<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(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, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission File Number: 0-24294
MEDIA ARTS GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 77-0354419
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
521 Charcot Ave, San Jose, California 95131
(Address of principal executive offices and zip code)
Registrant's telephone number: (408) 324-2020
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
--- ---
The number of shares outstanding of the Registrant's Common Stock, $0.01 par
value, was 9,867,032 at January 31, 1997.
This report consists of 14 pages of which this page is number 1.
<PAGE> 2
MEDIA ARTS GROUP, INC.
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
Page No.
-------------------
Part I: Financial Information
<S> <C>
Item 1: Financial Statements (unaudited)
Condensed Consolidated Balance Sheet as of December 31, 1996
and March 31, 1996 3
Condensed Consolidated Statement of Operations for the Three Month
and Nine Month Periods Ended December 31, 1996 and 1995 4
Condensed Consolidated Statement of Cash Flows for the Nine Month
Periods Ended December 31, 1996 and 1995 5
Notes to Unaudited Condensed Consolidated Financial Statements 6
Item II: Management's Discussion and Analysis of Financial Condition and
Results of Operations 8
Part II: Other Information
Item 1: Legal Proceedings 12
Item 2: Changes in Securities 12
Item 3: Defaults upon Senior Securities 12
Item 4: Submission of Matters to a Vote of Security Holders 12
Item 5: Other Information 12
Item 6: Exhibits and Reports on Form 8-K 12
(a). Exhibits 13
(b). Reports on Form 8-K 12
Signatures 14
</TABLE>
2
<PAGE> 3
MEDIA ARTS GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, UNAUDITED)
<TABLE>
<CAPTION>
December 31, March 31,
1996 1996
ASSETS ----------- -----------
Current assets:
<S> <C> <C>
Cash and cash equivalents......................................... $ 150 $ 382
Accounts receivable, net.......................................... 7,498 8,262
Inventories....................................................... 5,420 5,006
Net assets of discontinued operations............................. 1,546 17,398
Prepaid expenses and other current assets......................... 1,180 251
Deferred income taxes............................................. 1,874 1,059
Income taxes refundable........................................... 2,190 187
----------- -----------
Total current assets.......................................... 19,858 32,545
Property and equipment, net.......................................... 3,550 3,794
Receivable from related parties...................................... 117 99
Other assets......................................................... 262 220
----------- -----------
$ 23,787 $ 36,658
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................. $ 2,925 $ 2,800
Commissions payable............................................... 273 185
Accrued expenses.................................................. 3,480 3,063
Accrued royalties................................................. 1,447 345
Borrowings under line of credit................................... 1,627 4,375
Current portion of long-term debt................................. 554 586
----------- -----------
Total current liabilities..................................... 10,306 11,354
Long-term debt, less current portion................................. 6,727 6,928
Convertible notes payable to related parties......................... 2,863 2,682
----------- -----------
Total liabilities............................................. 19,896 20,964
----------- -----------
Minority interest - 115
----------- -----------
Stockholders' equity:
Common stock...................................................... 58 58
Additional paid-in capital........................................ 15,725 15,725
Cumulative translation adjustment................................. 139 164
Accumulated deficit............................................... (12,031) (368)
----------- -----------
3,891 15,579
----------- -----------
$ 23,787 $ 36,658
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 4
MEDIA ARTS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS, UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
December 31, December 31,
----------------------- -----------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales......................................... $ 15,471 $ 12,189 $ 35,512 $ 29,355
Cost of sales..................................... 5,228 3,941 12,982 9,818
---------- ---------- --------- ----------
Gross profit...................................... 10,243 8,248 22,530 19,537
---------- ---------- --------- ----------
Operating expenses
Marketing and selling............................. 3,502 2,619 9,631 6,897
General and administrative........................ 2,833 2,705 7,581 8,617
---------- ---------- --------- ----------
Total operating expenses..................... 6,335 5,324 17,212 15,514
---------- ---------- --------- ----------
Operating income.................................. 3,908 2,924 5,318 4,023
Interest expense.................................. (669) (393) (1,749) (846)
Exchange losses................................... (146) (180) (208) (162)
---------- ---------- --------- ----------
Income from continuing operations before
income taxes.................................... 3,093 2,351 3,361 3,015
