<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
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 No. 1-8911
TURNER BROADCASTING SYSTEM, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Georgia 58-0950695
- ------------------------------- ------------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
One CNN Center
Atlanta, Georgia 30303
- ------------------------------- ------------------------------------
(Address of principal (Zip Code)
executive offices)
(404) 827-1700
- --------------------------------------------------------------------------------
(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
-------- --------
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Outstanding at
Class March 31, 1995
- ---------------------------- -------------------------------
Class A Common Stock, par
value $0.0625 68,330,388
Class B Common Stock, par
value $0.0625 137,471,706
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TURNER BROADCASTING SYSTEM, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
UNAUDITED
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1995 1994
------------ ------------
<S> <C> <C>
ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . $ 38,856 $ 52,895
Accounts receivable, less allowance of
$31,959 and $31,862
Unaffiliated . . . . . . . . . . . . . . . . . . . . . . . . . . . . 539,919 567,404
Affiliated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68,631 103,432
Film costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 496,022 446,355
Installment contracts receivable, less
allowance of $12,362 and $10,661 . . . . . . . . . . . . . . . . . . . 48,676 46,806
Prepaid expense and other current assets . . . . . . . . . . . . . . . . . 79,630 71,510
---------- ----------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . 1,271,734 1,288,402
Film costs, less current portion . . . . . . . . . . . . . . . . . . . . . 1,902,242 1,893,069
Property and equipment, less accumulated
depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 312,818 308,960
Installment contracts receivable, less
discount of $536 and $347 . . . . . . . . . . . . . . . . . . . . . . 6,625 1,971
Goodwill and other intangible assets . . . . . . . . . . . . . . . . . . . 435,025 409,468
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159,330 170,675
---------- ----------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,087,774 $4,072,545
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses . . . . . . . . . . . . . . . . . . . $ 227,349 $ 298,849
Deferred income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130,675 108,122
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . 76,092 61,376
Participants' share and royalties payable . . . . . . . . . . . . . . . . . 66,215 58,417
Interest payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,049 37,338
Film contracts payable . . . . . . . . . . . . . . . . . . . . . . . . . . 66,151 40,252
Current portion of long-term debt . . . . . . . . . . . . . . . . . . . . . 1,477 1,345
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 47,537 40,702
---------- ----------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . 643,545 646,401
Long-term debt, less current portion . . . . . . . . . . . . . . . . . . . 2,522,139 2,517,748
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 402,989 385,731
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . 157,642 178,934
---------- ----------
TOTAL LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . 3,726,315 3,728,814
TOTAL STOCKHOLDERS' EQUITY . . . . . . . . . . . . . . . . . . . . 361,459 343,731
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY . . . . . . . . . . . $4,087,774 $4,072,545
========== ==========
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements.
2
<PAGE> 3
TURNER BROADCASTING SYSTEM, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
UNAUDITED
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31,
-----------------------------
1995 1994
------------- --------------
<S> <C> <C>
Revenue
Unaffiliated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $583,851 $469,104
Affiliated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126,464 98,200
-------- --------
710,315 567,304
-------- --------
Cost of operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 403,742 367,113
Selling, general and administrative . . . . . . . . . . . . . . . . . . . . . . 196,176 155,631
Depreciation of property and equipment and
amortization of goodwill and other
intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,377 12,294
Interest expense, net of interest income . . . . . . . . . . . . . . . . . . . 50,708 51,743
Equity in loss of unconsolidated entities . . . . . . . . . . . . . . . . . . . 5,069 2,317
-------- --------
672,072 589,098
-------- --------
Income (loss) before provision (benefit)
for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 38,243 (21,794)
Provision (benefit) for income taxes . . . . . . . . . . . . . . . . . . . . . 16,253 (8,170)
-------- --------
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 21,990 $(13,624)
======== ========
Earnings (loss) per common share and
common stock equivalent
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . $ 0.08 $ (0.07)
======== ========
Weighted average number of common shares
outstanding, including conversion of common
stock equivalents in 1995 . . . . . . . . . . . . . . . . . . . . . . . . 282,367 200,028
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements.
