UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
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(Mark One)
X Quarterly Report Pursuant To Section 13 Or 15(d) Of The Securities
Exchange Act Of 1934.
For the quarterly period ended December 31, 1997
OR
______ Transition Report Pursuant To Section 13 Or 15(d) Of The
Securities Exchange Act Of 1934.
For the transition period from _____________________ to _____________________.
Commission File Number: 0-26902
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 No.)
623 Welsh Run Road
Ruckersville, Virginia 22968
(Address of principal executive officers)
Telephone Number (804) 985-1100
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days:
Yes X No _______
---------
As of February 11, 1998 there were 39,012,786 shares of the Registrant's
Common Stock outstanding.
<PAGE>
NIMBUS CD INTERNATIONAL, INC.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements:
Condensed Consolidated Balance Sheets
December 31, 1997 and March 31, 1997........................3
Condensed Consolidated Statements of Income
Three and nine months ended December 31, 1997 and 1996......4
Condensed Consolidated Statements of Cash Flows Nine
months ended December 31, 1997 and 1996.....................5
Notes to Condensed Consolidated Financial Statements........6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.........................8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings..........................................12
Item 6. Exhibits and Reports on Form 8-K...........................12
Signatures.................................................13
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NIMBUS CD INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
<TABLE>
<S> <C> <C>
December 31,
1997 March 31,
ASSETS (Unaudited) 1997
Current Assets:
Cash and cash equivalents $ 5,072 $ 7,790
Accounts and notes receivable, less allowances
for doubtful accounts of $2,386 and $2,014 36,951 26,393
Inventories 2,559 2,217
Prepaid expenses 2,776 1,329
Deferred income taxes 3,415 3,415
------------ ------------
Total current assets 50,773 41,144
------------ ------------
Property, plant, and equipment, net 77,271 63,431
Other assets and intangibles 3,821 3,697
============ ============
$131,865 $108,272
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities:
Accounts payable $ 8,200 $ 5,617
Current portion of long-term debt 7,307 5,159
Accrued expenses and other liabilities 17,426 13,533
Income taxes payable 8,480 6,665
------------ ------------
Total current liabilities 41,413 30,974
------------ ------------
Long-term debt 21,307 20,840
Deferred income taxes 3,563 3,561
Minority interest and other liabilities 2,114 475
Stockholders' equity:
Preferred stock, $0.01 par value; authorized
2,000,000 shares, no shares issued or
outstanding
Common stock, $0.01 par value, 60,000,000
shares authorized, 39,012,786 shares issued;
21,388,581 and 20,870,579 shares outstanding 390 390
Paid-in capital 65,431 66,775
Retained earnings 43,223 31,969
Cumulative foreign currency translation adjustments 169 378
------------ ------------
109,213 99,512
Treasury stock, at cost, 17,624,205 and (45,745) (47,090)
18,142,207 shares
------------ ------------
Total stockholders' equity 63,468 52,422
------------ ------------
$131,865 $108,272
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
NIMBUS CD INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except per share data)
(Unaudited)
<TABLE>
<S> <C> <C> <C> <C>
Three months ended Nine months ended
December 31, December 31,
--------------------- -------------------
1997 1996 1997 1996
--------- ---------- --------- --------
Net sales $41,525 $40,352 $102,243 $100,942
Cost of goods sold 28,243 27,467 71,882 70,704
--------- ---------- --------- --------
Gross profit 13,282 12,885 30,361 30,238
Selling, general and administrative 3,666 3,802 12,891 11,381
expenses
--------- ---------- --------- --------
Operating income 9,616 9,083 17,470 18,857
Interest expense 773 701 2,162 1,972
Other (income) expense, net (1,590) (103) (2,077) (293)
--------- ---------- --------- --------
Income before income taxes 10,433 8,485 17,385 17,178
Provision for income taxes 3,555 2,975 6,128 6,112
--------- ---------- --------- --------
Net income $ 6,878 $ 5,510 $ 11,257 $ 11,066
========= ========== ========= ========
Earnings per share:
Basic $ 0.32 $ 0.26 $ 0.53 $ 0.53
========= ========== ========= ========
Diluted $ 0.30 $ 0.24 $ 0.49 $ 0.48
