to medium size CD manufacturing
operations. Nimbus is the third largest CD-ROM manufacturer in North America and
the fourth largest in Europe.
CD-ROM orders typically involve smaller production runs than CD-Audio
because CD-ROM is generally produced for more specialized applications. Because
it is an established independent manufacturer with the ability to produce small
runs efficiently, the Company believes that it is strategically positioned to
better serve the needs of CD-ROM customers, who generally require short
turnaround time with a high degree of customized services.
DVD Market. The Company believes that the digital video disc ("DVD") is
the next logical extension of CD technology. The new DVD format is capable of
holding a full length motion picture (135 minutes) on a standard-sized CD with
video and audio quality superior to current videocassette technology. DVD has
far greater information density as well as a new playback technology. Two
leading DVD formats emerged during the early development of this technology, led
by Philips-Sony and Toshiba-Time Warner. Following concern over a "format war",
the two groups agreed on a single format capable of meeting all of the
technological goals using a two-sided disc design. The Company is
technologically capable of manufacturing the DVD format and expects to have the
capacity to offer manufacturing services in anticipation of a late-1996
worldwide introduction.
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Initially, the primary application for the DVD format will be traditional
motion pictures. Unlike videocassettes, DVD offers no image or sound degradation
with normal use, greater storage capacity, indexing and random access and lower
manufacturing cost. The storage capacity of the DVD format will also allow for
added features such as multilingual voicetracks, CD-Audio soundtrack albums,
director's notes, story-based games and other CD-ROM applications. The Company
expects that DVD players will become widely available at retail prices ranging
from $500 to $800 with an initial industrywide catalog of more than 250 motion
picture titles. DVD is expected to compete most directly with the market for
videocassette sales (sell-through) which in 1995 was estimated to total almost
900 million units across the three major world regions of the U.S., Europe and
Japan.
DVD-ROM Market. The Company believes that the expanded information density
afforded by DVD will be employed by CD-ROM content owners who wish to
incorporate a significant video component in their material. As a result, the
introduction of DVD-ROM product is expected to occur in early 1997
simultaneously with the availability of DVD-ROM drives to the consumer market.
The Company believes that the new DVD-ROM drives will initially retail for less
than $300. Game and multimedia developers are expected to lead development of
DVD-ROM products.
Business Strategy
The Company's objective is to increase sales and profitability and to
maximize return to its stockholders by leveraging its position as a leading
independent manufacturer of CDs. The Company's strategy for achieving these
objectives includes the following:
Aggressively Expanding its Position as a Leading Manufacturer of CD-ROM.
CD-ROM is currently the Company's fastest growing product. CD-ROM customers are
often specialized software developers and providers of digital information who
are unable to manufacture CDs in their own facilities. In addition, the markets
for these applications are highly competitive and time-sensitive. Consequently,
CD-ROM customers typically demand high quality service with short turnaround
times. The Company believes its ability to meet these needs has resulted in
Nimbus becoming the third largest CD-ROM manufacturer in North America and the
fourth largest CD-ROM manufacturer in Europe. In order to expand this strong
market position to a wider range of potential customers, the Company has
increased the size of its CD-ROM sales and marketing organizations both in the
United States and the United Kingdom. Furthermore, Nimbus' agreement with Stream
has enabled the Company to develop relationships with many of the world's
largest hardware and software companies. In addition, the Company will take
advantage of its technological expertise to produce DVD-ROM product for content
owners and developers.
Targeting Selected Customers in the CD-Audio Market. CD-Audio production
provides the Company with a strong, stable revenue base. The Company's marketing
efforts will remain focused on independent record companies (the fastest growing
segment of the recording industry) that value the Company's high levels of
service including rapid turnaround, inventory tracking and control, print
material procurement, specialized packaging and fulfillment. In addition, the
CD-Audio and CD-ROM markets are beginning to converge, as record companies
introduce Enhanced CD or CD Extra (i.e., CD-ROM with an audio component, such as
a music video) which not only can be played in a standard audio CD player, but
includes special CD-ROM information for users with computers equipped with a
CD-ROM drive. The Company also intends to exploit its CD-ROM expertise in the
marketing of CD Extra formats to existing and new customers.
Capitalizing on the Development of DVD. The Company is well positioned to
participate in the emerging DVD market. The Company has acquired the equipment
necessary to manufacture the bonded two-sided disc format. In addition, Nimbus
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representatives have been active participants in industry forums involved in the
review and development of format standards and manufacturing protocols. By
combining a direct sales effort targeting independent motion picture production
companies and strategic alliances with multimedia companies who require CD
manufacturing expertise and provide access to potential customers not otherwise
served by Nimbus, the Company intends to pursue a strategy in the DVD market
similar to the one it has utilized in the CD-ROM market.
Expanding the Company's Service Offerings. The Company continues to expand
its value-added service offerings which complement its core CD manufacturing
capabilities. This strategy is demonstrated by the Company's acquisition of HLS
(which now operates as Nimbus Software Services, Inc.) which enabled the Company
to expand its ability to provide customers with turnkey services. Such turnkey
services include packaging design consultation, materials procurement, packaging
assembly and order fulfillment. The addition of these turnkey services allows
the Company's customers to "one-stop shop" and to better control their
inventories through real-time access to a single source for their finished CD
product.
Maintaining its Position as a Leader in Manufacturing Efficiency and
Technical Expertise. The Company continues to invest in, and maximize the
efficiency of, equipment, systems, processes and personnel to maintain its
position as a low-cost manufacturer of CDs. From fiscal 1991 to fiscal 1996,
production yields have increased from 40% to 92%, while pressing cycle times
have fallen from approximately seven seconds to less than five seconds. Discs
produced per employee have risen from 56,100 discs in fiscal 1990 to 148,300
discs in fiscal 1996. The Company is selectively implementing dual cavity
pressing which will further increase manufacturing efficiency.
Marketing Holographic CDs. In its effort to respond to customer piracy
concerns and needs, the Company has entered into joint venture arrangements in
both the U.S. and the United Kingdom to market patented technology to imprint
holograms onto CDs in order to provide customers with an effective piracy
deterrent without loss of data capacity or playing time. This technology is
marketed under the name 3-D id(TM) and allows for a holographic image to be
applied using the Security Band Process or the Edge-to-Edge Process. The Company
believes that the Edge-to-Edge Process cannot be duplicated without the
embossing machinery and the Company has received patents for certain mechanical
aspects of that machinery. The joint ventures are preparing to license 3-D id
(TM) technology to other CD manufacturers. The joint ventures will collect a
royalty fee for each CD produced by other manufacturers using 3-D id (TM)
technology with all royalty revenues split equally between the Company and
Applied Holographics.
Customers
The Company maintains a diverse base of over 1500 customers. The Company
believes that its high quality manufacturing capability and effective customer
service have contributed significantly to the loyalty of its customer base. As a
result of the dynamic nature of the CD-ROM market, the number of CD-ROM
customers is growing, the type of CD-ROM customers is changing and the size of
the orders is increasing. In addition, the Company maintains a stable base of
CD-Audio customers.
In April 1994, the Company entered into the Donnelley CD-ROM Agreement,
pursuant to which the Company established a multi-line CD manufacturing facility
in Provo, Utah, and Donnelley purchased 286,128 shares of the Company's Common
Stock for an aggregate purchase price of $1.0 million. In April 1995, as
permitted by the Donnelley CD-ROM Agreement, Donnelley assigned substantially
all of its rights in, and obligations under, the Donnelley CD-ROM Agreement and
transferred its shares of Nimbus Common Stock to Stream, Donnelley's
majority-owned subsidiary. The Stream CD-ROM Agreement, as amended and restated
on April 1, 1995, requires Stream, for a period of six years, to purchase 23
million discs in fiscal 1996 and 24 million discs annually thereafter for a
fixed price per disc, subject to possible reductions based upon changes in the
cost of manufacturing CD-ROM discs, and to use all commercially reasonable
efforts to promote and sell CD-ROM products manufactured by the Company. During
fiscal 1996, Stream purchased discs from the Company for an aggregate purchase
price of $20.1 million which accounted for 17% of the Company's revenues.
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Services and Marketing
The Company provides its CD-Audio and CD-ROM customers with an integrated
range of services including pre-mastering and mastering, disc replication and
full turnkey services, including packaging design consultation, materials
procurement, packaging assembly and order fulfillment. The Company has designed
its operations to efficiently produce a wide range of run sizes. Although the
Company can produce large run sizes efficiently, its ability to provide discs at
competitive prices for smaller order sizes with short turnaround times is
particularly attractive to independent record labels and the Company's CD-ROM
customers. The Company is equipped to provide product in a wide variety of
packaging configurations which enables customers to design finished products for
the most effective retail marketing presentation. The Company works closely with
its customers to ensure that label film which is used to produce printed
material on the disc and print material to supplement the packaged product is
ordered and delivered on time. The Company also stores print material for
customers to facilitate timely and cost-effective reordering.
CD-Audio. The Company's marketing strategy has focused primarily on
independent record labels who utilize the Company's ability to offer full CD
manufacturing services. In the United Kingdom, in addition to independent record
labels, the Company has attracted substantial business from United Kingdom-based
major record labels which accounted for approximately 19% of the Company's
fiscal 1996 unit production in the United Kingdom.
In the United States, the Company maintains CD-Audio sales offices near
Charlottesville, Virginia, in Gardena, California and in Short Hills, New
Jersey. The sales representatives are responsible for maintaining relationships
with their existing customers and developing new business relationships. The
sales representatives are supported by a customer service staff that is
responsible for ensuring that each order is processed on a timely basis, that
all required support materials are in place and that quality levels are
achieved. Customers in the United Kingdom and Europe are serviced by sales and
customer service representatives based at the Company's Cwmbran manufacturing
facility as well as a sales representative in London.
CD-ROM. In 1986, the Company formed a CD-ROM division to explore new
applications for CD technology and to cater to special requirements of "CD-data
product" clients. The Company believes it is a leading supplier of services and
discs to CD-ROM developers, publishers and resellers.
The Company provides complete CD-ROM services to customers from technical
and business consultation on the use of data and applications through the
conversion of raw data to the replication of information on disc. The Company
satisfies customer requirements for regular CD-ROM updates, data conversion and
indexing, authoring, pre-mastering and data verification. Value-added services
such as artwork service for printed material and specialized packaging are also
provided.
The CD-ROM sales and marketing organization in the United States is
organized geographically with sales offices near Charlottesville, Virginia,
Atlanta, Georgia and Gardena and Sunnyvale, California. The sales
representatives are supported by a customer service staff that is responsible
for ensuring that orders are filled on a timely and accurate basis. In addition,
marketing support personnel assist with new prospects and new product
development.
The CD-ROM sales and marketing organization in the United Kingdom is
organized around market segments. Sales resources are split into three market
areas: hardware/software developers, games and game developers and database
publishers. A sales and marketing executive directs the sales team which is
supported by a marketing assistant. The United Kingdom CD-ROM sales and
marketing organization develops markets within continental Europe and will
continue to do so until the demand for products dictates that a separate sales
force is needed.
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Holographic CDs. In June 1995, the Company and Applied Holographics
entered into joint venture arrangements in both the U.S. and the United Kingdom
to market patented technology to imprint holograms onto CDs in order to provide
customers with an effective piracy deterrent without loss of data capacity or
playing time. This technology is marketed under the name 3-D id (TM) and allows
for a holographic image to be applied to a CD using either the Security Band
Process or the Edge-to-Edge Process. The Company believes that the Edge-to-Edge
Process cannot be duplicated without the embossing machinery and the Company has
received patents for certain mechanical aspects of that machinery. The joint
ventures are preparing to license 3-D id (TM) technology to other CD
manufacturers. The joint ventures will collect a royalty fee for each CD
produced by other manufacturers using 3-D id (TM) technology with all royalty
revenues split equally between the Company and Applied Holographics.
Competition
The Company believes that the principal competitive factors in the
CD-Audio and CD-ROM markets are service, price, quality and reliability for
timely delivery of product. The Company believes that it competes favorably with
respect to each of these factors. With increased production capacity in the
market, CD prices have declined and CD pricing has become an increasingly
important factor in obtaining sales. The Company believes that the quality of
its products and services and its ability to accommodate tight delivery
schedules offset, to some extent, the price competition currently existing in
the market.
In addition to the Music Company Manufacturers, the Company competes with
independent manufacturing companies or groups of companies in both the CD-Audio
and CD-ROM markets. In the United States CD-Audio market, the Company's
competitors include Disctronics, Inc. ("Disctronics"), Disc Manufacturing Inc.
(a subsidiary of Quixote Corporation) ("DMI"), JVC America, Inc. ("JVC") and
Denon Electronics Inc. In 1995, the Company believes it was the third largest
independent manufacturing company in the United States CD-Audio market. In the
European CD-Audio market, the Company's competitors include Disctronics, MPO
Disque Compact ("MPO"), Europe Optical Disc and CD Plant Manufacturing A.B. In
1995, the Company believes it was the third largest independent manufacturing
company in the European CD-Audio market. In the United States CD-ROM market, the
independent manufacturers who compete with Nimbus include DMI, KAO Infosystems
Company ("KAO") and JVC. In 1995, the Company believes it was the second largest
independent manufacturing company in the United States CD-ROM market. In the
European CD-ROM market, the Company's competitors include KAO, MPO and
Disctronics. In 1995, the Company believes it was the second largest independent
manufacturing company in the European CD-ROM market. The Music Company
Manufacturers, as well as several of the independent manufacturers, are larger
and have greater financial resources than the Company.
Other existing technologies also compete with the Company's products to
deliver digital information. Portable media, such as digital audio tape, digital
compact cassette and the mini-disc have been introduced commercially, but have
failed to achieve widespread consumer acceptance. In addition, one-time
recordable CDs ("CD-R") are available and are often used by the Company's
customers to submit material for mastering. CD-R equipment retails at
significantly higher prices and CD-R blank discs are significantly more
expensive to manufacture. The Company does not expect any of these technologies
to expand beyond their current market niches in the near future.
Electronic on-line delivery of digital information through cable and
modem, satellite transmission or through the Internet are potential future
competitors to CD-ROM. The Company believes that current and projected
transmission speeds and infrastructure limitations of on-line delivery systems
will prevent them from replacing CD-ROM in the foreseeable future. For example,
a conventional modem operating at a data transmission speed of 28.8 kilobits per
second would take approximately two days to download an entire CD, which
currently has a capacity of 650 megabytes. In addition, future advances in
-10-
CD-ROM technology such as higher speed drives and greater data compression could
improve CD-ROM's advantages over potential competitive technologies.
The CD Manufacturing Process
The CD manufacturing process, used in each of the Company's facilities,
consists of three stages: (i) preproduction, (ii) replication and printing and
(iii) packaging and fulfillment. Except for preproduction, the manufacturing
process is the same for both CD-Audio and CD-ROM.
Preproduction. Preproduction of CDs consists of three distinct processes:
pre-mastering, mastering and electroplating. Through these processes, metal
stampers are created which contain the bytes of data in a digital format. The
metal stampers are then mounted in the plastic injection molding equipment to
create the disc. The preproduction process is critical to establishing the
quality of the final product.
For CD-Audio, the pre-mastering process consists of reviewing the
customer-supplied material to ensure that no discernible defects occurred during
the recording process. Once the material has passed the quality control process,
the editor creates a table of contents to indicate the start and stop times of
each audio track and downloads the data into a digital data format to be used in
the mastering process.
CD-ROM preproduction begins with the customer data supplied in any number
of approved input media. The data is processed through a pre-mastering computer
system where the data is formatted into the desired CD-ROM structure to ensure
that the finished disc will be compatible with the intended operating system.
The CD-ROM pre-master is then downloaded to a digital data cartridge for
mastering.