3
<PAGE> 4
TURNER BROADCASTING SYSTEM, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
UNAUDITED
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------------------
1995 1994
------------- -------------
<S> <C> <C>
Cash provided by operations before changes
in film costs and liabilities, net . . . . . . . . . . . . . . . . . . . . . $ 78,122 $ 64,175
Changes in film costs and liabilities, net
Purchased program rights . . . . . . . . . . . . . . . . . . . . . . . . . 20,267 18,757
Produced programming . . . . . . . . . . . . . . . . . . . . . . . . . . . (86,649) (27,168)
Licensed program and distribution rights . . . . . . . . . . . . . . . . . 2,030 (5,059)
-------- ---------
Net cash provided by operations . . . . . . . . . . . . . . . . . . . . . . . . . 13,770 50,705
-------- ---------
Cash provided by (used for) investing activities
Distribution from unconsolidated entities . . . . . . . . . . . . . . . . . . 5,720 -
Acquisitions and advances to unconsolidated entities. . . . . . . . . . . . . (2,522) (142,260)
Additions to property and equipment . . . . . . . . . . . . . . . . . . . . (26,452) (32,849)
-------- ---------
Net cash used for investing activities . . . . . . . . . . . . . . . . . . . . . (23,254) (175,109)
-------- ---------
Cash provided by (used for) financing activities
Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 574,610
Payments of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (129) (475,271)
Payments of cash dividends . . . . . . . . . . . . . . . . . . . . . . . . . (4,902) -
Proceeds from exercise of stock options . . . . . . . . . . . . . . . . . . 476 477
-------- ---------
Net cash provided by (used for) financing activities . . . . . . . . . . . . . . (4,555) 99,816
-------- ---------
Net decrease in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . (14,039) (24,588)
Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . . 52,895 162,858
-------- ---------
Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . $ 38,856 $ 138,270
======== =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION AND NON-CASH INVESTING AND FINANCING ACTIVITIES:
Cash paid for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 13,162 $ 6,317
Net interest paid, including interest
capitalized of $4,419 and $3,552 . . . . . . . . . . . . . . . . . . . . . . 58,596 33,205
Dividends declared but unpaid . . . . . . . . . . . . . . . . . . . . . . . . . . - 4,901
On January 28, 1994, the Company completed the merger with New Line Cinema Corporation as follows (in thousands):
Fair value of assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . $ 695,400
Less: common stock issued or issuable . . . . . . . . . . . . . . . . . . . . . . 406,700
cash paid for debt and other acquisition costs . . . . . . . . . . . . . . 139,600
---------
Liabilities assumed, including Convertible Debentures . . . . . . . . . . . . . . $ 149,100
=========
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements.
4
<PAGE> 5
TURNER BROADCASTING SYSTEM, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
UNAUDITED
NOTE 1. PREPARATION OF INTERIM CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
The consolidated condensed financial statements included herein have
been prepared by Turner Broadcasting System, Inc. (the "Company") pursuant to
the rules and regulations of the Securities and Exchange Commission. In the
opinion of management, the accompanying consolidated condensed financial
statements contain all adjustments, which are of a normal recurring nature,
necessary for a fair presentation of such financial statements. Although
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 such rules and regulations,
management believes that the disclosures are adequate to make the information
presented not misleading. For further information, reference is made to the
consolidated financial statements and the notes thereto incorporated by
reference in the Company's Form 10-K for the year ended December 31, 1994.
Certain prior year amounts have been reclassified to conform to the
current year presentation.
NOTE 2. FILM COSTS
The following table sets forth the components of unamortized film
costs (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
----------------- -----------------
<S> <C> <C>
Purchased program rights . . . . . . . . . . . . . . . . . . . . . . . $1,079,776 $1,102,563
Produced programming
Released . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 311,599 302,559
Completed and not released . . . . . . . . . . . . . . . . . . . . . 44,816 40,021
In process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 459,835 405,255
Episodic television . . . . . . . . . . . . . . . . . . . . . . . . 111,277 107,543
Licensed program and distribution rights . . . . . . . . . . . . . . . 277,492 257,796
Prepaid licensed program rights . . . . . . . . . . . . . . . . . . . 113,469 123,687
---------- ----------
2,398,264 2,339,424
Less current portion . . . . . . . . . . . . . . . . . . . . . . . . . 496,022 446,355
---------- ----------
$1,902,242 $1,893,069
========== ==========
</TABLE>
Episodic television includes serial television program costs. Prepaid
licensed program rights represent licensed program rights for which payments
have been made but the programming is not currently available for use. As
these programs become available for use they are reclassified to licensed
program rights.