Provision for income taxes........................ 1,289 929 1,394 1,191
---------- ---------- --------- ----------
Income from continuing operations................. 1,804 1,422 1,967 1,824
Loss from discontinued operations................. - (740) (1,385) (1,902)
Loss on disposal of discontinued operations....... - - (12,245) -
---------- ---------- ---------- ----------
Net income (loss)................................. $ 1,804 $ 682 $ (11,663) $ (78)
========== ========== ========== ==========-
Income (loss) from continuing operations per
common share.................................... $ 0.18 $ 0.14 $ 0.20 $ 0.18
Loss from discontinued operations................. - (0.07) (0.14) (0.19)
Loss on disposal of discontinued operations....... - - (1.24) -
---------- ---------- --------- ----------
Net income (loss) per common share................ $ 0.18 $ 0.07 $ (1.18) $ (0.01)
========== ========== ========= ==========
Weighted average common and common
equivalent shares outstanding..................... 9,932 9,909 9,889 9,877
========== ========== ========= ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE> 5
MEDIA ARTS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS, UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
December 31,
-----------------------------
1996 1995
------ ------
<S> <C> <C>
Cash flows from operating activities:
Net loss....................................................... $ (11,663) $ (78)
Adjustments to reconcile net loss to net cash provided by
(used in) continuing operating activities:
Losses from discontinued operations......................... 13,630 1,902
Depreciation................................................ 717 476
Amortization of intangibles................................. 243 137
Deferred income taxes....................................... 1,288 1,055
Provision for returns and allowances........................ 827 100
Provision for losses on accounts receivable................. 651 (180)
Changes in assets and liabilities:
Accounts receivable......................................... (714) (2,518)
Receivables from related parties............................ (18) 175
Inventories................................................. (414) (89)
Prepaid expenses and other current assets................... (368) (1,015)
Other assets................................................ (42) (51)
Accounts payable............................................ 241 (126)
Commissions payable......................................... 88 (596)
Accrued expenses............................................ (671) 754
Accrued royalties........................................... 1,102 (122)
----------- -----------
Net cash provided by (used in) continuing operating activities... 4,897 (176)
Net cash used in discontinued operations......................... (2,164) (4,637)
----------- -----------
2,733 (4,813)
----------- -----------
Net cash used in investing activities for acquisition
of property and equipment...................................... (473) (350)
----------- -----------
Cash flows from financing activities:
Repayment of borrowings under line of credit................... (2,169) (35)
Proceeds from (repayment of) notes payable, net of debt issuance
costs......................................................... (504) 5,469
Repayment of notes payable to related parties.................. - (1,080)
Payment of pro rata distribution to stockholders............... - (325)
----------- -----------
Net cash provided by (used in) financing activities.............. (2,673) 4,029
----------- -----------
Effect of exchange rate changes on cash.......................... 181 -
----------- -----------
Net decrease in cash and cash equivalents........................ (232) (1,134)
Cash and cash equivalents at beginning of period................. 382 1,552
----------- -----------
Cash and cash equivalents at end of period....................... $ 150 $ 418
=========== ===========
Noncash investing and financing activities:
Notes issued in exchange for operations of a gallery.............. $ - $ 1,494
Warrants issued in conjunction with issuance of notes............. - 453
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE> 6
MEDIA ARTS GROUP, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - Basis of Presentation
The consolidated financial statements of Media Arts Group, Inc. (the Company)
include its wholly owned subsidiary, Thomas Kinkade Stores, Inc., and its
majority owned subsidiary John Hine Limited (JHL). The Company markets and
distributes fine quality gift and collectible art work and other art memorabilia
primarily in the United States.
The condensed interim financial statements of Media Arts Group, Inc. have been
prepared by the Company without audit. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to rules and regulations of the Securities and Exchange Commission. The
information included in this report should be read in conjunction with the
Company's audited financial statements and notes thereto included in the
Company's Annual Report on Form 10-K.
In the opinion of management, the accompanying unaudited interim financial
statements reflect all material adjustments (consisting solely of normal
recurring adjustments) necessary for a fair presentation of the financial
position, operating results and cash flows for the periods presented. The
results of the interim period ended December 31, 1996 are not necessarily
indicative of the results that may be expected for the entire fiscal year which
ends March 31, 1997.
