EXHIBIT 99.6
FOR: PLAY-BY-PLAY TOYS & NOVELTIES, INC.
CONTACT: JOE M. GUERRA
CHIEF FINANCIAL OFFICER
PLAY-BY-PLAY TOYS & NOVELTIES, INC.
FOR IMMEDIATE RELEASE (210) 829-4666
PLAY-BY-PLAY TOYS & NOVELTIES, INC. RECEIVES NOTICE OF TERMINATION ON TWO
LICENSING AGREEMENTS WITH WARNER BROS. CONSUMER PRODUCTS
--COMPANY ALSO REVIEWING STRATEGIC ALTERNATIVES INCLUDING THE SALE OF
FUN SERVICES FRANCHISE BUSINESS--
SAN ANTONIO, TX, JULY 23, 2001-- PLAY-BY-PLAY TOYS & NOVELTIES, INC. (OTCBB:
PBYP) today announced that it received notices of termination from Warner Bros.
Consumer Products ("Warner Bros.") for two entertainment character licensing
agreements due to the non-payment by the Company of scheduled royalties due June
30, 2001 totaling approximately $1.2 million, and as a result of the
court-ordered cancellation of existing surety bonds securing payment of the
guaranteed royalty obligations totaling $10.8 million under the two licensing
agreements. On June 7, 2001, the issuer of the surety bonds, Amwest Surety
Insurance Company ("ASIC") became the subject of an Order of Liquidation,
Declaration of Insolvency, and Injunction by the District Court of Lancaster
County, Nebraska. The court appointed a liquidator who was authorized to take
possession and control of all assets of ASIC and administer them under the
general supervision of the court. Further, the Order of Liquidation provided for
the cancellation of bonds issued by ASIC effective July 6, 2001.
Of the two agreements subject to the termination notices, one provided licensing
rights for Looney Tunes and other characters for amusement and retail
distribution channels in Europe, Middle East and Africa ("EMEA") and the other
agreement provided worldwide licensing rights for Baby Looney Tunes ("BLT")
characters for mass-market retail distribution. Sales of merchandise under the
EMEA and BLT agreements for the nine-months ended April 30, 2001 totaled $7.4
million and $1.7 million, respectively.
Since the inception of the agreements and through the amended and extended terms
of the agreements, revenues under both agreements have been insufficient to
allow the Company to earn out the guaranteed royalty commitments. As a result,
over the past two years, the Company has recorded significant charges to
write-off significant portions of the guaranteed minimum royalties on these two
licensing agreements. Additionally, over the past two years, the Company has
engaged in discussions with Warner Bros. relative to restructuring the minimum
guaranteed royalty obligations under these two licensing agreements. While the
Company has succeeded in securing extensions of the terms and the periods for
the payment of the minimum guaranteed royalty obligations under the two
licensing agreements, it has not succeeded in securing any reductions of the
royalty obligations from the licensor.
The Company currently does not have sufficient cash or borrowing availability
under its credit facilities to satisfy these past due obligations. If the
Company is not able to restructure or modify the terms of these material
licensing agreements and the licensor elects not to continue to provide
licensing
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rights to the Company pursuant to these licensing agreements, this would have an
immediate and material adverse impact on the Company.
The Company is in discussions with prospective buyers interested in purchasing
the Company's Fun Services Franchise business. Due to the Company's financial
condition and as a result of defaults existing under its senior debt and
subordinated debentures, the Company has not been able to fund letters of credit
to purchase merchandise for its Fun Services 2001 Christmas Season orders. As a
result, the Company has determined to sell the business and related assets,
consisting principally of inventory and accounts receivable. Absent the ability
to fund its purchasing requirements for the upcoming season or the sale of the
business, the Company may be forced to release its franchisees from their
franchise agreements and purchasing commitments resulting in the loss of $4
million to $5 million of revenues for the upcoming Christmas season. The
Company's Fun Services division had sales of $6.5 million during FY 2000. There
can be no assurance that the Company will be able to complete a transaction to
sell the Fun Services business in a timely manner.
The Company is currently pursuing other strategic alternatives including the
sale of its European and Puerto Rican business units and certain real estate
holdings in an effort to reduce debt levels and provide working capital to fund
the Company's core operations. Similar to its Fun Services business, the Company
faces financing issues with respect to its Puerto Rican business unit and
currently does not have available funding to open letters of credit for the 2001
Christmas season funding. The Company is currently evaluating proposals from
third-party financial firms concerning representing the Company in any such sale
or other disposition of these two business units.
On a related note, on June 15, 2001, the Company completed the sale of Val Verde
Vending, its amusement game machine division, to Game Vendors of San Antonio,
Texas.
PlayoByoPlay Toys & Novelties, Inc. designs, develops, markets and distributes a
broad line of quality stuffed toys, novelties and consumer electronics based on
its licenses for popular children's entertainment characters, professional
sports team logos and corporate trademarks. The Company also designs, develops
and distributes electronic toys and non-licensed stuffed toys, and markets and
distributes a broad line of non-licensed novelty items. Play-By-Play has license
agreements with major corporations engaged in the children's entertainment
character business.
Except for the historical information contained herein, the matters discussed in
this release are forward-looking statements that involve risks and uncertainties
that could cause actual results to differ materially, including, without
limitation, risks associated with the Company's liquidity and capital resources,
relationships with licensors, competitive and economic factors, price changes by
competitors, ability to manage growth, ability to source products, international
trade relations, management of quarter to quarter results, increase in costs of
raw materials, timing of technological advances by the Company and its
competitors, lack of acceptance by consumers of new products, and the other
factors discussed in the "Risk Factors" section of the Company's Form 10-K dated
July 31, 2000. Updated information will be periodically provided by the Company
as required by the Securities Exchange Act of 1934.
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