On the basis of the Company's anticipated total gross revenue
estimates, over 86% of released and episodic television produced programming
costs at March 31, 1995 will be amortized within the three-year period ending
March 31, 1998.
Amortization of film costs included in Cost of Operations is composed
of the following (in thousands):
<TABLE>
<CAPTION>
Three months ended
March 31,
------------------------------
1995 1994
------------- -------------
<S> <C> <C>
Purchased program rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 22,363 $ 22,377
Produced programming . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161,385 165,811
Licensed program and distribution
rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,080 19,711
Participants' share and royalties . . . . . . . . . . . . . . . . . . . . . . . . 18,110 15,339
Non-cash amortization of certain
acquisition purchase adjustments . . . . . . . . . . . . . . . . . . . . . . 2,793 964
-------- --------
$231,731 $224,202
======== ========
</TABLE>
5
<PAGE> 6
NOTE 3. EARNINGS (LOSS) PER COMMON SHARE AND COMMON STOCK EQUIVALENT
Net income (loss) per common share and common stock equivalent is
computed by dividing net income (loss) applicable to common stock by the
weighted average number of outstanding shares of common stock and common stock
equivalents, when dilutive, during the applicable periods in 1995 and 1994. The
1995 common stock equivalents are principally the incremental shares associated
with the Class C Convertible Preferred Stock (the "Class C Preferred Stock")
and the outstanding stock options. Fully-diluted income (loss) per share
amounts are similarly computed, but include the effect, when dilutive, of the
Company's other potentially dilutive securities. In 1994, no common stock
equivalents are included in the calculation of primary earnings per share, due
to their anti-dilutive effect on net loss for the period. The Company's zero
coupon subordinated convertible notes and the convertible subordinated
debentures of a wholly-owned subsidiary are excluded from the fully-diluted
calculations of net income (loss) per common share for the three-month periods
ended March 31, 1995 and 1994 due to their anti-dilutive effect. The
difference between the primary and fully-diluted earnings per share is not
significant.
NOTE 4. LONG-TERM DEBT
Long-term debt is summarized as follows (in thousands):
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1995 1994
----------- ------------
<S> <C> <C>
Bank credit facilities . . . . . . . . . . . . . . . . . . . . . $1,490,000 $1,490,000
8 3/8% Senior Notes . . . . . . . . . . . . . . . . . . . . . . 297,396 297,381
7.4% Senior Notes . . . . . . . . . . . . . . . . . . . . . . . 249,645 249,637
8.4% Senior Debentures . . . . . . . . . . . . . . . . . . . . . 199,845 199,845
Zero coupon subordinated convertible notes . . . . . . . . . . . 249,982 245,569
Convertible subordinated debentures of
a wholly-owned subsidiary . . . . . . . . . . . . . . . . . . . 29,075 29,075
Obligations under capital leases . . . . . . . . . . . . . . . . 6,297 6,200
Other long-term debt . . . . . . . . . . . . . . . . . . . . . . 1,376 1,386
---------- ----------
2,523,616 2,519,093
Less current portion . . . . . . . . . . . . . . . . . . . . . . 1,477 1,345
---------- ----------
$2,522,139 $2,517,748
========== ==========
</TABLE>
6
<PAGE> 7
NOTE 5. STOCKHOLDERS' EQUITY
Stockholders' equity consists of the following components (in
thousands, except share data):
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1995 1994
-------------- ---------------
<S> <C> <C>
Class C Convertible Preferred Stock, par
value $0.125; authorized 12,600,000 shares;
issued and outstanding 12,396,976 shares . . . . . . . . . . $ 260,438 $ 260,438
Class A Common Stock, par value $0.0625;
authorized 75,000,000 shares; issued and
outstanding 68,330,388 shares . . . . . . . . . . . . . . . . 4,271 4,271
Class B Common Stock, par value $0.0625;
authorized 300,000,000 shares; issued and
outstanding 137,471,706 and 137,424,549
shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,592 8,589
Capital in excess of par value . . . . . . . . . . . . . . . . 1,073,952 1,073,317
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . (985,794) (1,002,884)
---------- -----------
Total stockholders' equity . . . . . . . . . . . . . . . . $ 361,459 $ 343,731
========== ===========
</TABLE>
On March 1, 1995, the Board of Directors declared a cash dividend on
the Company's outstanding shares of Class A Common Stock and Class B Common
Stock, payable at the rate of $0.0175 for each share held on the record date.