NOTE 2 - Discontinued Operations
On September 27, 1996, the Company decided to dispose of the assets and
operations of JHL, a United Kingdom company which was acquired in December 1993
and which manufactures and distributes collectible miniature cottages and
similar products. On November 11, 1996, a Receiver was appointed by Natwest,
John Hine's lender in the United Kingdom. The Receiver ceased operations of JHL
on December 31, 1996, and a Liquidator was appointed on February 7, 1997 to
dispose of the remaining assets of JHL. The disposal has been accounted for as a
discontinued operation and accordingly the assets held for disposal and
operating results of JHL have been segregated and reported as discontinued
operations in the accompanying consolidated balance sheets and statements of
operations. The loss on disposal of the segment of $12,245,000 included a
provision of $335,000 (net of income taxes of $135,000) for operating losses
during the phaseout period. Prior year financial statements have been restated
to reflect the discontinuance of the JHL operations. The net assets of the
discontinued operations at December 31, 1996 consist primarily of accounts
receivable and inventory related to United States operations less the net amount
due to JHL, and at March 31, 1996 also include goodwill, licenses and customer
lists together with the assets and liabilities of the United Kingdom operation.
6
<PAGE> 7
MEDIA ARTS GROUP, INC.
Operating results of discontinued operations are summarized as follows (in
thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
December 31, December 31,
----------------------- -----------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales of discontinued operations.............. $ 1,396 $ 3,283 $ 5,603 $ 11,817
========== ========== ========= ==========
Loss from discontinued operations before
income taxes.................................... - (1,037) (2,253) (2,846)
Benefit from income taxes......................... - (297) (868) (945)
---------- ---------- --------- ----------
Loss from discontinued operations................. - (740) (1,385) (1,901)
========== ========== ========= ==========
Loss on disposal of discontinued operations before
income taxes.................................... - - (15,513) -
Benefit from income taxes......................... - - (3,268) -
---------- ---------- --------- ----------
Loss on disposal of discontinued operations....... $ - $ - $ (12,245) $ -
========== ========== ========= ==========
</TABLE>
NOTE 3 - Net income (loss) per share
Net income (loss) per share is computed using the weighted average number of
shares of Common Stock and dilutive Common Stock equivalent shares outstanding.
Common Stock equivalents include shares from the exercise of stock options and
warrants (using the treasury stock method).
NOTE 4 - Inventories
Inventories consisted of (in thousands):
<TABLE>
<CAPTION>
December 31, March 31,
1996 1996
------------- -------------
<S> <C> <C>
Raw materials................................... $ 854 $ 854
Work-in-process................................. 50 41
Finished goods.................................. 4,516 4,111
------------- -------------
$ 5,420 $ 5,006
============= =============
</TABLE>
NOTE 5 - Debt
As of December 31, 1996, the Company had borrowings of $1.6 million under a line
of credit with a bank (the Senior Debt and the Senior Lender, respectively) and
had issued $8,000,000 in secured notes payable to investors (the Subordinated
Debt and the Investors, respectively). At December 31, 1996, the Company was not
in compliance with certain financial covenants under the Senior Debt and the
Subordinated Debt. The Senior Debt and the Subordinated Debt are secured by
substantially all of the assets of the Company.
NOTE 6 - Litigation
The Company and its subsidiaries are defendants in certain legal actions and
claims arising in the ordinary course of business. Management believes that such
litigation and claims will be resolved without material effect on the Company's
financial position or results of operations.
7
<PAGE> 8
MEDIA ARTS GROUP, INC.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information set forth below should be read in conjunction with the unaudited
condensed consolidated financial statements and notes thereto included in Part I
- - Item 1 of this Quarterly Report and the Company's Annual Report on Form 10-K
for the year ended March 31, 1996 which contains the audited financial
statements and notes thereto for the years ended March 31, 1996 and 1995 and
December 31, 1993 and for the three month period ended March 31, 1994 and
Management's Discussion and Analysis of Financial Condition and Results of
Operations for those respective periods.