========= ========== ========= ========
Weighted average shares outstanding:
Basic 21,388 20,869 21,101 20,859
========= ========== ========= ========
Diluted 22,937 22,958 22,957 23,011
========= ========== ========= ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
NIMBUS CD INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<S> <C> <C>
Nine months ended
December 31,
---------------------
1997 1996
---------- ---------
Cash flows from operating activities:
Net income $11,257 $11,066
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 8,377 6,893
Minority interest (434)
Net (gain) on sale of equipment (36)
Other, net 3 15
Change in operating assets and liabilities:
Accounts receivable-trade (10,388) (7,453)
Inventories (333) (610)
Prepaid expenses (1,432) (7)
Accounts payable 2,461 1,422
Accrued expenses 3,893 3,124
Income taxes payable 1,790 1,984
---------- --------
Net cash provided by operating activities 15,158 16,424
---------- --------
Cash flows from investing activities:
Purchase of property, plant and equipment (21,559) (16,670)
Expenditures for computer software (519) (1,054)
Proceeds from sale of equipment 415
Other investing activities 78 (112)
---------- --------
Net cash used in investing activities (21,585) (17,836)
---------- --------
Cash flows from financing activities:
Proceeds from exercise of stock options 41
Revolving credit borrowings, net 4,563 2,250
Proceeds of debt 1,873
Repayment of debt (3,977) (748)
Capital contribution by minority interest 1,649
---------- --------
Net cash provided by financing activities 4,108 1,424
---------- --------
Effect of exchange rate changes on cash (401) 128
Net increase (decrease) in cash (2,720) 150
---------- --------
Cash and cash equivalents, beginning of period 7,790 3,593
---------- --------
Cash and cash equivalents, end of period $ 5,072 $ 3,743
========== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
NIMBUS CD INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(Unaudited)
1. Preparation of Interim Financial Statements:
The condensed consolidated financial statements of Nimbus CD
International, Inc. (referred to as "Nimbus" or the "Company") have been
prepared in accordance with the rules and regulations of the Securities
and Exchange Commission ("SEC"). In the opinion of management, these
statements include all adjustments necessary for a fair presentation of
the financial position, operating results and cash flows of all interim
reporting periods reported herein. All such adjustments are of a normal
recurring nature. Certain information and footnote disclosures prepared in
accordance with generally accepted accounting principles have been either
condensed or omitted pursuant to SEC rules and regulations. However,
management believes that the disclosures made are adequate for a fair
presentation of results of operations and financial position. It is
suggested that these financial statements be read in conjunction with the
Company's audited financial statements and notes thereto, together with
management's discussion and analysis of financial condition and results of
operations, contained in the Company's Annual Report to Stockholders
incorporated by reference in the Company's Annual Report on Form 10-K for
the fiscal year ended March 31,1997. The results of operations for the
three and nine month periods ended December 31, 1997 are not necessarily
indicative of the results for the entire fiscal year ending March 31,
1998.
2. Inventories:
Inventories consist of the following:
<TABLE>
<S> <C> <C>
December 31, March 31,
1997 1997
---------- -----------
Raw materials $2,207 $1,518
Work-in-process 225 236
Finished goods 127 463
========== ===========
$2,559 $2,217
========== ===========
</TABLE>
3. Property, Plant and Equipment:
Property, plant and equipment consist of the following:
<TABLE>
<S> <C> <C>
December 31, March 31,
1997 1997
---------- -----------
Land, buildings and improvements $25,603 $20,865
Machinery and equipment 74,404 62,925
Construction in progress 10,037 5,976
---------- -----------
110,044 89,766
Less accumulated depreciation (32,773) (26,335)
---------- -----------
Net property, plant and equipment $77,271 $63,431
========== ===========
</TABLE>
<PAGE>
NIMBUS CD INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)
(Unaudited)
4. Commitments and Contingencies:
(a) Capital Expenditures: At December 31, 1997 commitments for capital
expenditures amounted to approximately $6,979.