In addition, holders of the Company's outstanding Class C Preferred Stock were
entitled to an equivalent cash dividend of $0.105 for each share held on the
record date based on the number of shares of Class B Common Stock which would
be issued upon conversion of each share of Class C Preferred Stock. Cash
dividends of $4,902,000 were paid on March 30, 1995 to shareholders of record
at the close of business on March 15, 1995.
The Company's ability to pay cash dividends to holders of shares of the
Class A and Class B Common Stock and the Class C Preferred Stock is subject to
certain covenants in the Company's outstanding debt instruments. Currently the
most restrictive of such covenants limits the maximum aggregate amount of
dividends permitted to be paid annually to such holders to $30,000,000.
NOTE 6. ACQUISITION
The Company and New Line Cinema Corporation ("New Line"), a motion
picture production and distribution company, completed a merger of New Line
with a wholly-owned subsidiary of the Company on January 28, 1994 (the
"Merger"). As a result of the Merger, each share of New Line Common Stock has
been converted into the right to receive 0.96386 of a share of the Company's
Class B Common Stock. The valuations used by New Line and the Company for
purposes of arriving at the exchange ratio were $20 per share of New Line
Common Stock and $20.75 per share of the Company's Class B Common Stock. The
maximum number of shares of Class B Common Stock issuable pursuant to the
Merger is approximately 21,300,000 shares, valued at approximately
$442,000,000. Cash will be distributed in lieu of any fractional shares. At
March 31, 1995 approximately 16,300,000 shares of the Company's Class B Common
Stock had been issued in connection with the Merger. The remaining shares are
issuable upon the exercise of New Line stock options and warrants and the
conversion of the New Line convertible subordinated debentures discussed below.
Additionally, the Company assumed and incurred liabilities of approximately
$149,100,000 and paid debt and certain other acquisition costs of approximately
$140,000,000 in connection with the Merger.
7
<PAGE> 8
Among the liabilities assumed in the Merger were $29,125,000 of New Line 6 1/2%
convertible subordinated debentures (the "Convertible Debentures"). The
Convertible Debentures are convertible at the option of the holders into an
aggregate of approximately 1,700,000 shares of Class B Common Stock.
The Merger was accounted for by the purchase method of accounting.
Goodwill and other intangible assets in the amount of approximately
$330,000,000 were recognized in the transaction, and are being amortized using
a straight-line basis over periods not to exceed 40 years. The pro forma effect
of the Merger for the three months ended March 31, 1994 is not considered
significant.
NOTE 7. SUBSEQUENT EVENT
On May 9, 1995, the Company signed an agreement with a financial
institution whereby the Company and certain of its subsidiaries will sell on an
ongoing basis and without recourse up to $300,000,000 of an undivided
percentage ownership interest in a designated pool of domestic cable and
advertising accounts receivable. The initial sale is expected to close during
the second quarter of 1995. The estimated cost of the program for the initial
sale of the accounts receivable will not have a material effect on the
consolidated statement of operations.
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
SOURCES AND USES OF CASH
Cash provided by operations after changes in film costs and associated
liabilities for the three months ended March 31, 1995 aggregated $14 million.
Included in cash provided by operations were $187 million utilized by the
Company for original entertainment and sports programming (including $101
million for theatrical film productions, excluding promotional and advertising
costs) and cash interest payments, net of cash interest received, of $59
million. Other primary uses of cash during the period included additions to
property and equipment of $26 million.
See the Consolidated Condensed Statements of Cash Flows for additional
details regarding sources and uses of cash and Note 4 of Notes to Consolidated
Condensed Financial Statements for additional information about the Company's
indebtedness.
CREDIT FACILITIES AND FINANCING ACTIVITIES
The Company had approximately $2.5 billion of outstanding indebtedness at
March 31, 1995, of which $1.5 billion was outstanding under unsecured revolving
credit facilities with banks.