The mastering process forms the master image of the CD from which the
polycarbonate replicas are molded. A laser beam recorder transfers the digital
information from the data cartridges onto a photo-sensitive coating applied to a
glass mastering substrate. This process creates the "glass master" with the
characteristic CD pits etched in the photo-sensitive coating. The Security Band
hologram can also be mastered onto the glass substrate at the same time that the
content is mastered. The mastering process is critical to product quality. Any
defect on the master will be replicated on all production discs; therefore, the
mastering process takes place in a class 1000 cleanroom, an environment free of
microscopic contaminants which can obscure large amounts of data. The Company
uses the Nimbus-Halliday laser mastering system, manufactured by Nimbus
Technology & Engineering, Inc., a former affiliate of the Company. The Company
believes this mastering system is the only available technology currently able
to master DVD formats. Each of the Company's senior technical managers has more
than 10 years of experience with the equipment, which the Company believes will
enable it to achieve maximum definition and resolution from this system. Using
an electroforming process, the glass master yields nickel stampers in the image
of the master. These stampers are mounted in the injection molding machines to
replicate CDs. The Company's extensive experience with the system has created
yields in excess of 90% and a reputation for producing high quality stampers.
Replicating and Printing. The replication of CDs utilizes a fully
integrated line process which incorporates a plastic injection molding press,
metalizing equipment and lacquering machinery. High quality, CD grade
polycarbonate is injected into the mold cavity where the metal stamper has been
mounted. The Company's state of the art technology allows for press cycle times
of less than 5 seconds per disc. The Company has begun utilizing dual cavity
molding which permits a single press to generate two discs each cycle. The clear
polycarbonate disc containing all of the digitized data is then covered with a
metallic coating to provide for reflection of the reading laser beam in the
player. Using equipment designed and manufactured by the Company, a thin layer
of lacquer is applied over the metal to protect it and to serve as a base for
printing on the disc. If a customer has requested an edge-to-edge hologram, it
is at this stage in the process that a holographic shim containing the
customer's unique art work will be used to emboss the hologram onto the disc.
The disc is then re-metalized and lacquered to enhance the holographic image.
The Company has organized each of its replicating facilities to incorporate its
uniquely designed in-line manufacturing cells. This system permits decreased
-11-
manning levels, higher operating efficiencies and reduced capital expenditures
necessary to fund a line extension. In addition, it provides automatic in-line
inspection for faster response to quality issues thus improving productivity.
Printing, which is the final production process, is performed in batches
off-line in order to take advantage of the high speed nature of the printing
process while avoiding production delays typically required for printer setup.
The Company's printing equipment includes both screen and offset printing
processes, each capable of five color printing. The dual infeed capability of
the printers effectively doubles the capacity of each printer. As a result, the
Company has been able to reduce labor and required capital while improving
production efficiency. The Company produces its own screens and can reuse a
screen up to four times. High demand colors are purchased pre-mixed in order to
reduce ink waste. Automated label inspection and print quality assurance are
integrated with the screen printers to ensure high quality and to reduce the
need for manual quality inspection.
Packaging and Fulfillment. The Company maintains equipment to provide for
most customer requested packaging configurations and effectively uses temporary
labor provided by local agencies as well as local packaging contractors to
manage unique, manual pack operations. Currently, the standard packaging
configuration is a jewel box with customer supplied print material on the bottom
and top sides of the box. The jewel box is generally shrink wrapped for
protection. Product is generally shipped by common carrier; however, the Company
will provide other methods of transport to ensure that critical delivery dates
are met. The Company's acquisition of HLS expanded the variety of turnkey
services offered to customers, including packaging design consultation, material
procurement, packaging assembly and order fulfillment. The Company also has the
capability to offer electronic order intake, either directly from the customer
or via the Internet, and inbound telemarketing.
Suppliers
Although the Company's practice is to seek reduced costs and enhanced
quality by purchasing from a limited number of suppliers, all raw materials
needed to manufacture the Company's CDs are readily available from numerous
sources of supply at competitive prices. The principal raw materials used by the
Company to manufacture CDs are CD grade polycarbonate, aluminum, UV curable
lacquers and ink, all of which are available from multiple commercial sources.
The Company maintains multiple sources of jewel boxes and trays for each of its
manufacturing facilities.
Seasonality
The Company's sales are seasonal, with peak sales activity normally
occurring in the third fiscal quarter as retail chains increase inventory before
the holiday season.
Geographic Segments
The summary of the Company's operations by geographic area for fiscal
years 1996, 1995 and 1994 set forth in Note 14 of Notes to Consolidated
Financial Statements on page 23 of the Company's 1996 Annual Report to
Stockholders is hereby incorporated by reference.
-12-
Employees
As of March 31, 1996, the Company had 871 full-time employees, of which
approximately 604 were hourly employees and 267 were salaried employees. None of
the Company's employees is represented by a labor union or is subject to a
collective bargaining agreement. The Company considers its employee relations to
be good.
Patents and Trademarks
The Company, like most other CD manufacturers, uses patented technology
primarily under nonexclusive licenses from the holders of patents which
generally provide for the payment of royalties based upon the number of CDs
sold.
The Company regards the design of some of its manufacturing equipment as
proprietary and attempts to protect it with a combination of trade secret laws
and nondisclosure agreements with key employees. There can be no assurance that
such measures will provide meaningful protection for the Company's trade
secrets, know-how and other proprietary information.
"Safe Harbor" Statement under the Private Securities Litigation
Reform Act of 1995
The statements included or incorporated by reference into the Company's
Securities and Exchange Commission filings and shareholder communications which
are not historical facts are forward-looking statements that involve risks and
uncertainties, including, but not limited to, the effect of changing CD
technology and the possibility that, over time, CD technology could be replaced
by another form of information storage and retrieval technology, the dependence
of the Company's growth prospects on the development of new technologies that
achieve market acceptance and create new demand for CDs and related services and
the highly competitive nature of the CD manufacturing industry which may
adversely affect prices for CDs and other aspects of the Company's business.
ITEM 2. PROPERTIES
The Company's headquarters is located off US Highway 29 in Ruckersville,
Virginia, which is approximately 20 miles north of Charlottesville, Virginia and
approximately 100 miles south of Washington, DC, on a 25-acre site with a
107,000 square foot facility, all of which the Company owns in fee simple. The
facility has the capacity to produce 155,000 discs per day utilizing 12 press
lines. The Company also owns an additional 237 acres of surrounding farmland.
The Company leases approximately 42,000 square feet of office and
manufacturing space adjacent to Donnelley's operating facility in Provo, Utah,
primarily to satisfy its production requirements under the Stream CD-ROM
Agreement. The lease expires in May 2000. The facility currently has the
capacity to produce 145,000 discs per day utilizing 10 press lines.
As a result of the HLS acquisition, the Company leases 82,000 square feet
in Sunnyvale, California which includes administrative and sales offices as well
as turnkey operations. Although, this facility currently has no CD manufacturing
capabilities, the Company intends to install pressing lines and other equipment
during fiscal 1997.
The Company also leases sales office space in Gardena, California,
Short Hills, New Jersey and Atlanta, Georgia.
-13-
The Company's United Kingdom manufacturing facility is located in Cwmbran,
Wales, which is 165 miles west of London. The 30,000 square foot building was
constructed in 1986 and a recent addition has added 25,000 square feet. This
facility's disc production capacity is approximately 233,000 discs per day using
15 press lines, of which two have twin cavity molding capability. The Company's
United Kingdom subsidiary also leases four 12,000 square foot warehouses
pursuant to three leases which are in the same industrial park and are used for
packing services, warehousing and shipping. One lease expires in November 2001
and the other two expire in 2011.
The Company's manufacturing facilities are equipped with specialized
equipment and utilize extensive automation for the manufacture of its products.
The Company believes that its property and equipment are in good operating
condition and that its facilities are adequate to meet its current requirements.
ITEM 3. LEGAL PROCEEDINGS
On March 18, 1996, the Company received notification from the United
States Environmental Protection Agency ("EPA") alleging that the Company is a
Potentially Responsible Party ("PRP") for cleanup of surface water contamination
at the Cherokee Oil Company Site (the "Site") in Charlotte, North Carolina which
was used by the Company for disposal of certain byproducts of its manufacturing
processes. Subsequently, the United States Department of Justice notified the
Company that it intends to seek recovery of the approximately $6.0 million
environmental clean-up costs incurred at the Site from the Company and 46 other
PRPs, each of which is considered to be jointly and severally liable. At a
meeting held June 27, 1996, the EPA indicated that it intends to allocate the
clean-up costs among the PRPs based on the volume of product disposed at the
Site by each PRP. The EPA has preliminarily determined that the Company's share
of the clean-up costs, based on the EPA's estimate of the volume of material
contributed by the Company to the Site, will be approximately 5% of the overall
cost. Management of the Company intends to challenge the EPA's basis of
allocation; however, management of the Company believes that the ultimate
settlement of this matter will not have a material adverse effect on the the
Company's financial position or results of operations.
The Company is, from time to time, involved in litigation that it
considers to be in the ordinary course of business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted during the fourth quarter of fiscal 1996 to a vote
of the Company's security holders.
-14-
PART II.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market and Price Information
The information required by this section is incorporated by reference to
the section entitled "Common Stock Information" appearing on the back inside
cover of the Company's 1996 Annual Report to Stockholders.
Number of Stockholders
As of June 6, 1996, there were 104 record holders of the Company's Common
Stock.
Dividends
The Company has not paid any dividends on its Common Stock, intends to
retain all earnings for the operation and expansion of its business and does not
anticipate paying cash dividends in the foreseeable future. Furthermore, the New
Credit Agreement restricts the Company's ability to pay dividends. Any future
determination as to the payment of cash dividends will depend upon the Company's
results of operations, financial condition and capital requirements, lender
consent under the New Credit Agreement and such other factors as the Company's
Board of Directors deem relevant.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item is incorporated by reference to the
section entitled "Selected Financial Data" appearing on page 9 of the Company's
1996 Annual Report to Stockholders.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The information required by this item is incorporated by reference to the
section entitled "Management's Discussion and Analysis of Financial Condition
and Results of Operations" appearing on page 10 of the Company's 1996 Annual
Report to Stockholders.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is incorporated by reference to the
Consolidated Financial Statements, and the related notes thereto, Report of
Independent Accountants and the Supplementary Quarterly Consolidated Financial
Data on pages 17 through 24 of the Company's 1996 Annual Report to Stockholders.
-15-
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
With the exception of the information specifically incorporated by
reference from the 1996 Annual Report to Stockholders in Parts II and IV of this
Form 10-K, the Company's 1996 Annual Report to Stockholders is not to be deemed
filed as part of this Form 10-K.
-16-
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item concerning the Company's directors
and executive officers is incorporated by reference to the information set forth
in the sections entitled "Proposal No. 1: Election of Directors" and "Executive
Officers of the Company" on pages 5 through 8 and pages 10 through 11 in the
Company's definitive Proxy Statement for the 1996 Annual Meeting of Stockholders
to be held on August 6, 1996 which will be filed with the Commission within 120
days after the end of the Company's fiscal year ended March 31, 1996.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item concerning the executive
compensation is incorporated by reference to the information set forth in the
section entitled "Executive Compensation" on pages 12 through 22 in the
Company's definitive Proxy Statement for the 1996 Annual Meeting of Stockholders
to be held on August 6, 1996 which will be filed with the Commission within 120
days after the end of the Company's fiscal year ended March 31, 1996.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by this item concerning the security ownership of
certain beneficial owners and management is incorporated by reference to the
information set forth in the section entitled "Securities Ownership of Certain
Beneficial Owners and Management" on pages 3 through 5 in the Company's
definitive Proxy Statement for the 1996 Annual Meeting of Stockholders to be
held on August 6, 1996 which will be filed with the Commission within 120 days
after the end of the Company's fiscal year ended March 31, 1996.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item concerning the certain relationships
and related transactions is incorporated by reference to the information set
forth in the section entitled "Certain Relationships and Transactions" on pages
22 through 25 in the Company's definitive Proxy Statement for the 1996 Annual
Meeting of Stockholders to be held on August 6, 1996 which will be filed with
the Commission within 120 days after the end of the Company's fiscal year ended
March 31, 1996.
-17-
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Form 10-K:
1. Financial Statements. The following consolidated
financial statements, and the related notes thereto,
of the Company and the Report of the Independent
Accountants are incorporated by reference to pages
13 through 24 of the Company's 1996 Annual Report
to Stockholders:
Report of Coopers & Lybrand, L.L.P, Independent
Accountants.
Consolidated Balance Sheets as of March 31, 1996 and 1995.
Consolidated Statements of Income for the three years
ended March 31, 1996, 1995 and 1994.
Consolidated Statement of Stockholder's Equity for the
three years ended March 31, 1996, 1995 and 1994.
Consolidated Statements of Cash Flows for the three years
ended March 31, 1996, 1995 and 1994.
Notes to Consolidated Financial Statements.
2. Schedules.
Report of Coopers & Lybrand, L.L.P, Independent
Accountants.
Schedule I Condensed Financial Information of Registrant
Schedule II Valuation and Qualifying Accounts
All other schedules are omitted because they are not applicable
or required, or because the required information is included in
the Consolidated Financial Statements or notes.
3. Exhibits. The exhibits listed on the accompanying
index to exhibits immediately following this Item
14 are filed as a part of, or incorporated by
reference into, this Form 10-K.
(b) Reports on Form 8-K. No reports on Form 8-K were filed during the
last quarter of the Company's fiscal year ended March 31, 1996.
(c) Exhibits. See Item 14(a)(3) above.
(d) Financial Statement Schedules. See Item 14(a)(2) above.
-18-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
NIMBUS CD INTERNATIONAL, INC.
Dated: June 28, 1996 /s/ L. Steven Minkel
---------------------------------
L. Steven Minkel
Executive Vice President, Chief
Financial Officer and Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on June 28, 1996.
/s/ Lyndon J. Faulkner
-------------------------------------
Lyndon J. Faulkner
Chairman of the Board of
Directors, President, Chief Executive
Officer (Principal Executive Officer)
/s/ L. Steven Minkel
-------------------------------------
L. Steven Minkel
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
/s/ Gary E. Krutul
-------------------------------------
Gary E. Krutul
Controller (Principal Accounting
Officer)
*/s/ Charles Ayres
-------------------------------------
Charles Ayres
Director
*/s/ Darryl G. Behrman
-------------------------------------
Darryl G. Behrman
Director
*/s/ Grant G. Behrman
-------------------------------------
Grant G. Behrman
Director
*/s/ Robert M. Davidson
-------------------------------------
Robert M. Davidson
Director
-20-
*/s/ David E. De Leeuw
-------------------------------------
David E. De Leeuw
Director
*/s/ Anthony V. Dub
-------------------------------------
Anthony V. Dub
Director
*/s/ Robert B. Hellman, Jr.
-------------------------------------
Robert B. Hellman, Jr.
Director
*/s/ David E. King
-------------------------------------
David E. King
Director
*/s/ George E. McCown
-------------------------------------
George E. McCown
Director
*/s/ Glenn S. McKenzie
-------------------------------------
Glenn S. McKenzie
Director
*/s/ David B. Wilson
-------------------------------------
David B. Wilson
Director
- - ------------
* By L. Steven Minkel as Attorney-in Fact.
-21-
REPORT OF INDEPENDENT ACCOUNTANTS
The Stockholders and Directors
Nimbus CD International, Inc.:
Our report on the consolidated financial statements of Nimbus CD International,
Inc. and subsidiaries has been incorporated by reference in this Form 10-K from
page 24 of the Company's Annual Report to Stockholders for the fiscal year ended
March 31, 1996. In connection with our audits of such financial statements, we
have also audited the related financial statement schedules listed in Item
14(a)(2) of this Form 10-K.
In our opinion, these financial statement schedules, when considered in relation
to the basic financial statements taken as a whole, present fairly, in all
material respects, the information required to be included therein.
COOPERS & LYBRAND L.L.P.
Richmond, Virginia
May 23, 1996
-22-
NIMBUS CD INTERNATIONAL, INC.
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(Dollar amounts in thousands)
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, March 31,
1996 1995
--------- ---------
<S> <C>
ASSETS
Cash .......................................................$ 2 $ 1
Prepaid expenses................................................ 149 20
Other assets.................................................... 5,652 1,053
Investment in subsidiaries, at equity........................... 37,834 30,642
------- -------
Total assets............................................... $43,637 $31,716
======= =======
LIABILITIES
Accounts payable................................................ 23 642
Accrued expenses................................................ 548 591
Notes payable to subsidiary..................................... 38,603
------- -------
Total liabilties........................................... 571 39,836
------- -------
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock, $0.01 par value; 2,000,000 shares
authorized; no shares issued or outstanding................