RESULTS OF OPERATIONS
Net Sales
Net sales for the quarter ended December 31, 1996, were $15.5 million, an
increase of $3.3 million or 27% compared to the $12.2 million reported for the
quarter ended December 31, 1995. Net sales for the nine months ended December
31, 1996, were $35.5 million, an increase of $6.2 million or 21% compared to the
$29.4 million reported for the same period in the prior year. The increase
compared to the prior year is due to increases in sales by the Company-owned
retail galleries (TK Stores) and expansion of the Company's customer base
through the opening of licensed Signature Galleries, as well as to improved
results from the Company's sales force, which was changed from independent sales
representatives to in-house employees in the prior year. Retail sales by TK
Stores for the nine months ended December 31, 1996 increased by $1.9 million, or
19%, due to increased demand for Thomas Kinkade lithograph products.
Gross Profit
Gross profit increased by $2.0 million, or 24%, to $10.2 million for the quarter
ended December 31, 1996, in comparison to $8.2 million for the quarter ended
December 31, 1995. Gross profit was $22.5 million for the nine months ended
December 31, 1996, an increase of $3.0 million compared to the prior year. The
increase was due to growth in net sales in the current quarter as compared to
the prior year partly offset by a decrease in gross margin. The Company's
consolidated gross margin was 66% for the quarter ended December 31, 1996,
compared to 68% for the same quarter in the prior year, and was 63% for the nine
months ended December 31, 1996, compared to 67% for the same period in the prior
year. The decrease in the gross margin was due primarily to changes in product
mix of wholesale products to lower priced products with lower gross margins, as
well as to an increase in the proportion of retail sales which have a lower
margin than wholesale sales. The Company increased selling prices by
approximately 6% in September 1996.
Selling Expenses
Selling expenses were $3.5 million during the quarter ended December 31, 1996,
compared to $2.6 million in the same period of the prior year, representing an
increase of approximately 34%. Selling expenses for the nine months ended
September 1996 totaled $9.6 million compared to $6.9 million in the prior year,
representing an increase of 40%. As a percentage of net sales, selling expenses
were 23% for the current quarter compared to 21% for the quarter ended December
31, 1995, and increased to 27% for the nine months ended December 31, 1996, from
23% for the same period in the prior year. The increase as a percentage of net
sales was primarily the result of salary and commission expenses increasing at a
greater rate than the increase in net sales. As a result of the decision to
discontinue the operations of John Hine Limited (JHL), the Company plans to
implement various cost-cutting measures relating to sales and marketing
expenses. However, the level of expenditure may not decrease significantly
during the remainder of the fiscal year in absolute terms as well as a
percentage of net sales as the Company continues to focus on expanding
distribution and establishing new distribution channels.
8
<PAGE> 9
MEDIA ARTS GROUP, INC.
General and Administrative Expenses
General and administrative expenses totaled $2.8 million during the quarter
ended December 31, 1996, compared to $2.7 million for the same period in the
prior year, and represented 18% and 22% of net sales for those periods,
respectively. General and administrative expenses for the nine months ended
December 31, 1995, decreased by $1.0 million to $7.6 million compared to $8.6
million for the same period in the prior year. The decrease in general and
administrative expenses was primarily due to reductions in headcount, together
with other cost-cutting measures such as the consolidation of the Company's
corporate offices into the Company's San Jose manufacturing facility.
Interest Expense
Interest expense was $669,000 and $1.7 million for the quarter and nine months
ended December 31, 1996, respectively, compared to $393,000 and $846,000 for the
same respective periods in the prior year. The increase in interest expense
compared to the prior year was due primarily to the issuance of $8 million in
notes payable in July 1995, which increased the aggregate amount and interest
rate of the Company's long-term debt, as well as to an increase in the rate of
interest on that debt in September 1996.
Foreign Currency Exchange Gains and Losses
In December 1994 the Company established a foreign currency bank line of credit
facility which was used to minimize the effects of currency exchange rate
fluctuations on the Company's income statement. In conjunction with the decision
to dispose of JHL, the Company ceased utilizing the facility during the
September 1996 quarter.
Provision for Income Tax
The Company recorded income tax expense of $1.3 million and $1.4 million for the
quarter and nine months ended December 31, 1996, respectively, compared to
income tax expense of $929,000 and $1.2 million for the same respective periods
in the prior year. The Company's effective income tax rate for the nine months
ended December 31, 1996 was 41% compared to 39% for the same period in the prior
year.