On May 9, 1995, the Company signed an agreement with a financial
institution whereby the Company and certain of its subsidiaries will sell on an
ongoing basis and without recourse up to $300 million of an undivided
percentage ownership interest in a designated pool of domestic cable and
advertising accounts receivable. The initial sale is expected to close during
the second quarter of 1995. The estimated cost of the program for the initial
sale of the accounts receivable will not have a material effect on the
consolidated statement of operations.
CAPITAL RESOURCES AND COMMITMENTS
During the next 12 months, the Company anticipates making cash
expenditures of approximately $280 million for sports programming, primarily
rights fees, approximately $840 million for original entertainment programming
(excluding promotional and advertising costs) and approximately $130 million
for licensed programming. Also, during the next 12 months, the Company expects
to make total expenditures of approximately $107 million for additional or
replacement property and equipment. Of the anticipated programming and capital
expenditures described above, firm commitments exist for approximately $570
million. Other capital resource commitments consist primarily of lease
obligations, some of which are contingent on revenues derived from usage.
Management expects to continue to lease satellite facilities, sports facilities
and office facilities not already owned by the Company.
Management expects to finance these commitments from working capital
provided by operations and financing arrangements with lessors, vendors and
film suppliers and additional borrowings.
9
<PAGE> 10
RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 1995 VS. THREE MONTHS
ENDED MARCH 31, 1994
<TABLE>
<CAPTION>
UNAUDITED UNAUDITED
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 1995 MARCH 31, 1994
-------------- --------------
(IN THOUSANDS)
<S> <C> <C>
Revenue
Entertainment
Networks $242,796 $197,437
Production & Distribution 286,646 210,850
Intrasegment revenue elimination (31,823) (14,868)
-------- --------
Total Entertainment 497,619 393,419
News 183,078 150,788
Other 33,763 25,992
Intersegment revenue elimination (4,145) (2,895)
-------- --------
$710,315 $567,304
======== ========
Operating profit (loss)
Entertainment
Networks $ 43,152 $ (1,094)
Production & Distribution 12,789 (3,166)
Intrasegment elimination (8,582) 4,070
-------- --------
Total Entertainment 47,359 (190)
News 67,423 49,197
Other (20,762) (16,741)
Equity in loss of
unconsolidated entities (5,069) (2,317)
-------- --------
$ 88,951 $ 29,949
======== ========
</TABLE>
ENTERTAINMENT SEGMENT
Entertainment Segment revenue increased $104 million, or 26%, from
$394 million to $498 million. In the networks, subscription revenue increased
$20 million, or 32%, due to higher rates and an increase in subscribers, while
advertising revenue increased $19 million, or 16%, due to an increase in the
amount charged per thousand homes and higher viewership. The Company's
production and distribution companies contributed the remaining revenue
increase primarily through strong home video distribution, which increased $43
million, or 60%, due to recent releases of theatrical film product as well as
international sales of existing library product. The remaining increase is due
to favorable box office results for new theatrical film releases, which
increased $18 million, or 51%.
Operating profit for the Entertainment Segment increased $48 million.
An increase in the operating profits of the Company's core networks (which
consist of TBS SuperStation, TNT and TNT Latin America) of $38 million was
primarily due to reduced sports programming costs as compared to the first
quarter of last year when the 1994 Winter Olympics were telecast, as well as
the subscription and advertising revenue advances mentioned above. Combined
operating losses for new networks decreased $2 million to $5 million, as
improved results from Cartoon Network and Cartoon Latin America were offset by
increased losses from the new operations of TNT & Cartoon Network Asia which
was launched in October 1994. Operations outside the networks accounted for
the remaining increase, primarily due to favorable results from theatrical film
and home video releases.
10
<PAGE> 11
NEWS SEGMENT
News Segment revenue rose $32 million, or 21%, to $183 million. The
increase was due primarily to an $18 million, or 28%, increase in domestic
advertising revenue associated with higher viewership levels, and a $5 million,
or 10%, increase in domestic subscription revenue primarily due to increased
sales in the home satellite dish market. The remaining increase in overall
revenue was generated by CNN International, where first quarter revenue rose $7
million, or 31%, to $30 million.
As a result of the revenue advances, which outpaced cost increases,
operating profit for the News Segment increased $18 million, or 37%.
OTHER SEGMENT
Revenue for the segment increased $8 million, or 30%, to $34 million.