Common stock, $0.01 par value; 60,000,000 shares
authorized; 38,973,173 shares issued; 20,829,962
and 13,804,962 shares outstanding.......................... 390 390
Paid-in capital................................................. 66,734 41,275
Retained earnings............................................... 22,794 15,287
Cumulative foreign currency translation adjustments............. 241 220
------- -------
90,159 57,172
Treasury stock, at cost 18,143,211 and 25,168,211 shares........ (47,093) (65,292)
-------- -------
Total stockholders' equity (deficit)....................... 43,066 (8,120)
-------- --------
Total liabilties and stockholders' equity.............. $ 43,637 $ 31,716
======== ========
</TABLE>
The information regarding long-term debt and credit agreements of subsidiaries
contained in Note 8 of the Notes to Consolidated Financial Statements is
incorporated herein by reference. Nimbus CD International, Inc., has guaranteed
the repayment of the outstanding debt of its subsidiaries.
-23-
NIMBUS CD INTERNATIONAL, INC.
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(Dollar amounts in thousands)
CONDENSED STATEMENTS OF INCOME For the
fiscal years ended March 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- ------
<S> <C>
Equity in earnings of subsidiaries, net of applicable income tax...... $ 7,507 $ 8,200 $ 3,946
======= ======= =======
CONDENSED STATEMENTS OF CASH FLOWS
For the fiscal years ended March 31, 1996, 1995, and 1994
<CAPTION>
1996 1995 1994
-------- --------- --------
<S> <C>
Cash flows from operating activities:
Net income ............................................. $ 7,507 $ 8,200 $ 3,946
Less undistributed earnings of subsidiaries...................... (7,507) (8,200) (3,946)
Write-off of public offering and acquisition costs............... 1,005
Change in:
Prepaid expenses............................................. (129) (13) 5
Accounts payable............................................. (619) 530 104
Accrued expenses............................................. (43) (1,227) 2,546
Other assets ............................................. 20 73 (37)
------- --------- --------
Net cash provided by (used in) operating activities... (771) 368 2,618
------- --------- --------
Cash flows from investing activities:
(Payment) refund of costs related to proposed acquisition........ 112 (459)
Advances to subsidiaries, net.................................... (4,267) (483) (3)
Purchase of property and equipment............................... (14) (33)
------- --------- --------
Net cash used in investing activities:....................... (4,281) (371) (495)
------- --------- --------
Cash flows from financing activities:
Issuance (repurchase) of common stock............................ 44,886 24,055 (1,863)
Proceeds from issuance of warrants............................... 1,750
Proceeds from exercise of stock options.......................... 1,168
Purchase of treasury stock....................................... (65,292)
Payment of costs related to initial public offering.............. (1,230) (281) (415)
Collection on note for sale of common stock...................... 155
Proceeds (repayments) of loans from subsidiaries, net............ (38,603) 38,603
------- ---------
Net cash provided by financing activities.................... 5,053 3 (2,123)
------- --------- --------
Increase in cash...................................... 1
Cash, beginning of year ............................................. 1 1 1
------- --------- --------
Cash, end of year..................................... $ 2 $ 1 $ 1
======= ========= ========
</TABLE>
The information regarding related party transactions contained in Note 12 of the
Notes to Consolidated Financial Statements is incorporated herein by reference.
-24-
NIMBUS CD INTERNATIONAL, INC.
SCHEDULE II
Valuation and Qualifying Accounts
(In thousands)
<TABLE>
<CAPTION>
Additions--
Balance at Charged to Acquisition Balance
Beginning Costs and of Deductions at End
Description of Year Expenses Business Write-Offs(1) Adjustments(2) of Year
- - ----------- ---------- ----------- ------------ ------------- -------------- -------
<S> <C>
Allowance for doubtful accounts:
Fiscal year ended March 31, 1996 $ 1,989 $ 1,268 $50 $ 1,246 $ (47) $ 2,014
Fiscal year ended March 31, 1995 $ 2,518 $ 514 $ 1,043 $ 77 $ 1,989
Fiscal year ended March 31, 1994 $ 1,812 $ 1,141 $ 435 $ (15) $ 2,518
</TABLE>
(1) Represents accounts written off as uncollectible, net of collections
on accounts previously written off.
(2) Represents foreign currency translation adjustments of foreign subsidiary.
-25-
INDEX TO EXHIBITS
Exhibit
Number Exhibit Description
- - -------------------------------------------------------------------------------
3.1 Restated Certificate of Incorporation of the Company (incorporated by
reference to Exhibit 3.1 to the Company's Registration Statement on
Form S-1, Registration No. 33-75632 ("Registrant's 1995 S-1")).
3.2 Restated Bylaws of the Company (incorporated by reference to Exhibit
3.2 to Registrant's 1995 S-1).
4.1 Form of Certificate Representing Common Stock (incorporated by
reference to Exhibit 4.1 to Registrant's 1995 S-1).
4.2 Amended and Restated Credit Agreement among Nimbus CD International,
Inc., Nimbus Manufacturing Inc., Nimbus Manufacturing (UK) Limited, The
Chase Manhattan Bank, as agent, and the Lenders party thereto
(incorporated by reference to Exhibit 4.2 to Registrant's 1995 S-1).
10.1 Limited Liability Company Agreement of 3dcd, L.L.C. dated as of June
28, 1995 between Nimbus Manufacturing Inc. and Applied Holographics
Corporation (incorporated by reference to Exhibit 10.1 to Registrant's
1995 S-1).
10.2 Co-operation Agreement dated June 28, 1995 between Nimbus Manufacturing
(UK) Limited and Applied Holographics Embossed Limited (incorporated by
reference to Exhibit 10.2 to Registrant's 1995 S-1).
10.3 Stockholders Agreement (incorporated by reference to Exhibit 10.3 to
Registrant's 1995 S-1).
10.4 Employment Agreement dated as of April 1, 1993 between the Company and
Lyndon J. Faulkner (incorporated by reference to Exhibit 10.4 to
Registrant's 1995 S-1).
10.5 Employment Agreement dated as of November 9, 1992 between the Company
and L. Steven Minkel (incorporated by reference to Exhibit 10.5 to
Registrant's 1995 S-1).
10.6 Employment Agreement dated as of March 8, 1993 between the Company and
Robert J. Headrick (incorporated by reference to Exhibit 10.6 to
Registrant's 1995 S-1).
10.7 Form of Indemnification Agreement (incorporated by reference to Exhibit
10.7 to Registrant's 1995 S-1).
10.8 Amended and Restated Agreement by and between the Company, Nimbus
Manufacturing Inc. and R.R. Donnelley & Sons Company dated as of April
1, 1995 (incorporated by reference to Exhibit 10.8 to Registrant's 1995
S-1).
10.9 Amended and Restated 1995 Nimbus CD International, Inc. Stock Option
and Stock Award Plan.
10.10 Form of Registration Rights Agreement (incorporated by reference to
Exhibit 10.10 to Registrant's 1995 S-1).
-26-
10.11 Asset Purchase Agreement, dated as of August 31, 1995 among Nimbus
Software Services, Inc., HLS Duplication, Inc., Nimbus Manufacturing
Inc. and Steven R. Sherman (incorporated by reference to Exhibit 10.11
to Registrant's 1995 S-1).
10.12 Nimbus CD International, Inc. 1995 Stock Option Plan for Non-Employee
Directors (incorporated by reference to Exhibit 10.12 to Registrant's
1995 S-1).
10.13 CD Disc License Agreement by and between U.S. Philips Corporation and
Nimbus Records Inc. dated as of December 1, 1986 (incorporated by
reference to Exhibit 10.13 to Registrant's 1995 S-1).
10.14 CD Disc License Agreement by and between Philips Electronics N.V. and
Nimbus Manufacturing (UK) Ltd., dated as of August 31, 1994
(incorporated by reference to Exhibit 10.14 to Registrant's 1995 S-1).
10.15 Patent License Agreement by and between Nimbus Manufacturing Inc. and
Thomson S.A., dated as of October 1, 1994 (incorporated by reference to
Exhibit 10.15 to Registrant's 1995 S-1).
11.1 Computation of Net Income Per Share of Common Stock.
13.1 Portions of the 1996 Annual Report to Stockholders for the year ended
March 31, 1996 expressly incorporated herein by reference.
21.1 Subsidiaries of the Registrant
24.1 Powers of attorney from officers and directors of the Company signing
by an attorney-in-fact.
27.1 Financial Data Schedule
-27-
AMENDED AND RESTATED
NIMBUS CD INTERNATIONAL, INC.
1995 STOCK OPTION AND STOCK AWARD PLAN
1. Purpose. The purpose of the Nimbus CD International, Inc. 1995 Stock
Option and Stock Award Plan (the "Plan") is to maintain the ability of Nimbus CD
International, Inc. (the "Company") and its subsidiaries to attract and retain
highly qualified and experienced employees and to give such employees a
continued proprietary interest in the success of the Company and its
subsidiaries. Pursuant to the Plan, such employees will be offered the
opportunity to acquire common stock through the grant of options, stock
appreciation rights in tandem with such options, the award of restricted stock
under the Plan, bonuses payable in stock or a combination thereof.
As used herein, the term "subsidiary" shall mean any present or future
corporation which is or would be a "subsidiary corporation" of the Company as
the term is defined in Section 424(f) of the Internal Revenue Code of 1986, as
amended from time to time (the "Code").
2. Administration of the Plan. The Plan shall be administered by a
compensation committee (the "Compensation Committee") as appointed from time to
time by the Board of Directors of the Company (the "Board"), which Compensation
Committee shall consist of not less than two (2) members of the Board. No member
of the Board shall be appointed to the Compensation Committee who has been
granted an option or stock appreciation right or awarded restricted stock or
bonuses payable in Common Stock under the Plan within one year prior to
appointment. A majority of the members of the Compensation Committee shall
constitute a quorum. The vote of a majority of a quorum shall constitute action
by the Compensation Committee.
In administering the Plan, the Committee may adopt rules and
regulations for carrying out the Plan. The interpretation and decision with
regard to any question arising under the Plan made by the Committee shall be
final and conclusive on all employees of the Company and its subsidiaries
participating or eligible to participate in the Plan. The
-1-
Committee may consult with counsel, who may be counsel to the Company, and shall
not incur any liability for any action taken in good faith in reliance upon the
advice of counsel. The Committee shall determine the employees to whom, and the
time or times at which, grants or awards shall be made and the number of shares
to be included in the grants or awards. Within the limitations of the Plan, the
number of shares for which options will be granted from time to time and the
periods for which the options will be outstanding will be determined by the
Committee.
Each option or stock or other awards granted pursuant to the Plan shall
be evidenced by an Option Agreement or Award Agreement (the "Agreement"). The
Agreement shall not be a precondition to the granting of options or stock or
other awards; however, no person shall have any rights under any option or stock
or other awards granted under the Plan unless and until the optionee to whom
such option or stock or other award shall have been granted shall have executed
and delivered to the Company an Agreement. The Committee shall prescribe the
form of all Agreements. A fully executed original of the Agreement shall be
provided to both the Company and the recipient of the grant.
3. Shares of Stock Subject to the Plan. The total number of shares that
may be optioned or awarded under the Plan is 722,100 shares of the $0.01 par
value voting common stock of the Company (the "Common Stock") except that said
number of shares shall be adjusted as provided in Paragraph 13. No employee
shall receive, over the term of the Plan, awards of restricted stock for more
than 500,000 shares of Common Stock or awards in the form of stock appreciation
rights or options, whether incentive stock options or options other than
incentive stock options, to purchase more than 500,000 shares of Common Stock.
Any shares subject to an option which for any reason expires or is terminated
unexercised and any restricted stock which is forfeited may again be optioned or
awarded under the Plan; provided, however, that forfeited shares shall not be
available for further awards if the employee has realized any benefits of
ownership from such shares. Shares subject to the Plan may be either authorized
and unissued shares or issued shares acquired by the Company or its
subsidiaries.
4. Eligibility. Key salaried employees, including officers, of the
Company and its subsidiaries (but excluding non-employee directors) and
consultants are eligible to be granted options and awarded restricted stock
under the Plan and to have their bonuses payable in stock. The employees and
consultants who shall receive awards or options under the Plan shall be selected
from time to time by the Committee, in its sole discretion, from among those
eligible, which may be based upon information furnished to the Committee by the
Company's management, and the Committee shall determine, in its sole discretion,
the number of shares to be covered by the award or awards and by the option or
options granted to each such employee selected. Such key salaried employees and
consultants who are selected to participate in the Plan shall be referred to
collectively herein as "Participants."
5. Duration of the Plan. No award or option may be granted under the
Plan after more than ten years from the date the Plan is adopted by the Board or
the date the Plan receives shareholder approval, whichever is earlier, but
awards or options theretofore granted may extend beyond that date.
6. Terms and Conditions of Stock Options. All options granted under
this Plan shall be either incentive stock options, as defined in Section 422 of
the Code, or options other than incentive stock options. Each such option shall
be subject to all the applicable provisions of the Plan, including the following
terms and conditions, and to such other terms and conditions not inconsistent
therewith as the Committee shall determine.
(a) The option price per share shall be determined by the Committee.
However, subject to Paragraph 6(k), the option price of incentive stock
options and other than incentive stock options shall not be less than 100%
of the fair market value of a share of Common Stock at the time the option
is granted. For purposes of the Plan, the fair market value shall be such
value as the Committee, in good faith, shall determine on the relevant
date (without discount for lack of marketability or minority interest);
provided that if the Common Stock is publicly traded on an established
securities market, fair market value shall be either (i) if the Common
Stock is listed on a national securities exchange, the mean between the
highest and lowest prices at which the Common Stock is traded on such
exchange on the relevant date; provided, however, if there is no sale of
the Common Stock on such exchange on such date, the mean between the bid
and asked prices on such exchange at the close of the market on such date
or (ii) if the Common Stock is quoted on the over-the-counter market on
the relevant date as reported by NASDAQ or any successor thereto, the mean
between the bid and asked prices at which the Common Stock is quoted on
such date; provided, however, if no such quotations are available on such
date, the most recent date upon which such quotations are available shall
be used.
(b) Each option shall be exercisable pursuant to the attainment of such
performance goals and/or during and over such period ending not later than
ten years from the date it was granted, as may be determined by the
Committee and stated in the Agreement. In no event may an option be
exercised more than 10 years from the date the option was granted.
(c) An option shall not be exercisable with respect to a fractional
share of Common Stock or with respect to the lesser of fifty (50) shares
or the full number of shares then subject to the option. No fractional
shares of Common Stock shall be issued upon the exercise of an option. If
a fractional share of Common Stock shall become subject to an option by
reason of a stock dividend or otherwise, the optionee shall not be
entitled to exercise the option with respect to such fractional share.
(d) Each option shall state whether it will or will not be treated as
an incentive stock option.
(e) Each option may be exercised by giving written notice to the
Company specifying the number of shares to be purchased, which shall be
accompanied by payment in full including, if required by applicable law,
applicable taxes, if any. Payment, except as provided in the Agreement,
shall be
(A) in United States dollars by check or bank draft, or
(B) by tendering to the Company Common Stock shares already
owned for at least six months by the person exercising the
option, which may include shares received as the result of a
prior exercise of an option, and having a fair market value, as
determined in accordance with Paragraph 6(a), on the date on
which the option is exercised equal to the cash exercise price
applicable to such option, or
(C) by a combination of United States dollars and Common Stock
shares as aforesaid.
No optionee shall have any rights to dividends or other rights of a
shareholder with respect to shares of Common Stock subject to his or her
option until he or she has given written notice of exercise of his or her
option and paid in full for such shares.