(b) Royalties: The Company is party to various licensing agreements in
both the United States and the United Kingdom for technology
associated with its product and the related manufacturing processes,
under which the Company is obligated to pay royalties ranging from
$.015 to $.045 per disc manufactured. In the United States, one
such licensor's patents were found invalid in a third party civil
action in July 1996, and accordingly, the Company suspended payment
of royalties as provided in the license agreement. The licensor has
appealed the verdict and a decision is not anticipated until
mid-1998. In the United Kingdom, the Company has suspended payment
of royalties to a licensor due to a dispute regarding breach of the
license agreement. Pending their ultimate disposition, the Company
continues to accrue royalty expense under these agreements, for
which the balance aggregates $8.6 million at December 31, 1997. The
Company believes that the outcome of these cases will not result in
a material adverse impact on the results of operations or the
consolidated financial position of the Company.
5. Earnings Per Share
The Company has adopted Financial Accounting Standards Board ("FASB")
Statement of Financial Accounting Standards No. 128 "Earnings Per Share"
(SFAS 128), resulting in the restatement of earnings per share for all
prior periods. SFAS 128 requires that "basic earnings per share" be
computed by dividing income available to common stockholders by the
weighted average number of common shares outstanding for the period.
"Diluted earnings per share" reflects the potential dilution if stock
options or other securities would result in the issuance or exercise of
additional shares of common stock.
6. Accounting Standard Changes
In June 1997, the FASB issued Statement No. 130 "Reporting Comprehensive
Income" ("SFAS 130") which is effective for fiscal years beginning after
December 15, 1997, including interim periods. SFAS 130 establishes
standards of reporting and display of comprehensive income and its
components in a full set of general-purpose financial statements, either
in the statement of operations or in a separate statement. Additionally,
SFAS 130 requires the display of the accumulated balance of other
comprehensive income as a separate caption in the equity section of the
balance sheet as well as the disclosure of material components of
accumulated other comprehensive income either on the face of the balance
sheet, in a statement of changes in equity or in notes to the financial
statements. The Company does not believe that adoption of SFAS 130 will
have a material effect on the Company's financial statements.
The FASB also issued Statement No. 131 "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS 131") in June 1997 which is
effective for fiscal years beginning after December 15, 1997, including
interim periods after the year of initial adoption. SFAS 131 established
standards for the way that public companies report information about
operating segments in both interim and annual financial statements,
including related disclosures about products and services, geographic
areas, and major customers. The Company has not determined what, if any,
impact SFAS 131 will have on the operating segments reported or the impact
SFAS 131 will have on its financial statements and related disclosures.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
Three Months Ended December 31, 1997 and 1996
Net Sales. Total discs sold increased 19.8% to 59.9 million discs in the three
months ended December 31, 1997 from 50.0 million discs in the same period of
1996. The increase was the result of a 29.7% increase in CD-ROM unit sales to
40.6 million discs in the three months ended December 31, 1997 from 31.3 million
discs in the same period of 1996. CD-Audio unit sales decreased 1.1% to 18.5
million units in the three months ended December 31, 1997 from 18.7 million
units in the same period of 1996. In the United States, total discs sold
increased 20.9% to 38.2 million units in the three months ended December 31,
1997 from 31.6 million units in the same period of 1996. United States CD-ROM
volume increased 22.5% to 27.8 million discs in the third fiscal quarter of 1998
from 22.7 million discs in the same period of fiscal 1997. CD Audio volume
increased in the United States by 9.0% to 9.7 million discs in the three months
ended December 31, 1997 from 8.9 million discs in the same period of 1996.
European total unit sales increased 18.6% to 21.7 million discs in the three
months ended December 31, 1997 from 18.3 million discs in the same period of
1996. CD-ROM volume increased 50.6% to 12.8 million discs from 8.5 million discs
while CD-Audio sales units decreased 10.2% to 8.8 million discs during the third
quarter of fiscal 1998 from 9.8 million units in the same period of fiscal 1997.