Increased revenues at World Championship Wrestling ("WCW") of $6 million
associated primarily with pay-per-view events accounted for the majority of the
increase. Overall, operating losses for the Segment rose $4 million, due
primarily to higher spending on information technology and other
infrastructure to support the growth of the Company and increased operating
costs at WCW, offsetting revenue gains. On March 31, 1995, the Major League
Baseball Players' Association ended its strike and Major League Baseball
scheduled a 144 game season. The strike and abbreviated season are not
expected to have a significant impact on the Company's operating results in
1995.
EQUITY IN LOSS OF UNCONSOLIDATED ENTITIES/OTHER CONSOLIDATED INFORMATION
Operating losses increased $3 million due primarily to reduced Atlanta
Hawks ticket revenue associated with attendance levels in comparison to the
prior year.
Consolidated depreciation and amortization increased approximately
$4 million due to purchases of property and equipment.
As a result of the information discussed above, the Company reported
net income of $22 million in the first quarter of 1995 ($0.08 net income per
common share and common share equivalent). This compares to a net loss of $14
million in the first quarter of 1994 ($0.07 net loss per common share).
11
<PAGE> 12
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Turner Broadcasting System, Inc. v. Federal Communications Commission and The
United States of America
As last updated in the Company's Form 10-K for the year ended December
31, 1994, on October 5, 1992, the Company filed a lawsuit in the United States
District Court for the District of Columbia challenging the provisions of the
Cable Television Consumer Protection and Competition Act of 1992 (the "1992
Act") that would require cable television operators to devote up to one-third
of their channel capacity to the carriage of local broadcast stations and
provide certain channel positioning rights to local broadcast stations. The
Company's complaint alleges that these provisions violate the First Amendment
of the United States Constitution. Under a provision of the 1992 Act, the case
was heard by a three-judge court. On April 8, 1993, the Court upheld the
constitutionality of these provisions by a 2-1 vote. On June 27, 1994, the
United States Supreme Court vacated the District Court's ruling and remanded
the case for further proceedings. The Company is pursuing its claims.
12
<PAGE> 13
ITEM 5. OTHER INFORMATION
REGULATION
On October 5, 1992, the 1992 Act became law. The Federal
Communications Commission (the "FCC" or the "Commission") is charged with
implementation of the 1992 Act.
RATE REGULATION
Section 623 of the Communications Act of 1934, as amended by the 1992
Act, establishes a two-tier rate structure applicable to systems not found to
be subject to "effective competition" as defined by the statute. Rates for a
required "basic service tier" are subject to regulation by practically every
community. Rates for cable programming services other than those carried on
the basic tier are subject to regulation if, upon complaint, the FCC finds that
such rates are "unreasonable." Programming offered by a cable operator on a
per-channel or per-program basis, however, is exempt from rate regulation.
On April 1, 1993, the FCC adopted implementing regulations for Section
623. The text of its Report and Order was released on May 3, 1993. The FCC
adopted a benchmark approach to rate regulation. Rates above the benchmark
would be presumed to be unreasonable. Once established, cable operators could
adjust their rates based on appropriate factors and could pass through certain
costs to customers, including increased programming costs.
On February 22, 1994, the Commission adopted further regulations.
Among other things, the additional regulations will govern the offering of bona
fide "a la carte" channels that are exempted from rate regulation. The
Commission also adopted a methodology for determining rates when channels are
added to or deleted from regulated tiers. These regulations may adversely
affect the Company's ability to sell its existing or new networks to cable
customers and/or may adversely affect the prices the Company may charge for its
services, although at this time the Company cannot predict their full effect on
its operations.
On April 5, 1993, the FCC also froze rates for cable services subject
to regulation under the 1992 Act for 120 days. On June 11, 1993, the FCC
deferred the implementation of rate regulation from June 21, 1993 until October
1, 1993, and extended the freeze on rates for cable services subject to
regulation from August 4, 1993 to November 15, 1993. On November 10, 1993, the
Commission further extended the freeze until February 15, 1994, and on February
8, 1994, extended the expiration date of the freeze until May 15, 1994. On
July 27, 1993, the FCC moved the effective date of rate regulation back to
September 1, 1993. Additionally, among other things, the FCC permitted cable
operators to structure rates and service offerings up until September 1, 1993,
without prior notice to subscribers.