(f) Notwithstanding the foregoing, the Committee may, in its sole
discretion, grant to a grantee of an option the right (hereinafter
referred to as a "stock appreciation right") to elect, in the manner
described below, in lieu of exercising his or her option for all or a
portion of the shares of Common Stock covered by such option, to
relinquish his or her option with respect to any or all of such shares and
to receive from the Company a payment having a value equal to the amount
by which (a) the fair market value, as determined in accordance with
Paragraph 6(a), of a share of Common Stock on the date of such election,
multiplied by the number of shares as to which the grantee shall have made
such election, exceeds (b) the exercise price for that number of shares of
Common Stock under the terms of such option. A stock appreciation right
shall be exercisable at the time the tandem option is exercisable, and the
"expiration date" for the stock appreciation right shall be the expiration
date for the tandem option. A grantee who makes such an election shall
receive payment in the sole discretion of the Committee (i) in cash equal
to such excess; or (ii) in the nearest whole number of shares of Common
Stock of the Company having an aggregate fair market value, as determined
in accordance with Paragraph 6(a), which is not greater than the cash
amount calculated in (i) above; or (iii) a combination of (i) and (ii)
above. A stock appreciation right may be exercised only when the amount
described in (a) above exceeds the amount described in (b) above. An
election to exercise stock appreciation rights shall be deemed to have
been made on the day written notice of such election, addressed to the
Committee, is received by the Company at Nimbus CD International, Inc.,
State Route 629, Guildford, VA 22968, Attention: L. Steven Minkel. An
option or any portion thereof with respect to which a grantee has elected
to exercise the stock appreciation rights described above shall be
surrendered to the Company and such option shall thereafter remain
exercisable according to its terms only with respect to the number of
shares as to which it would otherwise be exercisable, less the number of
shares with respect to which stock appreciation rights have been
exercised. The grant of a stock appreciation right shall be evidenced by
such form of agreement as the Committee may prescribe. The agreement
evidencing stock appreciation rights shall be personal and will provide
that the stock appreciation rights will not be transferable by the grantee
otherwise than by will or the laws of descent and distribution and that
they will be exercisable, during the lifetime of the grantee, only by him
or her.
(g) Except as provided in the Agreement, an option may be exercised
only if at all times during the period beginning with the date of the
granting of the option and ending on the date of such exercise, the
grantee was an employee of either the Company or of a subsidiary of the
Company or of another corporation referred to in Section 421(a)(2) of the
Code. The Agreement shall provide whether, and if so, to what extent, an
option may be exercised after termination of continuous employment, but
any such exercise shall in no event be later than the termination date of
the option. If the grantee should die, or become permanently disabled as
determined by the Committee in accordance with the Agreement, at any time
when the option, or any portion thereof, shall be exercisable by him, the
option will be exercisable within a period provided for in the Agreement,
by the optionee or person or persons to whom his or her rights under the
option shall have passed by will or by the laws of descent and
distribution, but in no event at a date later than the termination of the
option. The Committee may require medical evidence of permanent
disability, including medical examinations by physicians selected by it.
(h) The option by its terms shall be personal and shall not be
transferable by the optionee otherwise than by will or by the laws of
descent and distribution as provided in Paragraph 6(g) above. During the
lifetime of an optionee, the option shall be exercisable only by the
optionee. In the event any option is exercised by the executors,
administrators, heirs or distributees of the estate of a deceased optionee
as provided in Paragraph 6(g) above, the Company shall be under no
obligation to issue Common Stock thereunder unless and until the Company
is satisfied that the person or persons exercising the option are the duly
appointed legal representative of the deceased optionee's estate or the
proper legatees or distributees thereof.
(i) Notwithstanding any intent to grant incentive stock options, an
option granted will not be considered an incentive stock option to the
extent that it together with any earlier incentive stock options permits
the exercise for the first time in any calendar year of more than $100,000
in value of Common Stock (determined at the time of grant).
(j) The Committee may, but need not, require such consideration from an
optionee at the time of granting an option as it shall determine, either
in lieu of, or in addition to, the limitations on exercisability provided
in Paragraph 6(e).
(k) No incentive stock option shall be granted to an employee who owns
or would own immediately before the grant of such option, directly or
indirectly, stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company. This restriction does not
apply if, at the time such incentive stock option is granted, the option
price is at least 110% of the fair market value of one share of Common
Stock, as determined in accordance with Paragraph 6(a), on the date of
grant and the incentive stock option by its terms is not exercisable after
the expiration of five years from the date of grant.
(l) An option and any Common Stock received upon the exercise of an
option shall be subject to such other transfer restrictions and/or
legending requirements that are specified in the Agreement.
7. Terms and Conditions of Restricted Stock Awards. All awards of
restricted stock under the Plan shall be subject to all the applicable
provisions of the Plan, including the following terms and conditions, and to
such other terms and conditions not inconsistent therewith, as the Committee
shall determine.
(a) Awards of restricted stock may be in addition to or in lieu of
option grants.
(b) During a period set by, and/or until the attainment of particular
performance goals based upon criteria established by, the Committee at the
time of each award of restricted stock (the "restriction period") as
specified in the Agreement, the recipient shall not be permitted to sell,
transfer, pledge, or otherwise encumber the shares of restricted stock;
except that such shares may be used, if the Agreement permits, to pay the
option price of any option granted under the Plan provided an equal number
of shares delivered to the optionee shall carry the same restrictions as
the shares so used.
(c) Shares of restricted stock shall become free of all restrictions
if, during the restriction period, (i) the recipient dies, (ii) the
recipient's employment terminates by reason of permanent disability, as
determined by the Committee, (iii) the recipient retires after attaining
both 59-1/2 years of age and five years of continuous service with the
Company and/or a subsidiary, or (iv) if provided in the Agreement, there
is a "change in control" of the Company (as defined in such Agreement).
The Committee may require medical evidence of permanent disability,
including medical examinations by physicians selected by it. If the
Committee determines that any such recipient is not permanently disabled,
the restricted stock held by such recipient shall be forfeited and revert
to the Company.
(d) Unless and to the extent otherwise provided in the Agreement,
shares of restricted stock shall be forfeited and revert to the Company
upon the recipient's termination of employment during the restriction
period for any reason other than death, permanent disability, as
determined by the Committee, retirement after attaining both 59-1/2 years
of age and five years of continuous service with the Company and/or a
subsidiary, or, to the extent provided in the Agreement, a "change in
control" of the Company (as defined in the Agreement), except to the
extent the Committee, in its sole discretion, finds that such forfeiture
might not be in the best interest of the Company and, therefore, waives
all or part of the application of this provision to the restricted stock
held by such recipient.
(e) Stock certificates for restricted stock shall be registered in the
name of the recipient but shall be appropriately legended and returned to
the Company by the recipient, together with a stock power, endorsed in
blank by the recipient. The recipient shall be entitled to vote shares of
restricted stock and shall be entitled to all dividends paid thereon,
except that dividends paid in Common Stock or other property shall also be
subject to the same restrictions.
(f) Restricted stock shall become free of the foregoing restrictions
upon expiration of the applicable restriction period and the Company shall
then deliver Common Stock certificates evidencing such stock.
(g) Restricted Stock and any Common Stock received upon the expiration
of the restriction period shall be subject to such other transfer
restrictions and/or legending requirements that are specified in the
Agreement.
8. Bonuses Payable in Stock. In lieu of cash bonuses otherwise payable
under the Company's or applicable subsidiary's compensation practices to
employees eligible to participate in the Plan, the Committee, in its sole
discretion, may determine that such bonuses shall be payable in Common Stock or
partly in Common Stock and partly in cash. Such bonuses shall be in
consideration of services previously performed and as an incentive toward future
services and shall consist of shares of Common Stock subject to such terms as
the Committee may determine in its sole discretion. The number of shares of
Common Stock payable in lieu of a bonus otherwise payable shall be determined by
dividing such amount by the fair market value of one share of Common Stock on
the date the bonus is payable, with fair market value determined as of such date
in accordance with Paragraph 6(a).
9. Change in Control. (a) In the event of a change in control of the
Company, as defined (if at all) by the Committee in each Agreement, the
Committee may, in its sole discretion, provide that any of the following
applicable actions be taken as a result, or in anticipation, of any such event
to assure fair and equitable treatment of Participants:
(i) accelerate time periods for purposes of vesting in, or realizing
gain from, any outstanding option or stock appreciation right or shares of
restricted stock awarded pursuant to this Plan;
(ii) offer to purchase any outstanding option or stock appreciation
right or shares of restricted stock made pursuant to this Plan from the
holder for its equivalent cash value, as determined by the Committee, as
of the date of the change in control; or
(iii) make adjustments or modifications to outstanding options or stock
appreciation rights or with respect to restricted stock as the Committee
deems appropriate to maintain and protect the rights and interests of the
Participants following such change in control.
(b) In no event, however, may any option be exercised after
ten (10) years from the date it was granted.
10. Transfer, Leave of Absence. For the purpose of the Plan: (a) a
transfer of an employee from the Company to a subsidiary or affiliate of the
Company, whether or not incorporated, or vice versa, or from one subsidiary or
affiliate of the Company to another, and (b) a leave of absence, duly authorized
in writing by the Company or a subsidiary or affiliate of the Company, shall not
be deemed a termination of employment.
11. Rights of Employees. (a) No person shall have any rights or claims
under the Plan except in accordance with the provisions of the Plan and the
Agreement.
(b) Nothing contained in the Plan or Agreement shall be deemed
to give any employee the right to be retained in the service of the Company or
its subsidiaries.
12. Tax Withholding Obligations. (a) If required by applicable law, the
payment of taxes, if any, upon the exercise of an option pursuant to Paragraph
6(e) or a stock appreciation right pursuant to Paragraph 6(f), shall be in cash
at the time of exercise or on the applicable tax date under Section 83 of the
Code, if earlier; provided, however, tax withholding obligations may be met by
the withholding of Common Stock otherwise deliverable to the optionee pursuant
to procedures approved by the Committee; provided further, however, the amount
of Common Stock so withheld shall not exceed the minimum required withholding
obligation.
(b) If required by applicable law, recipients of restricted
stock, pursuant to Paragraph 7, shall be required to pay taxes to the Company
upon the expiration of restriction periods or such earlier dates as elected
pursuant to Section 83 of the Code; provided, however, tax withholding
obligations may be met by the withholding of Common Stock otherwise deliverable
to the recipient pursuant to procedures approved by the Committee. If tax
withholding is required by applicable law, in no event shall Common Stock be
delivered to any awardee until he has paid to the Company in cash the amount of
such tax required to be withheld by the Company or has elected to have his
withholding obligations met by the withholding of Common Stock in accordance
with the procedures approved by the Committee or otherwise entered into an
agreement satisfactory to the Company providing for payment of withholding tax.
(c) The Company shall withhold from any cash bonus described
in Paragraph 8, an amount of cash sufficient to meet its tax withholding
obligations. If the cash portion of such bonus is not sufficient to satisfy such
withholding obligation, the tax withholding obligations shall be paid in cash by
the recipient or may be met by withholding of Common Stock otherwise deliverable
to the recipient pursuant to procedures approved by the Committee.
13. Changes in Capital. Upon changes in the outstanding Common Stock by
reason of a stock dividend, stock split, reverse split, subdivision,
recapitalization, merger, consolidation (whether or not the Company is a
surviving corporation), an extraordinary dividend payable in cash or property,
combination or exchange of shares, separation, reorganization or liquidation,
the aggregate number and class of shares available under the Plan as to which
stock options and restricted stock may be awarded, the number and class of
shares under (i) each option (and related stock appreciation rights, if any) and
the option price per share and (ii) each award of restricted stock shall, in
each case, be correspondingly adjusted by the Committee, such adjustments to be
made in the case of outstanding options (and related stock appreciation rights,
if any) without change in the total price applicable to such options (and
related stock appreciation rights, if any).
14. Miscellaneous Provisions. (a) The Plan shall be unfunded. The
Company shall not be required to establish any special or separate fund or to
make any other segregation of assets to assure the issuance of shares or the
payment of cash upon exercise of any option or stock appreciation right under
the Plan. Proceeds from the sale of shares of Common Stock pursuant to options
granted under this Plan shall constitute general funds of the Company. The
expenses of the Plan shall be borne by the Company.
(b) It is understood that the Committee may, at any time and
from time to time after the granting of an option or the award of restricted
stock or bonuses payable in Common Stock hereunder, specify such additional
terms, conditions and restrictions with respect to such option or stock as may
be deemed necessary or appropriate to ensure compliance with any and all
applicable laws, including, but not limited to, terms, restrictions and
conditions for compliance with federal and state securities laws and methods of
withholding or providing for the payment of required taxes.
(c) If at any time the Committee shall determine, in its
discretion, that the listing, registration or qualification of shares of Common
Stock upon any national securities exchange or under any state or federal law,
or the consent or approval of any governmental regulatory body, is necessary or
desirable as a condition of, or in connection with, the sale or purchase of
shares of Common Stock hereunder, no option or stock appreciation right may be
exercised or restricted stock or stock bonus may be transferred in whole or in
part unless and until such listing, registration, qualification, consent or
approval shall have been effected or obtained, or otherwise provided for, free
of any conditions not acceptable to the Committee.
(d) By accepting any benefit under the Plan, each Participant
and each person claiming under or through such Participant shall be conclusively
deemed to have indicated his acceptance and ratification, and consent to, any
action taken under the Plan by the Committee, the Company or the Board.
(e) The Plan shall be governed by and construed in accordance
with the laws of the State of Delaware.
15. Limits of Liability. (a) Any liability of the Company or a subsidiary
of the Company to any Participant with respect to any option or award shall be
based solely upon contractual obligations created by the Plan and the Agreement.
(b) Neither the Company nor a subsidiary of the Company, nor
any member of the Committee or the Board, nor any other person participating in
any determination of any question under the Plan, or in the interpretation,
administration or application of the Plan, shall have any liability to any party
for any action taken or not taken in connection with the Plan, except as may
expressly be provided by statute.
16. Amendments and Termination. The Board may, at any time, amend,
alter or discontinue the Plan; provided, however, no amendment, alteration or
discontinuation shall be made which would impair the rights of any holder of an
award of restricted stock or option or stock appreciation rights or stock bonus
theretofore granted, without his or her written consent, or which, without the
approval of the shareholders, would:
(a) except as is provided in Paragraph 13, increase the maximum number
of shares of Common Stock reserved for the purpose of the Plan;
(b) except as is provided in Paragraph 13 of the Plan, decrease the
option price of an option (and related stock appreciation rights, if any)
to less than 100% of the fair market value, as determined in accordance
with Paragraph 6(a), of a share of Common Stock on the date of the
granting of the option (and related stock appreciation rights, if any);
(c) change the class of persons eligible to receive an award of
restricted stock or options or stock appreciation rights under the Plan;
or
(d) extend the duration of the Plan.
The Committee may amend the terms of any award of restricted
stock or option or stock appreciation rights theretofore granted, retroactively
or prospectively, but no such amendment shall impair the rights of any holder
without his or her written consent.
17. Duration. The Plan shall be adopted by the Board as of the date on
which it is approved by a majority of the Company's stockholders, which approval
must occur within the period ending twelve months after the date the Plan is
adopted. The Plan shall terminate upon the earlier of the following dates or
events to occur:
(a) upon the adoption of a resolution of the Board, terminating the
Plan; or
(b) the date all shares of Common Stock subject to the Plan are
purchased according to the Plan's provisions; or
(c) ten years from the date of adoption of the Plan by the Board.
No such termination of the Plan shall affect the rights of any
Participant hereunder and all options or stock appreciation rights previously
granted and restricted stock and stock bonuses awarded hereunder shall continue
in force and in operation after the termination of the Plan, except as they may
be otherwise terminated in accordance with the terms of the Plan.
The effective date of this Amendment and Restatement shall be
the date on which such Amendment and Restatement is approved by a majority of
the Company's stockholders and adopted by the Board.
Exhibit 11
NIMBUS CD INTERNATIONAL, INC.
COMPUTATION OF NET INCOME PER SHARE OF COMMON STOCK
For the Years Ended March 31, 1996 and 1995
(In thousands, except per share data)
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C>
Primary and fully diluted (A):
Weighted average common shares outstanding 13,894 13,805
Net additional common shares issuable
upon Exercise of dilutive warrants
and stock options, determined by the
treasury stock method using the estimated
initial public offering price for options
and warrants granted within one year
prior to the Offering and Private
Placement and the average market price
for options and warrants outstanding in
periods after the Offering 2,055 2,088
Issuance of common shares by the Company
in the Offering and Private Placement 6,850 6,850
------- -------
Pro forma common shares and equivalents 22,799 22,743
====== =======
Net income - pro forma for the Offering and
Private Placement $12,040 $8,196
======= =======
Earnings per share - pro forma for the Offering and
Private Placement $ 0.53 $ 0.36
======= ========
</TABLE>
(A) See Note 18 of Notes to Consolidated Financial Statements.