Net sales increased 2.7% to $41.5 million in the three months ended December 31,
1997 from $40.4 million in the same period of 1996. Compact disc and related
revenues, excluding DVD, increased 1.6% to $39.3 million in the three months
ended December 31, 1997 from $38.7 million in the third quarter of fiscal 1997.
DVD revenues were $2.2 million in the three months ended December 31, 1997,
while turnkey and other related service revenues of Nimbus Software Services,
Inc. ("NSS"), which closed its Sunnyvale facility in the first quarter of fiscal
1998, contributed $1.3 million of revenues for the three month period ended
December 31, 1996. The increase in net sales is due to the increase in disc
volumes described above, offset by a 13% decline in the average disc selling
price from $0.77 to $0.67 for the three month periods ended December 31, 1996
and 1997, respectively. The price decline reflects an oversupply of production
capacity in Europe as well as the continued shift in sales mix to CD-ROM from
CD-Audio, which typically has a higher per unit packaging configuration. In
addition, the Company realized lower disc prices under a vendor supply
agreement. The price declines noted above were partially mitigated by exchange
rate changes between the United States and the United Kingdom during the three
month periods ended December 31, 1997 and 1996, respectively.
Gross Profit. Gross profit increased 3.1% to $13.3 million in the three months
ended December 31, 1997 from $12.9 million in the same period of 1996. Gross
profit as a percentage of net sales increased to 32.0% in the three months ended
December 31, 1997 from 31.9% in the same period of 1996. The increase in gross
profit was attributable to reduced raw material costs and a decrease in the
overall level of factory overhead expenses due to the closure of the Company's
Sunnyvale facility, partially offset by a decline in the average selling price
noted above. The Company's gross profit margin was unfavorably impacted by an
increase in depreciation expense resulting from capital expansion and
acquisition projects in fiscal 1997 and 1998, increased packaging material and
labor due to higher sales levels of non-automated packing configurations, and
increased factory overhead charges for additional warehousing facilities at both
the Charlottesville and Provo locations. Finally, the Company's gross profit
margin included the absorption of depreciation and factory overhead charges at
the Luxembourg facility as the plant commenced disc production in December. If
the results of the Luxembourg facility were excluded, the Company's gross profit
margin would have been 32.9%.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased 2.6% to $3.7 million in the three months ended
December 31, 1997 from $3.8 million in the same period of 1996. As a percentage
of net sales, selling, general and administrative expenses decreased to 8.9% in
the three months ended December 31, 1997 from 9.4% in the same period of the
prior year. The decrease in selling, general and administrative expenses is
attributable to lower administrative personnel and travel expense in the United
States and bad debt expense in the United Kingdom, partially offset by increased
sales and marketing costs associated with efforts to penetrate the OEM and DVD
markets. The third fiscal quarter also includes $0.8 million of costs
attributable to the EuroNimbus operations in Luxembourg, which commenced
operations during the quarter.
Operating Income. Operating income increased 5.5% to $9.6 million in the three
months ended December 31, 1997 from $9.1 million in the same period of 1996. The
increase in operating income primarily reflects the higher unit volume and net
sales mentioned above. Operating income as a percentage of net sales increased
to 23.1% in the three months ended December 31, 1997 from 22.5% in the same
period of 1996.
Interest Expense. Interest expense increased to $0.8 million in the three months
ended December 31, 1997 from $0.7 million in the same period of 1996. The
increase in interest expense reflects an increase in the Company's effective
interest rate for the third quarter of fiscal 1998.
Other Income. Other income increased to $1.6 million in the three months ended
December 31, 1997 from $0.1 million in the same period of 1996. The increase in
other income resulted from the recognition of income earned by a joint venture
of the Company as a result of an exclusive licensing agreement for certain
applications of holographic technology.