On July 16, 1993, the FCC issued a Notice of Proposed Rulemaking to
add the regulatory requirements to govern cost-of-service showings that cable
operators may submit under this provision to justify rates above the
benchmarks. On February 22, 1994, the Commission adopted interim rules to
govern the cost of service proceedings.
13
<PAGE> 14
On March 30, 1994, the Commission released a Further Notice of
Proposed Rulemaking in connection with its cost of service regulations. In
that Notice, the Commission proposed to limit the price a cable operator may
recover in transactions with its affiliates. The proposal, if adopted, could
adversely affect the Company's transactions with certain cable operators,
including Tele-Communications, Inc. and Time Warner, Inc., which are affiliates
of the Company. On July 1, 1994, the Company filed comments opposing this
proposal. The Company cannot predict the ultimate outcome of the proceeding.
The FCC on November 10, 1994 reversed its policy regarding rate
regulation of packages of "a la carte" services. "A la carte" services that
are offered in a package will now be subject to rate regulation by the FCC. In
light of the uncertainty created by the various criteria that the FCC
previously applied to "a la carte" packages, the FCC, in those cases in which
it was not clear how the FCC's previous criteria should have been applied to
the package at issue, and where only a "small number" of channels were moved
from a previously regulated tier to the package, will allow cable operators to
treat existing packages as New Product Tiers ("NPTs") as discussed below.
The FCC, in addition to revising its rules governing "a la carte"
channels, also on November 10, 1994 revised its regulations governing the
manner in which cable operators may charge subscribers for new cable
programming services. The FCC instituted a three-year flat fee mark-up plan
for charges relating to new channels of cable programming services in addition
to the present formula for calculating the permissible rate for new services.
Commencing on January 1, 1995, operators may charge for new channels of cable
programming services added after May 14, 1994 at a mark-up of 20 cents per
channel over actual programming costs, but may not make adjustments to monthly
rates for these new services totaling more than $1.20, plus an additional 30
cents solely for programming license fees, per subscriber over the first two
years of the three-year period. Cable operators may charge an additional 20
cents in the third year only for channels added in that year. Cable operators
electing to use the 20 cents per channel adjustment may not take a 7.5% mark-up
on programming cost increases, which is permitted under the FCC's current rate
regulations. The FCC requested further comment on whether cable operators
should continue to receive the 7.5% mark-up on increases in license fees on
existing programming services.
Additionally, the FCC will permit cable operators to offer NPTs at
rates which they elect so long as, among other conditions, other service tiers
that are subject to rate regulation are priced in conformity with applicable
FCC regulations and cable operators do not remove programming services from
such existing tiers and offer them on the NPT.
The constitutionality of these provisions has been challenged in
litigation filed in the United States District Court for the District of
Columbia. On September 27, 1993, the district court upheld the
constitutionality of these provisions. An appeal of that decision is pending
in the U.S. Court of Appeals for the District of Columbia. Appeals of the
Commission's implementing regulations have also been taken to the United States
Court of Appeals for the District of Columbia Circuit. The Company cannot
predict the ultimate outcome of the litigation.
MUST CARRY AND RETRANSMISSION CONSENT
The 1992 Act contains provisions that would require cable television
operators to devote up to one-third of their channel capacity to the carriage
of
14
<PAGE> 15
local broadcast stations and provide certain channel position rights to local
broadcast stations. The 1992 Act also includes provisions governing
retransmission of broadcast signals by cable systems, whereby retransmission of
broadcast signals would require the broadcaster's consent and provides each
local broadcaster the right to make an election between must carry or
retransmission consent. The retransmission consent provisions of the 1992 Act
became effective on October 5, 1993.
On March 11, 1993, the FCC adopted a Report and Order implementing
these provisions. The provisions could affect the ability and willingness of
cable systems to carry cable programming services. The Company has filed
litigation challenging the provision as unconstitutional (see "Legal
Proceedings - Turner Broadcasting System, Inc. v. Federal Communications
Commission and The United States of America").