EXHIBIT 13.1
PORTIONS OF THE 1996 ANNUAL REPORT TO STOCKHOLDERS FOR THE
YEAR ENDED MARCH 31, 1996 EXPRESSLY INCORPORATED HEREIN BY REFERENCE
NIMBUS CD INTERNATIONAL, INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA(1)
<TABLE>
<CAPTION>
Predecessor Combined Company
Pro Forma
Twelve
Fiscal Year Six Months Months Six Months Fiscal Year
Ended Ended Ended Ended Ended Ended ENDED
(DOLLARS IN THOUSANDS, March 31, Sept. 30, March 31, March 31, March 31, March 31 MARCH 31,
EXCEPT PER SHARE DATA) 1992 1992 1993 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING RESULTS:
Net sales $63,591 $32,138 $69,447 $37,309 $69,934 $85,827 $118,245
Gross profit 17,522 7,674 18,648 10,974 19,527 27,606 34,436
Operating income 6,112 947 6,888 5,941 8,107 15,412 21,447
Income (loss) before
extraordinary item 3,409 (16) 3,125 3,141 4,836 8,524 10,459
Extraordinary item(2) (890) (324) (2,952)
Net income (loss) 3,409 (16) 3,125 3,141 3,946 8,200 7,507
PRO FORMA OPERATING DATA(3):
Net income $ 8,196 $ 12,040
Earnings per share $ 0.36 $ 0.53
Weighted average
shares outstanding 22,743 22,799
FINANCIAL POSITION:
Total assets $55,541 $59,532 $79,995 $ 90,753
Total debt 18,144 18,043 63,909 26,131
Stockholders' equity (deficit) 17,206 19,339 (8,120) 43,066
Working capital 4,546 (1,415) 5,716 15,762
OTHER DATA:
Discs sold (units):
CD-Audio 43,009 20,392 47,211 26,819 54,378 58,766 61,748
CD-ROM 739 626 1,791 1,165 4,865 28,982 63,930
Total discs 43,748 21,018 49,002 27,984 59,243 87,748 125,678
</TABLE>
(1) Set forth above is selected consolidated financial data of the Company for
the period October 1, 1992 (date of formation) to March 31, 1993 and for
the fiscal years ended March 31, 1994, 1995 and 1996. Also set forth above
is selected consolidated financial data of Nimbus Records Limited (the
"Predecessor") for the fiscal year ended March 31, 1992 and for the six
months ended September 30, 1992. The historical data of the Predecessor and
the Company are substantially comparable as the effects of purchase
accounting adjustments did not materially affect operating income; however,
interest expense is not comparable due to the use of different methods of
financing before and after the Company's acquisition of the Predecessor in
October 1992. The results of operations for the twelve months ended March
31, 1993 are presented on an unaudited basis combining the Company's
results of operations for the six months ended March 31, 1993 with the
results of the Predecessor for the six months ended September 30, 1992.
(2) In November 1993, the Company refinanced its outstanding debt and incurred
an extraordinary charge of $1,302 ($890 net of tax) on the debt
extinguishment. In March 1995, the Company refinanced its outstanding debt
and incurred an extraordinary charge of $515 ($324 net of tax) on the debt
extinguishment. In October 1995, the Company refinanced its outstanding
debt and incurred an extraordinary charge of $4,164 ($2,952 net of tax) on
the debt extinguishment.
(3) The pro forma net income gives effect to the Recapitalization, the Offering
and the Private Placement (each as defined in Notes 1 and 4 to the
Company's Consolidated Financial Statements). See Note 18 of the Company's
Notes to Consolidated Financial Statements.
<PAGE>
NIMBUS CD INTERNATIONAL, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
FISCAL 1996 COMPARED TO FISCAL 1995
NET SALES. Total discs sold increased 43.3% to 125.7 million units in fiscal
1996 from 87.7 million units in fiscal 1995. The increase was the result of a
120.3% increase in CD-ROM unit sales from 29.0 million discs in fiscal 1995 to
63.9 million discs in fiscal 1996, combined with a 5.1% increase in CD-Audio
unit sales from 58.7 million discs in fiscal 1995 to 61.7 million discs in
fiscal 1996. In the United States, CD-ROM volume increased 102.2% to 46.9
million discs in fiscal 1996 from 23.2 million discs in fiscal 1995. The
increase was primarily due to an additional 16.4 million discs manufactured at
the Company's Provo facility resulting from a vendor supply agreement with
Stream International, Inc. (the "Stream CD-ROM Agreement"). In fiscal 1996, the
United Kingdom CD-ROM volume increased 193.1% to 17.0 million discs from 5.8
million discs. CD-Audio volume increased in the United States by 7.5% to 28.7
million discs in fiscal 1996 while the United Kingdom experienced a 3.1%
increase in CD-Audio unit sales to 33.0 million. Net sales increased 37.8% to
$118.2 million in fiscal 1996 from $85.8 million in fiscal 1995. Approximately
$23.4 million of the sales increase in fiscal 1996 was due to the increase in
disc volume offset by a decrease in the average disc selling price from $0.98 in
fiscal 1995 to $0.87 in fiscal 1996. Both the CD-ROM and the CD-Audio markets
experienced a decline in average disc selling price in fiscal 1996 in response
to an increase in production capacity within the CD industry in both North
America and Europe. Discs manufactured under the Stream CD-ROM Agreement also
realized lower disc prices as, under the terms of the agreement, cost
efficiencies resulting from increased production volumes are reflected in the
disc sales price. The acquisition of substantially all of the assets of HLS
Duplication, Inc. ("HLS"), which now operates as Nimbus Software Services, Inc.
("NSS"), on August 31, 1995, contributed $8.7 million of turnkey and other
related service revenues in fiscal 1996.
GROSS PROFIT. Gross profit increased 24.6% to $34.4 million in fiscal 1996
from $27.6 million in fiscal 1995. The increase in gross profit was primarily
due to the higher unit volume and additional turnkey related service revenues
described above, reduced costs in the printing process and improved labor and
production efficiencies resulting from the higher unit volumes. Fiscal 1995
gross profit included a $2.3 million gain from settlements reached with
licensing companies for prior royalty obligations, while in fiscal 1996 the
Company recorded a gain of $1.7 million resulting from a settlement with one
licensing company regarding prior royalty obligations. Gross margin decreased to
29.1% in fiscal 1996 from 32.2% in fiscal 1995. The Company's gross margin was
unfavorably impacted by the additional revenues from the turnkey and collateral
related services of NSS which have a lower gross margin than CD replication
sales, as well as an increase in the cost of polycarbonate, a primary raw
material component. In addition, the mix of product sales toward CD-ROM
resulted in increased packaging, assembly and shipping costs.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased 6.6% to $13.0 million in fiscal 1996 from
$12.2 million in fiscal 1995. The increase in selling, general and
administrative expenses in fiscal 1996 was due to higher administrative support,
insurance, travel and computer leasing costs associated with the increased level
of operations and the greater number of production facilities. The increased
selling, general and administrative expenses in fiscal 1996 includes a $0.5
million increase in the allowance for doubtful accounts, resulting, in part,
from the filing for bankruptcy by one of the Company's customers. Fiscal 1995
selling, general and administrative expenses included non-recurring charges of
$1.0 million associated with the termination of efforts to complete a business
acquisition and an offering of securities, $0.5 million for the settlement of
litigation, and $0.4 million of compensation expense related to accelerated
vesting of stock options. As a percentage of net sales, selling, general and
administrative expenses decreased to 11.0% in fiscal 1996 from 14.2% in fiscal
1995.
OPERATING INCOME. Operating income increased 39.0% to $21.4 million in
fiscal 1996 from $15.4 in fiscal 1995. The increase in operating income
primarily reflects the higher unit volume described above. Operating income as a
percentage of net sales was 18.1% and 18.0% for fiscal years 1996 and 1995,
respectively.
INTEREST EXPENSE. Interest expense increased to $5.3 million in fiscal 1996
from $2.0 million in fiscal 1995 due to the increased borrowings in connection
with the Recapitalization (as defined in Note 1 to the Company's Consolidated
Financial Statements).
INCOME TAXES. Income tax expense increased to $5.6 million in fiscal 1996
from $5.0 million in fiscal 1995. The increase in income taxes was attributable
to an increase in income before taxes, which was partially offset by a decrease
in the Company's effective tax rate from 37.1% in fiscal 1995 to 35.0% in fiscal
1996. The decrease in the Company's effective tax rate resulted from favorable
tax adjustments arising from an examination by the Inland Revenue of tax returns
of the Company's United Kingdom subsidiary.
<PAGE>
FISCAL 1995 COMPARED TO FISCAL 1994
NET SALES. Total discs sold increased 48.1% to 87.7 million units in fiscal
1995 from 59.2 million in fiscal 1994. This increase was primarily due to a
354.5% increase in United States CD-ROM volume (excluding Stream) to 15.0
million discs in fiscal 1995 from 3.3 million discs in fiscal 1994, a 286.7%
increase in the United Kingdom CD-ROM volume to 5.8 million discs in fiscal 1995
from 1.5 million discs in fiscal 1994, the addition of 8.2 million discs
resulting from the Stream CD-ROM Agreement, and an 8.4% and 7.6% increase in CD-
Audio unit sales in the United States and United Kingdom, respectively. Net
sales increased 22.7% to $85.8 million in fiscal 1995 from $69.9 million in
fiscal 1994 due to favorable pricing provided by the Stream CD-ROM Agreement
combined with additional CD-ROM and CD-Audio disc volumes, offset by a decrease
in the average disc selling price from $1.18 in fiscal 1994 to $0.98 in fiscal
1995. Both the CD-ROM market and the CD-Audio market experienced a decline in
average disc selling price, with much of the decline in CD-ROM disc selling
prices resulting from the sale of unpackaged discs as part of many equipment
manufacturers' strategy to bundle discs with the sales of CD-ROM drives.
GROSS PROFIT. Gross profit increased 41.5% to $27.6 million in fiscal 1995
from $19.5 million in fiscal 1994. This increase was attributable to decreases
in raw material prices, continued gains in labor productivity, automation of
quality testing and the reversal of $2.3 million of accrued royalties to reflect
a settlement reached with licensors of technology regarding prior royalty
obligations. These gains were partially offset by $1.2 million of start-up costs
for the Company's Provo facility. Gross margin improved to 32.2% in fiscal 1995
from 27.9% in fiscal 1994.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased 7.0% to $12.2 million in fiscal 1995 from
$11.4 million in fiscal 1994. As a percentage of net sales, selling, general and
administrative expenses decreased to 14.2% in fiscal 1995 from 16.3% in fiscal
1994. Fiscal 1995 selling, general and administrative expenses reflect
non-recurring charges of $1.0 million for the write-off of costs associated with
the termination of efforts to complete a business acquisition and an offering of
securities, $0.5 million for settlement of litigation, $0.2 million of
compensation expense due to the accelerated vesting of stock options
specifically in connection with the Recapitalization, as well as an additional
$0.2 million in stock option compensation expense. Fiscal 1994 selling, general
and administrative expenses include a one-time expense of $1.3 million relating
to the accrual of payments to be made under a technical services agreement with
former stockholders of the Company. Excluding these unusual charges incurred in
each year, the increase in selling, general and administrative expenses was less
than 2% from fiscal 1994 to fiscal 1995.
OPERATING INCOME. Operating income increased 90.1% to $15.4 million in
fiscal 1995 from $8.1 million in fiscal 1994. The increase in operating income
was the result of the higher unit sales and improved gross profit margins
described above. Operating income as a percentage of net sales improved to 18.0%
in fiscal 1995 from 11.6% in fiscal 1994.
INTEREST EXPENSE. Interest expense increased to $2.0 million in fiscal 1995
from $1.7 million in fiscal 1994. The increase in interest expense was due to
higher interest rates as well as increased borrowings in connection with the
start-up of the Company's Provo facility.
INCOME TAXES. Income taxes increased to $5.0 million in fiscal 1995 from
$1.6 million in fiscal 1994. The increase in income taxes was attributable to a
significant increase in income before taxes and a change in the Company's
effective tax rate from 25.2% in fiscal 1994 to 37.1% in fiscal 1995. In fiscal
1994, the Company recorded the benefit of acquired foreign net operating losses
and benefited from favorable tax adjustments by the Company's United Kingdom
subsidiary resulting from an examination of its tax returns by the Inland
Revenue. The effective income tax rate for fiscal 1995 was higher than the
federal statutory rate due to state income taxes and the Company's inability to
utilize certain foreign tax credits in determining United States taxable income.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has satisfied its liquidity needs through cash
flows from operations and various borrowing arrangements. Principal liquidity
needs have included capital expenditures and debt repayment.
Operating activities provided net cash of $11.9 million in fiscal 1996.
Working capital was $15.8 million at March 31, 1996, compared to $5.7 million at
March 31, 1995. Accounts receivable increased $6.6 million due to higher sales
volumes and inventories increased $0.4 million to support the increased level of
sales. Accounts payable and accrued expenses decreased $4.8 million in fiscal
1995, largely reflecting the resolution of past royalty obligations.
Capital expenditures were $10.1 million for fiscal 1996. Capital
expenditures in fiscal 1996 are related to the expansion of manufacturing
capacity and administrative facilities in the United Kingdom, as well as
expanding the manufacturing capacity of the Provo facility. The Company
increased Provo's capacity to ten press lines by entering into operating leases
with General Electric Capital Corporation for $4.9 million of equipment and by
purchasing $1.1 million of equipment. On August 31, 1995, the Company acquired a
west coast production facility by purchasing substantially all of the assets of
HLS for approximately $5.15 million in cash and the assumption of certain
liabilities.
<PAGE>
NIMBUS CD INTERNATIONAL, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(CONTINUED)
On October 30, 1995, the Company completed its initial public offering with
the sale of 6,350,000 shares of common stock and 500,000 shares of common stock
in a concurrent private placement that generated net cash proceeds of $43.7
million. Contemporaneously with the completion of the public offering, the
Company entered into an amended and restated credit agreement (the "New Credit
Agreement") with The Chase Manhattan Bank, N.A., as agent and one or more
lenders. Borrowings under the New Credit Agreement, along with the proceeds of
the public offering and cash generated from operations, enabled the Company to
reduce its long-term debt and to purchase property and equipment.
During fiscal 1997, the Company anticipates the need for approximately $25
million in cash for capital expenditures to expand its compact disc production
capacity, install full DVD manufacturing capability, and upgrade its worldwide
MIS system. The Company believes that these capital expenditures, working
capital requirements, and any future acquisitions will be financed through a
combination of funds provided by operating activities and availability under the
New Credit Agreement.
At March 31, 1996, outstanding borrowings under the New Credit Agreement
were $26.1 million and the remaining availability under the revolving credit
facility was $23.25 million.
The Company has entered into interest rate swap agreements to protect
against fluctuations in its variable rate term debt for initial notational
amounts of $5 million and approximately $20 million (denominated in pounds
sterling). The interest rate caps ensure that the Company will not pay interest
rates higher than 7.0% on $5 million and not higher than 9.5% on $20 million of
its term debt outstanding at March 31, 1996.
SEASONALITY AND QUARTERLY INFORMATION
The Company's sales are seasonal, with peak sales activity normally
occurring in the third fiscal quarter as retail chains increase inventory before
the holiday season. As a result, operating income is typically higher in the
third fiscal quarter as fixed operating costs are spread over generally higher
sales volume. In addition, in order to provide for capacity demands, long lead
time production equipment is typically ordered for delivery during the first
fiscal quarter and, to a lesser extent, the second fiscal quarter. Equipment
installations generally result in some level of production inefficiency which
may have a negative impact on margins. The effect on margins may be amplified
when equipment is installed in the lower sales volume first and second quarters.