Minority Interest
Minority shareholders owned a 49% interest in John Hine until August 31, 1994,
at which time the Company acquired an additional 46% interest in John Hine,
leaving a 3% minority interest outstanding.
Discontinued Operations
On September 27, 1996, the Company decided to dispose of the assets and
operations of JHL, a United Kingdom company which was acquired in December 1993
and which manufactures and distributes collectible miniature cottages and
similar products. On November 11, 1996, a Receiver was appointed by Natwest,
John Hine's lender in the United Kingdom. The Receiver ceased operations of JHL
on December 31, 1996, and a Liquidator was appointed on February 7, 1997 to
dispose of the remaining assets of JHL. The loss on disposal of the segment of
$12,245,000 included a provision of $335,000 (net of income taxes of $135,000)
for operating losses during the phaseout period. Net sales of the discontinued
operations aggregated $5,603,000 and $11,990,000 for the nine months ended
December 31, 1996 and 1995, respectively, and aggregated $1,396,000 and
$3,283,000 for the quarters ended December 31, 1996 and 1995, respectively.
9
<PAGE> 10
MEDIA ARTS GROUP, INC.
Seasonality
The Company's business has experienced, and is expected to continue to
experience, significant seasonality. The Company's net revenues and net income
are usually highest in the September and December quarters. Management believes
that the seasonal effect is due primarily to customer buying patterns and is
typical of the fine art, gift and collectible industry.
The Company expects the seasonal trends to continue in the foreseeable future.
In addition, because the Company generally does not maintain a significant
backlog of orders due to the Company's relatively short production lead time,
sales in any quarter are substantially dependent on orders booked in that
quarter. Fluctuations in operating results may also result in volatility in the
Company's earnings and the price of the Company's Common Stock.
Liquidity and Capital Resources
The Company's working capital position decreased by $11.6 million during the
nine months ended December 31, 1996, from $21.2 million at March 31, 1996 to
$9.6 million at December 31, 1996. The decrease was due principally to the write
off of assets related to the planned disposal of JHL, as well as to the accrual
of $335,000 of losses during the phaseout period and accrual of $690,000 of
estimated costs of the disposal (net of income tax benefit of $135,000 and
$433,000, respectively).
Cash provided by continuing operating activities totaled approximately $4.9
million during the nine months ended December 31, 1996, and related primarily to
income from continuing operations of $2.0 million plus an increase in accrued
royalties, partly offset by increases in accounts receivable and inventory.
Accrued royalties increased by $1.1 million during the period, while accounts
receivable and inventory decreased by $1.1 million due to seasonal factors.
The Company made capital expenditures of $473,000 for property and equipment
during the nine months ended December 31, 1996. The Company anticipates that
total capital expenditure for the year ended March 31, 1997 will be
approximately $750,000.
The Company's working capital requirements in the foreseeable future will change
depending on various factors. The primary variables include product development
efforts, consumer acceptance of the company's products, expansion of
distribution channels for the Company's products, successful third party
manufacturing relationships, and any other adjustments in its operating plan
needed in response to competition, acquisition opportunities or unexpected
events.
In conjunction with the disposal of JHL, notes payable to a related party
aggregating $1.7 million are due for repayment. The Company is currently
negotiating the deferral of this payment. In the event the payment is not
deferred, the Company may require additional external financing in order to
repay the note. No assurances can be given that such additional financing can be
obtained.
As of December 31, 1996, the Company had borrowings of $1.6 million under a line
of credit with a bank (the Senior Debt and the Senior Lender, respectively) and
had issued $8,000,000 in secured notes payable to investors (the Subordinated
Debt and the Investors, respectively). At December 31, 1996, the Company was not
in compliance with certain financial covenants under the Senior Debt and the
Subordinated Debt. Under the terms of the Senior Debt facility, the Senior
Lender is not required to make additional advances to the Company. The Senior
Debt and the Subordinated Debt are secured by substantially all of the assets of
the Company.
10
<PAGE> 11
MEDIA ARTS GROUP, INC.