Income Taxes. Income tax expense increased to $3.6 million in the three months
ended December 31, 1997 from $3.0 million in the same period of 1996. The
increase in income tax expense is attributable to the increase in income before
taxes. The effective tax rate was 34.1% for the three months ended December 31,
1997 as compared with 35.1% for the three month period ended December 31, 1996.
The decrease in the effective tax rate reflects a change in the statutory rate
in the United Kingdom, which has been lowered from 33% to 31%.
Nine Months Ended December 31, 1997 and 1996
Net Sales. Total discs sold increased 18.6% to 142.2 million discs in the nine
months ended December 31, 1997 from 119.9 million discs in the same period of
1996. The increase resulted primarily from a 23.8% increase in CD-ROM volume to
87.4 million discs from 70.6 million discs for the nine month periods ended
December 31, 1997 and 1996, respectively. The increase in CD-ROM unit sales was
experienced both in the United States, which increased 12.3% to 60.3 million
discs in fiscal 1998 from 53.7 million discs in fiscal 1997, and in Europe,
which increased 60.4% to 27.1 million discs from 16.9 million discs for the nine
months ended December 31, 1997 and 1996, respectively. Overall, CD-Audio unit
volume increased 8.7% to 53.6 million units for the nine months ended December
31, 1997 from 49.3 million discs in the same period of the prior fiscal year.
The CD-Audio volume increase was 7.7% to 25.2 million units from 23.4 million
units in the United States and 9.7% to 28.4 million units from 25.9 million
units in Europe for the first nine months of fiscal 1998.
Net sales increased 1.3% to $102.2 million for the nine months ended December
31, 1997 from $100.9 million for the same period of 1996. Compact disc and
related revenues, excluding DVD, increased 2.1% to $98.2 million in the nine
months ended December 31, 1997 from $96.2 million in fiscal 1997. DVD revenues
were $3.6 million in the nine months ended December 31, 1997, while turnkey and
other related service revenues of NSS contributed $4.2 million of revenues for
the nine month period ended December 31, 1996. Approximately $14.6 million of
the sales increase is due to the increase in disc volume, offset by a 12.5%
decrease in the average disc selling price from $0.80 to $0.70, or $14.1
million.
Gross Profit. Gross profit increased 0.7% to $30.4 million for the nine month
period ended December 31, 1997 from $30.2 million in the same period of 1996.
Gross margin decreased to 29.7% in the nine month period ended December 31, 1997
from 29.9% in the same period of 1996. The decrease in gross profit margin was
attributable to the decline in the average selling price noted above, a $1.7
million increase in depreciation expense associated with fiscal 1997 and 1998
capital acquisitions, and a $0.9 million increase in freight expense. In
addition, the Company incurred additional factory overhead charges associated
with the transferring of the CD manufacturing equipment and inventory from the
Sunnyvale facility to the Provo plant and for additional warehousing facilities
at both the Charlottesville and Provo locations. These costs were partially
offset by reduced raw material costs and a decrease in the overall level of
factory overhead expenses due to the closure of the Company's Sunnyvale
facility. If the results of the Luxembourg facility were excluded, the Company's
gross profit margin would have been 30.2%.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased 13.2% to $12.9 million in the nine month
period ended December 31, 1997 from $11.4 million in the same period of 1996.
The increase in the current year includes $1.4 million of costs incurred in the
process of establishing the EuroNimbus operations in Luxembourg. In addition,
the Company incurred higher sales and marketing costs due to the increased level
of sales noted above and by the Company's efforts to penetrate additional
product markets. The prior year selling, general and administrative expenses
includes a $0.3 million reserve for environmental clean-up costs.
Operating Income. Operating income decreased 7.4% to $17.5 million in the nine
month period ended December 31, 1997 from $18.9 million in the same period of
1996. The decrease in operating income reflects the higher level of selling,
general and administrative expenses mentioned above. Operating income as a
percentage of net sales declined to 17.1% in the nine months ended December 31,
1997 from 18.7% in the same period of 1996.
Interest Expense. Interest expense increased to $2.2 million in the nine months
ended December 31, 1997 from $2.0 million in the same period of 1996. The
increase in interest expense reflects an increase in the Company's effective
interest rate during fiscal 1998.