Further, pricing and unit volumes can impact comparative quarterly financial
results either positively or negatively in a manner that may not necessarily be
indicative of a full year's results.
ACCOUNTING STANDARDS CHANGE
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"), which is effective for fiscal years beginning after
December 15, 1995. SFAS 123 requires a fair value based method of accounting for
stock based compensation, and provides an option to the Company to either
recognize compensation expense for employee stock based compensation or to
provide pro forma earnings information as if such compensation cost had been
recognized. The Company has not yet determined the various assumptions that will
be used in the fair value calculations, the method of adoption nor the impact
this statement will have on its financial statements.
CONTINGENCIES
On March 18, 1996, the Company received notification from the United States
Environmental Protection Agency ("EPA") alleging that the Company is a
Potentially Responsible Party ("PRP") for the cleanup of surface water
contamination at the Cherokee Oil Company Site (the "Site") in Charlotte, North
Carolina which was used by the Company for the disposal of certain byproducts of
its manufacturing processes. Subsequently, the U.S. Department of Justice
notified the Company that it intends to seek recovery of the approximately $6
million environmental cleanup cost incurred at the Site from the Company and 46
other PRPs each of which is considered to be jointly and severally liable. The
Company does not yet know its potential share of the cleanup costs, the
allocation of which is typically based on the amount of product disposed at the
Site. Many of the PRPs are larger than the Company and appear to have
substantial resources. Management of the Company believes that the ultimate
settlement of this matter will not have a material adverse effect on the
Company's financial position or results of operations.
<PAGE>
NIMBUS CD INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1996 AND 1995
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 1996 1995
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,593 $ 2,318
Accounts and notes receivable-trade, less allowances
for doubtful accounts of $2,014 and $1,989 26,121 19,533
Inventories 2,177 1,743
Prepaid expenses 729 1,508
Deferred income taxes 1,766 2,600
Total current assets 34,386 27,702
Property, plant, and equipment, net 50,809 48,650
Other assets and intangibles 5,558 3,643
$ 90,753 $ 79,995
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable 6,437 8,507
Current portion of long-term debt 1,463 1,000
Accrued expenses and other liabilities 7,297 10,006
Income taxes payable 3,427 2,473
Total current liabilities 18,624 21,986
Long-term debt 24,668 62,909
Deferred income taxes 4,395 3,220
Commitments and contingencies
Stockholders' equity (deficit):
Preferred stock, $0.01 par value, 2,000,000 shares
authorized, no shares issued or outstanding
Common stock, $0.01 par value, 60,000,000 shares
authorized, 38,973,173 shares issued; 20,829,962 and
13,804,962 shares outstanding 390 390
Paid-in capital 66,734 41,275
Retained earnings 22,794 15,287
Cumulative foreign currency translation adjustments 241 220
90,159 57,172
Treasury stock, at cost, 18,143,211 and 25,168,211 shares (47,093) (65,292)
Total stockholders' equity (deficit) 43,066 (8,120)
$ 90,753 $ 79,995
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
<PAGE>
NIMBUS CD INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED MARCH 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 1996 1995 1994
<S> <C> <C> <C>
Net Sales $118,245 $85,827 $69,934
Cost of goods sold 83,809 58,221 50,407
Gross profit 34,436 27,606 19,527
Selling, general and administrative expenses 12,989 12,194 11,420
Operating income 21,447 15,412 8,107
Interest expense 5,305 1,983 1,663
Other (income) expense, net 41 (121) (17)
Income before income taxes and extraordinary item 16,101 13,550 6,461
Provision for income taxes 5,642 5,026 1,625
Income before extraordinary item 10,459 8,524 4,836
Extraordinary item-extinguishment of debt
(less income tax benefit of $1,213, $191 and $412) (2,952) (324) (890)
Net income $ 7,507 $ 8,200 $ 3,946
Net income-Pro forma for the Offering (Note 18) $ 12,040 $ 8,196
Earnings per share-Pro forma for the Offering (Note 18) $ 0.53 $ 0.36
Weighted average shares outstanding 22,799 22,743
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
<PAGE>
NIMBUS CD INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED MARCH 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
Cumulative Notes
Foreign Receivable for
Number of shares Currency Purchases of
(DOLLARS IN THOUSANDS, Common Treasury Common Paid-in Translation Common Retained Treasury
EXCEPT PER SHARE DATA) Stock Stock Stock Capital Adjustments Stock Earnings Stock
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances,
April 1, 1993 29,199,058 $291 $ 15,239 $ (379) $ (1,086) $ 3,141
Stock repurchased
and canceled (3,503,874) (34) (2,761) 931
Collections on
notes from
stockholders 155
Net income 3,946
Foreign currency
translation
adjustments (104)
Balances,
March 31, 1994 25,695,184 - 257 12,478 (483) - 7,087 -
Issuance of
common stock 286,128 3 997
Issuance of com-
mon stock in
recapitalization 10,817,847 108 27,192
Issuance of
warrants 1,750
Exercise of
stock options
(including
income tax
benefit of
$1,190) 2,174,014 22 3,104
Repurchase of
common stock (25,168,211) $ (63,515)
Fees and expenses
related to
recapitalization (4,246) (1,777)
Net income 8,200
Foreign currency
translation
adjustments 703
Balances,
March 31, 1995 38,973,173 (25,168,211) 390 41,275 220 - 15,287 (65,292)
Stock issued in
connection
with initial
public offering
and private
placement 6,850,000 25,911 17,745
Exercise of
warrants 175,000 (452) 454
Net income 7,507
Foreign currency
translation
adjustments 21
BALANCES,
MARCH 31, 1996 38,973,173 (18,143,211) $390 $ 66,734 $ 241 - $22,794 $ (47,093)
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
<PAGE>
NIMBUS CD INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 1996 1995 1994
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 7,507 $ 8,200 $ 3,946
Adjustments to reconcile net income to net cash
provided by operating activities:
Extraordinary item 2,047 324 890
Depreciation and amortization 7,938 6,217 4,877
Net loss (gain) on sale of equipment and other
assets 361 19 (321)
Deferred income taxes 2,922 796 162
Gain on settlement of royalty obligation (1,744) (2,300)
Write-off of public offering and acquisition costs 1,005
Noncash compensation expense for stock options 628 337
Other, net (56) 70 25
Change in operating assets and liabilities, net of
acquisition:
Accounts receivable-trade (5,694) (3,156) 830
Inventories 31 (116) 83
Prepaid expenses 891 (1,063) 158
Accounts payable (1,206) 5,373 953
Accrued expenses (1,132) (1,164) 1,384
Net cash provided by operating activities 11,865 14,833 13,324
Cash flows from investing activities:
Purchases of property , plant and equipment (10,087) (17,017) (13,154)
Acquisition of business, net of cash acquired (4,850)
Proceeds from sale of equipment and other assets 64 108 475
(Payment) refund of costs related to proposed
acquisition 112 (459)
Expenditures for computer software (929) (130)
Other investing activities (548)
Net cash used in investing activities (16,350) (16,797) (13,268)
Cash flows from financing activities:
Proceeds of debt 2,357 66,993 15,011
Repayment of debt (37,000) (21,612) (18,828)
Revolving credit borrowings, net (1,991) (109) 3,850
Issuance (repurchase) of common stock 44,886 24,055 (1,863)
Proceeds from issuance of warrants 1,750
Proceeds from exercise of stock options 1,168
Purchase of treasury stock (65,292)
Payment of financing fees (1,140) (3,686) (1,009)
Payment of costs related to initial public offering (1,230) (281) (415)
Collection on note for sale of common stock 155
Net cash provided by financing activities 5,882 2,986 (3,099)
Effect of exchange rate changes on cash (122) 59 (41)
Net increase (decrease) in cash 1,275 1,081 (3,084)
Cash and cash equivalents, beginning of year 2,318 1,237 4,321
Cash and cash equivalents, end of year $ 3,593 $ 2,318 $ 1,237
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
NIMBUS CD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1. ORGANIZATION AND PRINCIPLES
OF CONSOLIDATION:
Nimbus CD International, Inc. was organized in October 1992 to acquire
certain companies which operate manufacturing facilities in the U.S. and the
U.K. (collectively, the "Company"). The Company is a manufacturer of compact
discs ("CDs") which are used primarily for the playback of pre-recorded music
("CD-Audio") and the distribution of digitally recorded information, including
data, text, video, audio and other interactive applications ("CD-ROM").
On March 31, 1995, certain affiliates of McCown De Leeuw & Co. ("MDC") and
Behrman Capital, L.P. ("Behrman") replaced affiliates of DLJ Merchant Banking,
Inc. ("DLJMB") as the Company's majority stockholders through a series of
transactions (the "Recapitalization"). MDC and Behrman acquired 10,698,970
shares of the Company's common stock for an aggregate purchase price of $27,000
and another investor acquired 118,876 shares of common stock for $300. The
Company refinanced its then-outstanding debt incurring an extraordinary charge
of $515 ($324 net of tax) related to the write-off of deferred financing costs,
and borrowed an additional $41,091. The Company also received $1,750 from the
issuance of warrants to purchase 693,453 shares of its common stock for $0.01
per share. The proceeds from the issuance of common stock, warrants and
additional debt were used by the Company to acquire 22,333,768 shares of its
common stock held by DLJMB and 2,834,436 shares of common stock from certain
members of management and other stockholders for an aggregate cost of $65,292,
including related fees and expenses. The Recapitalization was accounted for as a
treasury stock transaction with no step up in the basis of the Company's assets.
The Company's deficiency in consolidated stockholders' equity was due to the
amount of treasury shares purchased in the Recapitalization.
The consolidated financial statements present the operating results and
financial position of the Company and its subsidiaries. All significant
intercompany balances and transactions have been eliminated.
The asset and liability accounts of foreign subsidiaries are translated from
their respective functional currencies at the rates in effect at the balance
sheet date, and revenue and expense accounts are translated at average monthly
rates during the period. Foreign currency translation adjustments are reflected
as a separate component of stockholders' equity. The gains and losses from
foreign currency transactions, not material in amount, are reflected in
operations.
2. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES:
a. Accounting estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
b. Cash and cash equivalents: Cash and cash equivalents include all cash
balances and highly liquid investments with an original maturity of three
months or less.
c. Foreign exchange contracts and hedging instruments: The Company enters into
foreign exchange contracts to hedge exposures related to foreign currency
transactions. Gains and losses on these contracts are recognized in the same
period in which gains or losses from the transaction being hedged are
recorded.
d. Inventories: Inventories are valued at the lower of cost or market, with cost
for raw materials determined using the first-in, first-out method and cost
for work-in-process and finished goods determined using the average cost
method.
e. Property, plant and equipment: Property, plant and equipment are stated at
cost. The costs of significant improvements are capitalized. Maintenance and
repairs are expensed as incurred. Depreciation is charged to operations over
the estimated useful lives of the assets using the straight-line method.
Depreciable lives are as follows:
Years
Buildings 40
Leasehold improvements 5-12
Machinery and equipment 5-12
When properties are sold or retired, their cost and the related
accumulated depreciation are eliminated from the accounts and the gain or
loss is reflected in operations.
f. Income taxes: The Company provides for deferred income taxes based on the
liability method of accounting for income taxes. Deferred tax liabilities and
assets are determined based on the difference between financial statement
carrying amounts and the tax basis of assets and liabilities using enacted
tax rates in effect in the years in which the differences are expected to
reverse.
<PAGE>
NIMBUS CD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(CONTINUED)
g. Other Assets and Intangibles: The excess purchase price over the fair value
of identifiable net assets acquired is allocated to goodwill and amortized
over 15 years. Goodwill of $2,787 is presented net of accumulated
amortization of $96 as of March 31, 1996. Purchased software including
related implementation costs are capitalized in other assets and amortized
over its estimated useful life.
h. Impairment of Long-Lived Assets: Beginning in fiscal 1996, the review for
the possible impairment of long-lived tangible and intangible assets is
performed in accordance with Statement of Financial Accounting Standards
("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of." For assets to be held and used in
operations, this standard requires that, whenever events indicate that an
asset may be impaired, the entity estimate the future undiscounted cash
flows expected to result from the use of the asset and its eventual
disposition. Assets are grouped for this purpose at the lowest level for
which there are identifiable and independent cash flows. If the sum of these
undiscounted cash flows is less than the carrying amount of the asset, an
impairment loss is recognized. Measurement of the impairment loss is based
on the estimated fair value of the asset. At March 31, 1996, the Company
believes that there was no impairment of its tangible and intangible
noncurrent assets.
3. ACQUISITION:
On August 31, 1995, the Company acquired substantially all of the assets of
HLS Duplication, Inc. ("HLS") for a purchase price of approximately $5.15
million in cash plus the assumption of certain specified liabilities. The
acquisition is being accounted for as a purchase for financial reporting
purposes. The results of the acquired entity, which are not material in relation
to the Company, have been included in the consolidated financial results since
the date of acquisition. The assets acquired and liabilities assumed were as
follows:
Fair value of assets acquired $ 3,360
Goodwill 2,883
Liabilities assumed (1,093)
$ 5,150
Cash acquired (300)
Cash paid for acquisition, net $ 4,850
4. INITIAL PUBLIC OFFERING:
On October 30, 1995, the Company completed its initial public offering with
the sale of 6,350,000 shares of common stock at an offering price of $7 per
share (the "Offering").
Contemporaneously with the Offering, Behrman Capital, L.P., purchased
500,000 shares of common stock of the Company in a private placement transaction
(the "Private Placement") at a price per share equal to the initial public
offering price less the underwriting discount.
The net proceeds to the Company from the Offering and the Private Placement,
after deducting underwriting discounts, commissions and expenses payable by the
Company, were $43.7 million. The Company used $41.7 million of the net proceeds
to reduce outstanding indebtedness and $2.0 million for general corporate
purposes.
The Company incurred an extraordinary charge of $4,164 ($2,952 net of tax)
in the third quarter of fiscal 1996 related to the write-off of deferred
financing costs and the costs of terminating interest rate swap agreements in
connection with the repayment of debt with the proceeds from the Offering and
the Private Placement and borrowings under the amended and restated credit
agreement. Such charge has not been reflected in the pro forma net income and
per share data.
5. INVENTORIES:
Inventories at year-end consisted of the following:
1996 1995
Raw materials $ 1,849 $ 1,323
Work-in-process 263 299
Finished goods 65 121
$ 2,177 $ 1,743
6. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment at year-end consisted of the following:
1996 1995
Land, buildings and improvements $ 18,652 $ 16,447
Machinery and equipment 46,986 41,786
Construction in progress 1,549 1,143
67,187 59,376
Less accumulated depreciation (16,378) (10,726)
Net property, plant and equipment $ 50,809 $ 48,650
Depreciation expense amounted to $7,256, $5,974 and $4,789 for fiscal years
1996, 1995 and 1994, respectively.
7. ACCRUED EXPENSES AND OTHER LIABILITIES:
Accrued expenses and other liabilities at year-end consisted of the
following:
1996 1995
Royalty obligations $ 2,753 $ 5,627
Taxes payable, other than income taxes 1,237 1,853
Employee compensation and benefits 1,863 1,663
Other items 1,444 863
$ 7,297 $10,006
8. DEBT:
Long-term debt at year-end consisted of the following:
1996 1995
Variable rate term loan (effective interest
rate of 7.9% at March 31, 1996),
payable in quarterly installments of
varying amounts commencing in
December , 1996 with the final
maturity in September, 2000 $24,381
Variable rate revolving loans (effective
interest rate of 7.1% at March 31, 1996) 1,750
Variable rate term loan (effective interest
rate of 9.1% at March 31, 1995) payable
in quarterly installments of varying
amounts commencing in December, 1996
with final maturity in March, 2000 $35,168
Variable rate term loan (effective interest
rate of 9.4% at March 31, 1995) payable
in quarterly installments of $250 com-
mencing in June, 1995 with the balance
due at maturity in March, 2002 25,000
Variable rate revolving loans
(effective interest rate of 9.2%
at March 31, 1995) 3,741
Totals 26,131 63,909
Less current maturities 1,463 1,000
$24,668 $62,909
On October 30, 1995, the Company entered into an amended and restated credit
agreement (the "New Credit Agreement") with The Chase Manhattan Bank, N.A., as
agent and one or more other lenders. The New Credit Agreement provides for the
Company's ongoing working capital and capital expenditure needs. The New Credit
Agreement provides for a term loan of $25.0 million and a revolving credit
facility, the aggregate principal amount of which shall not exceed $25.0 million
outstanding at any time. A portion of the revolving loan commitment may be
utilized for letters of credit, a swingline facility and an overdraft facility.