The Company is currently negotiating with a prospective lender in order to
increase working capital and to replace the Senior Debt. No assurance can be
given that the terms of any new debt will be comparable to that of the Senior
Debt.
11
<PAGE> 12
MEDIA ARTS GROUP, INC.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS - Not Applicable
ITEM 2. CHANGES IN SECURITIES - Not Applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES - As of December 31, 1996,
the Company had borrowings of $1.6 million under a line of
credit with a bank (the Senior Debt and the Senior Lender,
respectively). Borrowing capacity under the Senior Debt
facility is based upon eligible accounts receivable and
aggregated $6.0 million as of December 31, 1996. As of
December 31, 1996, the Company had also issued $8,000,000 in
secured notes payable to investors (the Subordinated Debt and
the Investors, respectively). At December 31, 1996, the
Company was not in compliance with certain financial covenants
under the Senior Debt and the Subordinated Debt. Under the
terms of the Senior Debt facility, the Senior Lender is not
required to make additional advances to the Company. The
Senior Debt and the Subordinated Debt are secured by
substantially all of the assets of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - None
ITEM 5. OTHER INFORMATION - Not Applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 11.01 - Computation of Income From Continuing
Operations and Net Income Per Share
(b) Reports on Form 8-K - none
12
<PAGE> 13
MEDIA ARTS GROUP, INC.
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.
MEDIA ARTS GROUP, INC.
(Registrant)
By /s/ Kenneth E. Raasch
-----------------------------------
Kenneth E. Raasch
Chairman of the Board of Directors
President & Chief Executive Officer
By /s/ Raymond A. Peterson
-----------------------------------
Raymond A. Peterson
Vice President of Finance &
Chief Financial Officer
Date: February 12, 1996
13
<PAGE> 14
EXHIBIT INDEX
Exhibit Number
11.01 Computation of Income From Continuing Operations and
Net Income Per Share
27. Financial Data Schedule.
<PAGE> 1
MEDIA ARTS GROUP, INC.
EXHIBIT 11.01
ITEM 6(A): EXHIBITS AND REPORTS ON FORM 8-K
COMPUTATION OF NET INCOME FROM CONTINUING OPERATIONS
AND NET INCOME PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (1)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
December 31, December 31,
----------------------- -----------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Income (loss) from continuing operations.......... 1,804 1,422 1,967 1,824
Loss from discontinued operations................. - (740) (1,385) (1,902)
Loss on disposal of discontinued operations....... - - (12,245) -
---------- ---------- ---------- ----------
Net income (loss)................................. $ 1,804 $ 682 $ (11,663) $ (78)
========== ========== ========= ==========
Weighted average common shares outstanding........ 9,867 9,718 9,867 9,718
Common shares issuable on exercise of options
and warrants (2)................................ 65 191 22 159
---------- ---------- --------- ----------
Weighted average common and common
equivalent shares outstanding................... 9,932 9,909 9,889 9,877
========== ========== ========= ==========
Income (loss) from continuing operations per
common share...................................... $ 0.18 $ 0.14 $ 0.20 $ 0.18
Loss from discontinued operations................. - (0.07) (0.14) (0.19)
Loss on disposal of discontinued operations....... - - (1.24) -
---------- ---------- --------- ----------
Net loss per common share......................... $ 0.18 $ 0.07 $ (1.18) $ (0.01)
========== ========== ========= ==========
</TABLE>
(1) This Exhibit should be read with Note 2 of Notes to Unaudited Condensed
Consolidated Financial Statements.
(2) The computation of common and common stock equivalents utilizes the
treasury stock method.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 150
<SECURITIES> 0
<RECEIVABLES> 10,130
<ALLOWANCES> 2,632
<INVENTORY> 5,420
<CURRENT-ASSETS> 19,975
<PP&E> 5,490
<DEPRECIATION> 1,940
<TOTAL-ASSETS> 23,787
<CURRENT-LIABILITIES> 10,306
<BONDS> 0
0
0
<COMMON> 58
<OTHER-SE> 3,833
<TOTAL-LIABILITY-AND-EQUITY> 23,787
<SALES> 35,512
<TOTAL-REVENUES> 35,512
<CGS> 12,982
<TOTAL-COSTS> 17,212
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 875
<INTEREST-EXPENSE> 1,749
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