Other Income. Other income increased to $2.1 million in the nine months ended
December 31, 1997 from $0.3 million in the same period of 1996. The increase in
other income resulted from the recognition of income earned by a joint venture
of the Company as a result of an exclusive licensing agreement for certain
applications of holographic technology, and $0.3 million of interest income.
Income Taxes. Income tax expense remained at $6.1 million in the nine months
ended December 31, 1997 from $6.1 million in the same period of 1996. The
effective tax rate was 35.2% for the nine months ended December 31, 1997 as
compared with 35.6% for the same period of 1996. The decrease in the effective
tax rate reflects a change in the statutory rate in the United Kingdom, which
has been lowered from 33% to 31%.
Liquidity and Capital Resources
Working capital was $9.4 million at December 31, 1997 compared to $10.2 million
at March 31, 1997. Accounts receivable increased $10.4 million for the nine
month period ended December 31, 1997 due to the higher sales volumes of the
third quarter of fiscal 1998, and inventories increased $0.3 million to support
the increased level of seasonal sales. Accounts payable and accrued expenses
increased $6.4 million for the nine month period ended December 31, 1997,
primarily due to an increase in accrued royalties and reflecting the higher
level of raw material purchases and operational expenses associated with the
higher sales volumes of the third quarter of fiscal 1998. Income taxes payable
increased $1.8 million reflecting the timing of estimated tax payments.
Capital expenditures were $21.6 million for the nine month period ended December
31, 1997. Fiscal 1998 capital expenditures include $10.6 million for the
establishment of a disc manufacturing facility in Luxembourg, the expansion of
disc manufacturing capacity in the United States, the replacement and expansion
of ancillary production equipment, additional DVD bonding equipment, and the
continued upgrading of the Company's worldwide management information system.
The Company believes that these capital expenditures and working capital
requirements will be financed through a combination of funds provided by
operating activities and availability under its borrowing arrangements.
The Company is party to various licensing agreements in both the United States
and the United Kingdom for technology associated with its product and the
related manufacturing processes, under which the Company is obligated to pay
royalties ranging from $.015 to $.045 per disc manufactured. In the United
States, one such licensor's patents were found invalid in a separate civil
action in July 1996, and accordingly, the Company suspended payment of royalties
as provided in the license agreement. The licensor has appealed the verdict and
a decision is not anticipated until mid 1998. In the United Kingdom, the Company
has suspended payment of royalties to a licensor due to a dispute regarding
breach of the license agreement. Pending their ultimate disposition, the Company
continues to accrue royalty expense under these agreements, whose liability
balance has increased to $8.6 million at December 31, 1997. The Company believes
that the outcome of these cases will not result in a material adverse impact on
the liquidity, results of operations, or the consolidated financial position of
the Company.
Accounting Standards Changes
In June 1997, the FASB issued Statement No. 130 "Reporting Comprehensive Income"
(SFAS 130) which is effective for fiscal years beginning after December 15,
1997, including interim periods. SFAS 130 establishes standards of reporting and
display of comprehensive income and its components in a full set of
general-purpose financial statements, either in the statement of operations or
in a separate statement. Additionally, SFAS 130 requires the display of the
accumulated balance of other comprehensive income as a separate caption in the
equity section of the balance sheet as well as the disclosure of material
components of accumulated other comprehensive income either on the face of the
balance sheet, in a statement of changes in equity or in notes to the financial
statements. The Company does not believe that adoption of SFAS 130 will have a
material effect on the Company's financial position.
The FASB also issued Statement No. 131 "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS 131") in June 1997 which is effective
for fiscal years beginning after December 15, 1997, including interim periods
after the year of initial adoption. SFAS 131 established standards for the way
that public companies report information about operating segments in both
interim and annual financial statements, including related disclosures about
products and services, geographic areas, and major customers. The Company has
not determined what, if any, impact SFAS 131 will have on the operating segments
reported nor the impact SFAS 131 will have on financial statements and related
disclosures.