The New Credit Agreement has a dual currency option, which permits the Company
to borrow in U.S. dollars or pounds sterling. Loans under the revolving credit
facility may be borrowed, repaid and reborrowed, subject to a schedule of
mandatory repayments and commitment reductions. This transaction resulted in the
write-off of $3,260 in deferred loan fees and the capitalization of $911 in new
loan costs.
The New Credit Agreement requires a commitment fee of .375% on the unused
portion of the available line of credit amount. Interest is payable in arrears
for optionally selected interest periods, with interest payable not to exceed a
three-month period. The weighted average interest rate on outstanding borrowings
at March 31, 1996 was 7.9%.
The New Credit Agreement provides for the prepayment of principal based on
the Company's cash flow (as defined) or upon the occurrence of certain specified
events. The scheduled annual principal payments, after fiscal 1997 are $4,876 in
1998, $7,217 in 1999, $7,217 in 2000, and $3,608 in 2001.Interest paid on the
outstanding debt during fiscal years 1996, 1995 and 1994 was $4,721, $1,882 and
$1,748, respectively. No interest was capitalized during fiscal years 1996, 1995
and 1994. The recorded value of the Company's long-term debt at March 31, 1996
approximates its fair value.
The Company has entered into interest rate swap agreements to protect
against fluctuations in its variable rate term debt through September 30, 1998,
as required by the New Credit Agreement. The Company purchased interest rate
caps for initial notional amounts of $5,000 and approximately $20,000
(denominated in pounds sterling), each declining over the term of the related
borrowings. The cost of these agreements was approximately $308 and is being
amortized over the terms of the agreements.
The interest rate caps ensure that the Company will not pay interest at
rates higher than 7.0% on $5,000, and not higher than 9.5% on $20,000 of its
term debt outstanding at March 31, 1996. These interest rate agreements did not
have any material effect on the Company's interest expense for the year ended
March 31, 1996.
The estimated fair value of the Company's interest rate swap agreements
which hedge outstanding borrowings was an asset of $1,011 as of March 31, 1996.
Substantially all of the Company's tangible and intangible assets are
pledged as collateral for borrowings under the New Credit Agreement. The New
Credit Agreement subjects the Company to certain restrictions and covenants,
including limitations on the incurrence of additional debt, capital
expenditures, asset sales and the maintenance of certain financial ratios. The
New Credit Agreement restricts the payment of dividends on the Company's common
stock, and at March 31, 1996, none of the Company's retained earnings was
available for the payment of such dividends.
On November 23, 1993, the Company refinanced its original acquisition debt.
This transaction resulted in the write-off of $1,302 ($890 net of tax) in
deferred loan and other fees.
9. INCOME TAXES:
The components of income before income taxes and extraordinary items were
as follows:
1996 1995 1994
Domestic $ 8,162 $ 6,764 $1,957
Foreign 7,939 6,786 4,504
Income before income taxes
and extraordinary items $ 16,101 $ 13,550 $6,461
<PAGE>
NIMBUS CD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(CONTINUED)
The provision for income taxes consisted of the following:
1996 1995 1994
Current
Federal $1,057 $2,039 $ 344
State 156 178 56
Foreign 2,492 2,013 1,063
Total current 3,705 4,230 1,463
Deferred:
Federal 1,733 164 337
State 296 25
Foreign (92) 607 (175)
Total deferred 1,937 796 162
Total income tax expense $5,642 $5,026 $1,625
The principal reasons for the differences between the federal statutory
income tax rate and the Company's effective income tax rate on income before
extraordinary item were as follows:
1996 1995 1994
Federal statutory tax rate 34.0% 34.0% 34.0%
Increase (decrease) in taxes
resulting from:
State taxes, net of federal
tax effect 1.9 1.0 0.6
U.S. tax attributable to
deemed repatriation of
foreign subsidiary earnings
(net of foreign tax credit) 0.7 0.8 7.1
Difference between U.S.
federal statutory rate and
foreign effective rates,
primarily attributable
in 1996 and 1994 to
examinations by foreign
tax authorities (1.9) 2.3 (9.9)
Release of valuation
allowance (5.1) (9.0)
Other 0.3 4.1 2.4
Effective tax rate 35.0% 37.1% 25.2%
Cash payments for income taxes were $1,275, $1,855 and $1,747 for fiscal
years 1996, 1995 and 1994, respectively. The components of the net deferred tax
assets and liabilities as of March 31, 1996 were as follows:
Domestic Foreign Total
Deferred tax assets:
Accrued royalties $ 276 $ 276
Accounts receivable $ 401 401
Other accrued liabilities 425 425 850
Net operating loss
carryforward 2,115 2,115
Deferred tax asset 2,941 701 3,642
Deferred tax liabilities:
Property, plant and
equipment (5,254) (1,017) (6,271)
Deferred tax liability (5,254) (1,017) (6,271)
Net deferred tax liability $ (2,313) $ (316) $ (2,629)
The components of the net deferred tax assets and liabilities as of March
31, 1995 were as follows:
Domestic Foreign Total
Deferred tax assets:
Accrued royalties $ 1,099 $ 99 $ 1,198
Accounts receivable 445 445
Other accrued liabilities 473 243 716
Net operating loss
carryforward 2,355 2,355
Deferred tax asset 4,372 342 4,714
Deferred tax liabilities:
Property, plant and
equipment (4,561) (774) (5,335)
Deferred tax liability (4,561) (774) (5,335)
Net deferred tax liability $ (189) $ (432) $ (621)
At March 31, 1996, the Company had net operating loss carryforwards for U.S.
tax return purposes of approximately $5,641, which expire in the years 2003
through 2008. Due to certain ownership changes as of October 1, 1992, the use of
these net operating losses is limited to approximately $640 per year.
A current income tax provision has been recognized on all of the unremitted
earnings of the Company's foreign subsidiaries (approximately $5,900 at March
31, 1996). The taxes on these foreign earnings have been offset, in part, by
foreign tax credits.
<PAGE>
10. COMMITMENTS AND CONTINGENCIES:
a. ROYALTIES: The Company is party to various licensing agreements for
technology associated with its product and the related manufacturing process
under which the Company is obligated to pay royalties ranging from $.019 to
$.048 per disc sold. Royalty expense incurred under these agreements amounted to
$9,037, $6,258 and $3,831 for fiscal years 1996, 1995 and 1994, respectively.
During fiscal 1996, the Company reached a settlement with one licensing company
and reduced its accrued liability for this and certain other prior royalties by
$2,049. During fiscal 1995, the Company reached settlements with certain
licensing companies for prior-year royalties, recognizing a gain of $2,294. The
Company believes that its accrued expenses adequately provide for royalties
payable to patent holders for proprietary technology.
b. OPERATING LEASES: The Company leases manufacturing facilities, warehouse
space, equipment and other property under various agreements which expire from
1996 through 2011. Aggregate rent expense for these leases amounted to $1,678,
$494 and $331 for fiscal years 1996, 1995 and 1994, respectively.
At March 31, 1996, future obligations under operating lease agreements were
as follows:
Fiscal Year Ending March 31, Amount
1997 $2,424
1998 2,273
1999 1,670
2000 1,516
2001 790
Thereafter 205
$8,878
c. MANAGEMENT INFORMATION SYSTEM UPGRADE: During fiscal 1996, the Company
entered into agreements with software developers to acquire software products to
upgrade its worldwide management information system. The Company has also
entered into agreements with consulting firms to assist in the implementation of
the system upgrade. At March 31, 1996, commitments for software and consulting
fees related to the installation and implementation of its MIS upgrade amounted
to approximately $1,250.
d. CAPITAL EXPENDITURES: At March 31, 1996, commitments for capital expenditures
amounted to approximately $1,284.
e. LITIGATION AND RELATED MATTERS: On March 18, 1996, the Company received
notification from the United States Environmental Protection Agency ("EPA")
alleging that the Company is a Potentially Responsible Party ("PRP") for the
cleanup of surface water contamination at the Cherokee Oil Company Site (the
"Site") in Charlotte, North Carolina which was used by the Company for the
disposal of certain byproducts of its manufacturing processes. Subsequently, the
U.S. Department of Justice notified the Company that it intends to seek recovery
of the approximately $6 million environmental cleanup cost incurred at the Site
from the Company and 46 other PRPs each of which is considered jointly and
severally liable. The Company does not yet know its potential share of the
cleanup costs, the allocation of which is typically based on the amount of
product disposed at the Site. Many of the PRPs are larger than the Company and
appear to have substantial resources. Management of the Company believes that
the ultimate settlement of this matter will not have a material adverse effect
on the Company's financial position or results of operations.
From time to time, the Company is involved in litigation that it considers
to be in the normal course of business. Certain parties have alleged that the
Company is liable for its manufacturing discs from data provided by its
customers that contain copyrighted material not belonging to such customers. A
customer of the Company has asserted that certain discs manufactured by the
Company in excess of the quantity ordered by the customer had not been destroyed
in accordance with contractual arrangements. Two former employees of the Company
have asserted claims alleging wrongful discharge; a settlement was reached with
one former employee during fiscal 1995. The Company is not presently involved in
any legal proceedings which the Company expects individually or in the aggregate
to have a material adverse effect on its financial condition or results of
operations.
f. STOCK WARRANTS: At March 31, 1996, 518,453 shares of the Company's
common stock were reserved for issuance upon exercise of outstanding stock
warrants which expire in 2005 and are exercisable at a price of $.01 per share.
During fiscal 1996, 175,000 warrants were exercised by the warrantholder.
11. STOCK OPTION PLANS:
The Company has adopted the Nimbus CD International, Inc. 1995 Stock Option
and Stock Award Plan (the "Nimbus Plan") which provides for grants to officers
and key employees of stock options, stock appreciation rights, restricted stock
awards or common stock in lieu of bonuses. Under the terms of the Nimbus Plan,
2,715,449 shares of the Company's non-voting common stock were authorized to be
issued. Awards and their terms are authorized by the Compensation Committee of
the Company's Board of Directors.
In October 1995, the Company adopted the Nimbus CD International, Inc. 1995
Stock Option Plan for Non-employee Members of the Company's Board of Directors
(the "Directors Plan"). An aggregate of 50,000 shares of common stock has been
reserved for issuance thereunder. On October 30, 1995, the Company awarded
options to the Company's only independent director to purchase 10,000 shares of
common stock at the initial public offering price.
<PAGE>
NIMBUS CD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(CONTINUED)
The exercise price of options granted under the Nimbus Plan and the
Directors Plan is the fair market value of the Company's common stock at the
dates of grant. All options expire 10 years from the date of grant and vest over
periods of up to 10 years with earlier vesting upon the attainment of certain
performance measurements or upon the occurrence of certain other events.
No restricted stock awards have been made under the Nimbus Plan. Non-
qualified stock options to purchase 477,958 shares of common stock were granted
in exchange for options granted under previous Company option plans. On April 3,
1995, the Company awarded qualified options to purchase 1,163,865 shares of non-
voting common stock. These options will vest ratably over five years from the
date of grant. On May 31, 1995, the Company awarded qualified options to
purchase 451,258 shares of non-voting common stock. These options will vest if
the Company meets certain performance measurements or six years from the date of
grant.
At March 31, 1996, 40,000 common shares were available for future grant
under the Directors Plan and 664,578 common shares were available for future
grant under the Nimbus Plan.
The following is a summary of the activity in the Company's stock option
plans for fiscal years 1996, 1995 and 1994:
Number of Option Price
Stock Options Per Share
Outstanding, April 1, 1993 2,571,592 $ 0.53
Granted 75,210 1.06
Canceled (15,136) 0.53
Outstanding, March 31, 1994 2,631,666 0.53 to 1.06
Granted 37,605 1.06
Canceled (17,298) 0.53 to 1.06
Exercised (2,174,015) 0.53 to 1.06
Outstanding, March 31, 1995 477,958 0.53 to 1.06
Granted 1,625,123 2.52 to 7.00
Canceled (42,210) 2.52
Outstanding March 31, 1996 2,060,871 0.53 to 7.00
Exercisable:
March 31, 1994 1,252,348 0.53 to 1.06
March 31, 1995 477,958 0.53 to 1.06
March 31, 1996 747,874 0.53 to 2.52
12. RELATED-PARTY TRANSACTIONS:
On October 1, 1992, the Company entered into a Technical Services Agreement
with a company owned by certain former stockholders of the Company. Pursuant to
this agreement, the Company made annual payments of approximately $740 for
technical support services. In September 1993, the Company reacquired its common
stock held by these stockholders for an aggregate consideration of $2,795,
including cancellation of $931 of notes receivable from the stockholders.
Because these persons no longer had any equity interest in the Company,
management believed that little future benefit would arise under the Technical
Services Agreement. Accordingly, during fiscal 1994, the Company recorded a
$1,315 charge for the remaining future payments to be made under this agreement.
During fiscal 1995, the Company negotiated a settlement with the former stock-
holders to terminate this agreement. This settlement resulted in a gain of $140
during fiscal 1995.
Sales to a business owned by former stockholders of the Company amounted to
$437 for fiscal 1996, $450 for fiscal 1995 and $486 for fiscal 1994.
On May 4, 1994, the Company made an interest-bearing advance of $155 to a
stockholder, due on demand after February 1, 1995. This note was collected on
March 31, 1995.
During fiscal 1995, the Company paid to McCown De Leeuw & Co., Behrman
Capital L.P., and Donaldson, Lufkin & Jenrette Securities Corporation Merchant
Banking, Inc. approximately $5.7 million in transaction costs related to the
Recapitalization. Approximately $4.0 million of the costs was recorded as a
reduction of paid-in-capital and $1.5 million was recorded as an addition to
treasury stock. The remaining transaction costs were charged to expense.
13.EMPLOYEE BENEFIT PLANS:
The Company has adopted a 401(k) savings and investment plan which covers
substantially all U.S. employees. Contributions to the plan are at the
discretion of the Company. The expense recognized for the plan amounted to $343,
$296 and $214 for fiscal years 1996, 1995 and 1994, respectively.
The Company has adopted a defined contribution retirement plan which covers
substantially all U.K. employees. Contributions to the plan are at the
discretion of the Company. The expense recognized for the plan amounted to $413,
$395 and $346 for fiscal years 1996, 1995 and 1994, respectively.
<PAGE>
14. GEOGRAPHIC SEGMENT INFORMATION:
A summary of the Company's operations by geographic area for fiscal years 1996,
1995 and 1994 is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
NET OPERATING Net Operating Net Operating
SALES INCOME ASSETS Sales Income Assets Sales Income Assets
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
United States $ 71,654 $10,793 $57,925 $48,663 $ 8,319 $52,171 $35,738 $2,790 $36,253
United Kingdom 46,919 10,698 32,828 37,466 7,141 27,824 34,805 5,339 23,279
Inter-area sales (328) (44) (302) (48) (609) (22)
$118,245 $21,447 $90,753 $85,827 $15,412 $79,995 $69,934 $8,107 $59,532
</TABLE>
Inter-area sales represented shipments of CDs and equipment between
geographic locations. Inter-area sales were made at prices which approximate
cost and have been eliminated from consolidated net sales.
15.SUPPLEMENTAL INCOME STATEMENT INFORMATION:
The Company incurred $696 of costs in connection with its registration
statement for an attempted public offering in the spring of 1994, which costs
had been deferred and reflected in other assets. These costs were charged to
expense as of December 31, 1994.
During the attempted public offering, the Company had entered into
agreements to acquire the operations of CD Plant Manufacturing AB, located in
Sweden. The acquisition was contingent on the completion of an initial public
offering of the Company's common stock by no later than June 1, 1994. When the
Company was not able to complete the offering by the indicated date, the
acquisition was not consummated. The cancellation resulted in a $309 write-off
of accumulated acquisitions costs as of June 30, 1994.
16.OFF-BALANCE SHEET RISK AND CONCENTRATION OF CREDIT RISK:
The Company enters into foreign exchange contracts to hedge foreign currency
transactions and to protect it from risk due to exchange rate movements because
gains and losses on these contracts offset gains and losses on the transactions
being hedged. The Company does not engage in speculation. At March 31, 1996, the
Company was not party to any foreign exchange contracts.
The Company's customer base is primarily American and European recording and
software companies. One customer operating under a vendor supply agreement
accounted for 17% of fiscal year 1996 net sales. No other customers represented
more than 10% of consolidated sales for fiscal years 1996, 1995 or 1994. The
Company performs credit evaluations of its customers and maintains reserves for
credit losses. The provision for doubtful accounts amounted to $1,268, $514 and
$1,141 for the fiscal years 1996, 1995 and 1994, respectively.
17. STOCK SPLIT:
On October 16, 1995, the Company's board of directors approved an increase
in the authorized shares of the Company's common stock to 60 million shares and
a 3.76049-for-1 stock split which was distributed on October 18, 1995. All
shares and per share amounts have been adjusted to reflect such stock split.
18.PRO FORMA EARNINGS PER SHARE:
The pro forma net income gives effect to the Recapitalization, the Offering
and the Private Placement, and pro forma earnings per share are computed based
on the total number of shares of common stock issued and outstanding at March
31, 1996 and 1995, as adjusted for the 3.76049-for-1 stock split that became
effective prior to the Offering and the Private Placement and for the following
assumptions as if each had occurred on April 1, 1994: (i) the assumed exercise
of warrants and stock options outstanding during each year, determined by the
treasury stock method using the public offering price of $7.00 per share for
options and warrants granted within one year prior to the Offering and the
Private Placement and the average market price for options and warrants
outstanding in periods after the Offering; (ii) the net additional debt incurred
in the Recapitalization, at an average interest rate of 9.2%, resulting in
additional interest expense of $2,512 ($1,557 net of tax) for the fiscal year
ended March 31, 1995; (iii) the issuance by the Company of 6,350,000 shares of
common stock in the Offering and 500,000 shares in the Private Placement; (iv)
the application by the Company of the net proceeds of the Offering to repay
$41.7 million of outstanding debt; and (v) an assumed average outstanding
borrowing of $28,300 at an average interest rate of 9.2%, resulting in a
reduction of historical interest expense of $2,551 ($1,582 net of tax) for the
fiscal year ended March 31, 1996, and $1,983 ($1,229 net of tax) for the fiscal
year ended March 31, 1995.
Historical earning per share data has been omitted as the historical
capitalization of the Company prior to the Recapitalization and the Offerings is
not indicative of its capital structure following such events.
<PAGE>
NIMBUS CD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(CONTINUED)
19. ACCOUNTING STANDARDS CHANGES:
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"), which is effective for fiscal years beginning after
December 15, 1995. SFAS 123 requires a fair value based method of accounting for
stock based compensation, and provides an option to the Company to either
recognize compensation expense for employee stock based compensation or provide
pro forma earnings information as if such compensation cost had been recognized.
The Company has not yet determined the various assumptions that will be used in
the fair value calculations, the method of adoption nor the impact this
statement will have on its financial statements.
20. QUARTERLY FINANCIAL DATA (UNAUDITED):
Summarized quarterly financial data for fiscal years 1996 and 1995
follows:
DOLLARS IN THOUSANDS, Three Months Ended
EXCEPT PER SHARE DATA 6/30 9/30 12/31 3/31
1996
Discs sold 21,680 33,228 37,531 33,239
Net sales $21,307 $30,545 $36,645 $29,748
Gross profit 7,212 8,982 9,880 8,362
Operating income 3,529 6,072 7,213 4,633
Income before
extraordinary item 994 2,808 3,980 2,677
Net income $ 994 $ 2,808 $ 1,028 $ 2,677
Net income-pro forma
for the Offering $ 1,655 $ 3,451 $ 4,257 $ 2,677
Earnings per share:
Pro forma for the Offering $ 0.07 $ 0.15 $ 0.19 $ 0.12
DOLLARS IN THOUSANDS, Three Months Ended
EXCEPT PER SHARE DATA 6/30 9/30 12/31 3/31
1995
Discs sold 16,792 18,548 29,865 22,543
Net sales $17,044 $18,912 $27,493 $22,378
Gross profit 5,185 6,100 8,674 7,647
Operating income 2,337 3,793 5,753 3,529
Income before
extraordinary item 1,254 2,142 3,654 1,474
Net income $ 1,254 $ 2,142 $ 3,654 $ 1,150
Net income-pro forma
for the Offering $ 1,184 $ 2,009 $ 3,599 $ 1,404
Earnings per share:
Pro forma for the Offering $ 0.05 $ 0.09 $ 0.16 $ 0.06
REPORT OF INDEPENDENT
ACCOUNTANTS
The Stockholders and Directors
Nimbus CD International, Inc.:
We have audited the accompanying consolidated balance sheets of Nimbus CD
International, Inc. and its subsidiaries (the "Company") as of March 31, 1996
and 1995, and the related consolidated statements of income, stockholders'
equity and cash flows for each of the three years in the period ended March 31,
1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Nimbus CD
International, Inc. and its subsidiaries as of March 31, 1996 and 1995, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended March 31, 1996 in conformity with generally
accepted accounting principles.
/s/ COOPERS & LYBRAND L.L.P.
Richmond, Virginia
May 23, 1996
COMMON STOCK INFORMATION
The Company's common stock commenced trading on the Nasdaq National Market on
October 26, 1995 under the symbol NMBS. Prior to that date, there was no
established public trading market for the common stock.
Set forth are the daily high and low sales prices for the Company's common
stock for the period indicated, as reported by MicroQuote II. The current quoted
price of the stock is listed daily in The Wall Street Journal in the National
Association of Securities Dealers Automated Quotation System (Nasdaq). As of
June 6, 1996, there were 104 shareholders of record. The Company has not paid
any dividends on its common stock.
Quarter Ended
Fiscal 1996 12/31 3/31
High $ 9 3/4 $ 9 1/8
Low 7 6 1/2
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
Name of Corporation State/County of Incorporation
------------------- -----------------------------
Nimbus Manufacturing Inc. Virginia
Nimbus Manufacturing (UK) Limited United Kingdom
Nimbus Information Systems, Inc. Virginia
Nimbus Software Services, Inc. Delaware
CD Manufacturing (UK) Limited United Kingdom
3dcd, L.L.C. Delaware
EXHIBIT 24.1
POWERS OF ATTORNEY FROM OFFICERS AND DIRECTORS OF THE COMPANY
SIGNING BY AN ATTORNEY-IN-FACT
POWER OF ATTORNEY
I, CHARLES AYRES, a duly elected Director of NIMBUS CD INTERNATIONAL,
INC., a Delaware corporation (the "Company"), do hereby constitute and appoint
L. Steven Minkel and Gary E. Krutul, each with full power of substitution, for
me and in my name, place and stead, in any and all capacities (including without
limitation, as Director of the Company), to sign the Company's Annual Report on
Form 10-K for the year ended March 31, 1996, which is to be filed with the
Securities and Exchange Commission, with all exhibits thereto, and any and all
documents in connection therewith, hereby granting unto said attorney-in-fact
and agent full power and authority to do and perform any and all acts and things
requisite and necessary to be done, and hereby ratifying and confirming all that
said attorney-in-fact and agent may do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this instrument as of
June 26, 1996.
\s\ Charles Ayers
CHARLES AYERS
<PAGE>
POWER OF ATTORNEY
I, DARRYL G. BEHRMAN, a duly elected Director of NIMBUS CD INTERNATIONAL,
INC., a Delaware corporation (the "Company"), do hereby constitute and appoint
L. Steven Minkel and Gary E. Krutul, each with full power of substitution, for
me and in my name, place and stead, in any and all capacities (including without
limitation, as Director of the Company), to sign the Company's Annual Report on
Form 10-K for the year ended March 31, 1996, which is to be filed with the
Securities and Exchange Commission, with all exhibits thereto, and any and all
documents in connection therewith, hereby granting unto said attorney-in-fact
and agent full power and authority to do and perform any and all acts and things
requisite and necessary to be done, and hereby ratifying and confirming all that
said attorney-in-fact and agent may do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this instrument as of May
20, 1996.
\s\ Darryl G. Behrman
DARRYL G. BEHRMAN
<PAGE>
POWER OF ATTORNEY
I, GRANT G. BEHRMAN, a duly elected Director of NIMBUS CD INTERNATIONAL,
INC., a Delaware corporation (the "Company"), do hereby constitute and appoint
L. Steven Minkel and Gary E. Krutul, each with full power of substitution, for
me and in my name, place and stead, in any and all capacities (including without
limitation, as Director of the Company), to sign the Company's Annual Report on
Form 10-K for the year ended March 31, 1996, which is to be filed with the
Securities and Exchange Commission, with all exhibits thereto, and any and all
documents in connection therewith, hereby granting unto said attorney-in-fact
and agent full power and authority to do and perform any and all acts and things
requisite and necessary to be done, and hereby ratifying and confirming all that
said attorney-in-fact and agent may do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this instrument as of May
20, 1996.
\s\ Grant G. Behrman
GRANT G. BEHRMAN
<PAGE>
POWER OF ATTORNEY
I, ROBERT M. DAVIDSON, a duly elected Director of NIMBUS CD INTERNATIONAL,
INC., a Delaware corporation (the "Company"), do hereby constitute and appoint
L. Steven Minkel and Gary E. Krutul, each with full power of substitution, for
me and in my name, place and stead, in any and all capacities (including without
limitation, as Director of the Company), to sign the Company's Annual Report on
Form 10-K for the year ended March 31, 1996, which is to be filed with the
Securities and Exchange Commission, with all exhibits thereto, and any and all
documents in connection therewith, hereby granting unto said attorney-in-fact
and agent full power and authority to do and perform any and all acts and things
requisite and necessary to be done, and hereby ratifying and confirming all that
said attorney-in-fact and agent may do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this instrument as of
June 4, 1996.
\s\ Robert M. Davidson
ROBERT M. DAVIDSON
<PAGE>
POWER OF ATTORNEY
I, DAVID E. DE LEEUW, a duly elected Director of NIMBUS CD INTERNATIONAL,
INC., a Delaware corporation (the "Company"), do hereby constitute and appoint
L. Steven Minkel and Gary E. Krutul, each with full power of substitution, for
me and in my name, place and stead, in any and all capacities (including without
limitation, as Director of the Company), to sign the Company's Annual Report on
Form 10-K for the year ended March 31, 1996, which is to be filed with the
Securities and Exchange Commission, with all exhibits thereto, and any and all
documents in connection therewith, hereby granting unto said attorney-in-fact
and agent full power and authority to do and perform any and all acts and things
requisite and necessary to be done, and hereby ratifying and confirming all that
said attorney-in-fact and agent may do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this instument as of
June 26, 1996.
\s\ David E. De Leeuw
DAVID E. DE LEEUW
<PAGE>
POWER OF ATTORNEY
I, ANTHONY V. DUB, a duly elected Director of NIMBUS CD INTERNATIONAL,
INC., a Delaware corporation (the "Company"), do hereby constitute and appoint
L. Steven Minkel and Gary E. Krutul, each with full power of substitution, for
me and in my name, place and stead, in any and all capacities (including without
limitation, as Director of the Company), to sign the Company's Annual Report on
Form 10-K for the year ended March 31, 1996, which is to be filed with the
Securities and Exchange Commission, with all exhibits thereto, and any and all
documents in connection therewith, hereby granting unto said attorney-in-fact
and agent full power and authority to do and perform any and all acts and things
requisite and necessary to be done, and hereby ratifying and confirming all that
said attorney-in-fact and agent may do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this instrument as of
June 26, 1996.
\s\ Anthony V. Dub
ANTHONY V. DUB
<PAGE>
POWER OF ATTORNEY
I, ROBERT B. HELLMAN, JR., a duly elected Director of NIMBUS CD
INTERNATIONAL, INC., a Delaware corporation (the "Company"), do hereby
constitute and appoint L. Steven Minkel and Gary E. Krutul, each with full power
of substitution, for me and in my name, place and stead, in any and all
capacities (including without limitation, as Director of the Company), to sign
the Company's Annual Report on Form 10-K for the year ended March 31, 1996,
which is to be filed with the Securities and Exchange Commission, with all
exhibits thereto, and any and all documents in connection therewith, hereby
granting unto said attorney-in-fact and agent full power and authority to do and
perform any and all acts and things requisite and necessary to be done, and
hereby ratifying and confirming all that said attorney-in-fact and agent may do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this instrument as of
June 26, 1996.
\s\ Robert B. Hellman, Jr.
ROBERT B. HELLMAN, JR.
<PAGE>
POWER OF ATTORNEY
I, DAVID E. KING, a duly elected Director of NIMBUS CD INTERNATIONAL,
INC., a Delaware corporation (the "Company"), do hereby constitute and appoint
L. Steven Minkel and Gary E. Krutul, each with full power of substitution, for
me and in my name, place and stead, in any and all capacities (including without
limitation, as Director of the Company), to sign the Company's Annual Report on
Form 10-K for the year ended March 31, 1996, which is to be filed with the
Securities and Exchange Commission, with all exhibits thereto, and any and all
documents in connection therewith, hereby granting unto said attorney-in-fact
and agent full power and authority to do and perform any and all acts and things
requisite and necessary to be done, and hereby ratifying and confirming all that
said attorney-in-fact and agent may do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this instrument as of
June 26, 1996.
\s\ David E. King
DAVID E. KING
<PAGE>
POWER OF ATTORNEY
I, GEORGE E. McCOWN, a duly elected Director of NIMBUS CD INTERNATIONAL,
INC., a Delaware corporation (the "Company"), do hereby constitute and appoint
L. Steven Minkel and Gary E. Krutul, each with full power of substitution, for
me and in my name, place and stead, in any and all capacities (including without
limitation, as Director of the Company), to sign the Company's Annual Report on
Form 10-K for the year ended March 31, 1996, which is to be filed with the
Securities and Exchange Commission, with all exhibits thereto, and any and all
documents in connection therewith, hereby granting unto said attorney-in-fact
and agent full power and authority to do and perform any and all acts and things
requisite and necessary to be done, and hereby ratifying and confirming all that
said attorney-in-fact and agent may do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this instrument as of May
10, 1996.
\s\ George E. McCown
GEORGE E. MCCOWN
<PAGE>
POWER OF ATTORNEY
I, GLENN McKENZIE, a duly elected Director of NIMBUS CD INTERNATIONAL,
INC., a Delaware corporation (the "Company"), do hereby constitute and appoint
L. Steven Minkel and Gary E. Krutul, each with full power of substitution, for
me and in my name, place and stead, in any and all capacities (including without
limitation, as Director of the Company), to sign the Company's Annual Report on
Form 10-K for the year ended March 31, 1996, which is to be filed with the
Securities and Exchange Commission, with all exhibits thereto, and any and all
documents in connection therewith, hereby granting unto said attorney-in-fact
and agent full power and authority to do and perform any and all acts and things
requisite and necessary to be done, and hereby ratifying and confirming all that
said attorney-in-fact and agent may do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this instrument as of
June 26, 1996.
\s\ Glenn McKenzie
GLENN MCKENZIE
<PAGE>
POWER OF ATTORNEY
I, DAVID B. WILSON, a duly elected Director of NIMBUS CD INTERNATIONAL,
INC., a Delaware corporation (the "Company"), do hereby constitute and appoint
L. Steven Minkel and Gary E. Krutul, each with full power of substitution, for
me and in my name, place and stead, in any and all capacities (including without
limitation, as Director of the Company), to sign the Company's Annual Report on
Form 10-K for the year ended March 31, 1996, which is to be filed with the
Securities and Exchange Commission, with all exhibits thereto, and any and all
documents in connection therewith, hereby granting unto said attorney-in-fact
and agent full power and authority to do and perform any and all acts and things
requisite and necessary to be done, and hereby ratifying and confirming all that
said attorney-in-fact and agent may do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this instrument as of May
7, 1996.
\s\ David B. Wilson
DAVID B. WILSON
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