Year 2000
As part of the upgrade of its worldwide information systems, the Company is
updating all of its systems to ensure that they will continue to function beyond
the turn of the century. The Company believes that its enterprise wide systems
will be year 2000 compliant by March 31, 1999.
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.
"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.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On March 18, 1996, the Company received notification from the United States
Environmental Protection Agency ("EPA") alleging that the Company was 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 intended to seek recovery of the approximately $6.4
million environmental cleanup cost incurred at the site from the Company and the
other PRPs, each of which was considered jointly and severally liable. In April,
1997, the Company and numerous other PRPs reached a settlement with the EPA.
Under the terms of the settlement, 58 PRPs and the Site owner have reimbursed
the EPA $4.0 million for the cleanup costs. The Company's share of the aggregate
settlement, paid June 25, 1997, was $277, which was fully provided for at March
31, 1997.
From time to time, the Company is involved in litigation that it considers to be
in the normal course of business.
Item 6. Exhibits and Reports on Form 8-K.
A. Exhibit 11 - Computation of Net Income Per Share of Common Stock.
B. Reports on Form 8-K
No reports on form 8-K were filed during the quarter ended December 31,
1997.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: February 12, 1998
NIMBUS CD INTERNATIONAL, INC.
(Registrant)
--------------------------------
L. Steven Minkel
Executive Vice President and
Chief Financial Officer
--------------------------------
Gary E. Krutul
Corporate Controller
(Principal Accounting Officer)
<PAGE>
Exhibit 11
NIMBUS CD INTERNATIONAL, INC.
COMPUTATION OF NET INCOME PER SHARE OF COMMON STOCK
(In thousands, except per share data)
(Unaudited)
<TABLE>
<S> <C> <C> <C> <C>
Three months Nine months
ended ended
December 31, December 31,
------------------ -----------------
1997 1996 1997 1996
-------- -------- -------- -------
Net income used in calculating basic
and diluted earnings per common share:
Net income $6,878 $5,510 $11,257 $11,066
======== ======== ======== =======
Basic earnings per common share:
Weighted average shares outstanding 21,388 20,869 21,101 20,859
Basic earnings per common share $ 0.32 $ 0.26 $ 0.53 $ 0.53
======== ======== ======== =======
Diluted earnings per common share:
Weighted average common shares 21,388 20,869 21,101 20,859
outstanding
Net additional common shares
issuable upon exercise of dilutive
warrants and stock options,
determined by the treasury stock
method using the average market 1,549 2,089 1,856 2,152
price for options and warrants
outstanding during the periods -------- -------- -------- -------
Weighted average number of shares
used in calculating diluted 22,937 22,958 22,957 23,011
earnings per common share
Diluted earnings per common share $ 0.30 $ 0.24 $ 0.49 $ 0.48
======== ======== ======== =======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000919550
<NAME> Nimbus CD International, Inc.
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> Mar-31-1998
<PERIOD-END> Dec-31-1997
<CASH> 5,072
<SECURITIES> 0
<RECEIVABLES> 36,951
<ALLOWANCES> 2,386
<INVENTORY> 2,559
<CURRENT-ASSETS> 50,773
<PP&E> 110,044
<DEPRECIATION> 32,773
<TOTAL-ASSETS> 131,865
<CURRENT-LIABILITIES> 41,413
<BONDS> 0
0
0
<COMMON> 390
<OTHER-SE> 63,078
<TOTAL-LIABILITY-AND-EQUITY> 131,865
<SALES> 102,243
<TOTAL-REVENUES> 102,243
<CGS> 71,882
<TOTAL-COSTS> 71,882
<OTHER-EXPENSES> 12,891
<LOSS-PROVISION> 654
<INTEREST-EXPENSE> 2,162
<INCOME-PRETAX> 17,385
<INCOME-TAX> 6,128
<INCOME-CONTINUING> 11,257
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,257
<EPS-PRIMARY> 0.53
<EPS-DILUTED> 0.49
</TABLE>