PROGRAM ACCESS
On April 1, 1993, the Commission issued regulations implementing a
provision that, among other things, makes it unlawful for a cable network, in
which a cable operator has an attributable interest, to engage in certain
"unfair methods of competition or unfair or deceptive acts or practices," the
purpose and effect of which is to hinder significantly, or prevent, any
multichannel video programming distributor from providing satellite cable
programming or satellite broadcast programming to cable subscribers or
consumers. The provisions contain an exemption for any contract that grants
exclusive distribution rights to a person with respect to satellite cable
programming or that was entered into on or before June 1, 1990. While the
Company cannot predict the regulations' full effect on its operations, such
regulations may affect the rates charged by the Company's cable programming
services to its customers and could affect the terms and conditions of
contracts between the Company and its customers.
The constitutionality of this provision has been challenged in
litigation filed in the United States District Court for the District of
Columbia. On September 27, 1993, the district court upheld this provision. An
appeal of that decision is pending in the United States Court of Appeals for
the District of Columbia Circuit. Appeals of the Commission's implementing
regulations have also been taken to the United States Court of Appeals for the
District of Columbia Circuit. The Company cannot predict the ultimate outcome
of the litigation.
REGULATION OF CARRIAGE AGREEMENTS
The 1992 Act contains a provision that requires the FCC to establish
regulations governing program carriage agreements and related practices between
cable operators and video programming vendors, including provisions to prevent
the cable operator from requiring a financial interest in a program service as
a condition of carriage and provisions designed to prohibit a cable operator
from coercing a video programming vendor to provide exclusive rights as a
condition of carriage. On October 22, 1993, the Commission issued regulations
implementing this provision. The Company cannot at this time predict the
effect of this provision on its operations.
The constitutionality of this provision has been challenged in
litigation filed in the United States District Court for the District of
Columbia. On September 27, 1993, the district court upheld the
constitutionality of this
15
<PAGE> 16
provision. An appeal of that decision is pending in the United States Court of
Appeals for the District of Columbia Circuit. The Company cannot predict the
outcome of the litigation.
OWNERSHIP LIMITATIONS
Section 11 of the 1992 Act directed the Commission to prescribe rules
and regulations establishing limits on the number of cable subscribers a person
is authorized to reach through cable systems owned by such person and the
number of channels that can be occupied by video programmers in which a cable
operator has an attributable interest. The Commission must also consider the
necessity of imposing limitations on the degree to which multichannel video
programming distributors may engage in the creation or production of video
programming.
On December 28, 1992, the FCC issued a Notice of Proposed Rulemaking
and Notice of Inquiry with respect to these provisions. On October 22, 1993,
the FCC adopted a Second Report and Order that established a 40% limit on the
number of channels that may be occupied by programming services in which the
particular cable operator has an attributable interest. The Company is subject
to this provision. The FCC also established a national limit of 30% on the
number of homes passed that any one person can reach through cable systems
owned by such person, but stayed implementation of that provision pending
judicial review of its constitutionality. On April 5, 1995, the FCC denied the
petitions for reconsideration. The Company cannot at this time predict the
effect of this provision or of these proposals on its operations.
The constitutionality of these provisions has been challenged in
litigation filed in the United States District Court for the District of
Columbia. On September 27, 1993, the district court found the national limit
on homes passed unconstitutional, but upheld the constitutionality of the
channel capacity limits. An appeal of that decision is currently pending in
the United States Court of Appeals for the District of Columbia Circuit.
Appeals of the Commission's implementing regulations have also been taken to
the United States Court of Appeals for the District of Columbia Circuit. The
Company cannot predict the ultimate outcome of the litigation.
SPORTS MIGRATION
The 1992 Act directed the FCC to submit an interim report by July 1,
1993, and a final report by July 1, 1994, to Congress on the migration of
sports programming from broadcast networks to cable networks and cable
pay-per-view. On June 30, 1994, the FCC issued its final report in which it
recommended that no action by Congress was necessary.
16
<PAGE> 17
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
4.6.6 Form of Amendment No. 4, dated as of December 5, 1994, among the Company,
the banks listed therein and The Chase Manhattan Bank (National
Association), as Agent, to the Credit Agreement dated as of July 1, 1993.
4.7.1 Form of Amendment No. 1, dated as of December 5, 1994, among the Company,
the banks listed therein and The Chase Manhattan Bank (National
Association), as Agent, to the Credit Agreement dated as of September 7,
1994.
11 Computation of Earnings per Common and Common Equivalent Share
27 Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K
No reports have been filed on Form 8-K during the quarter for which
this report is filed.
17
<PAGE> 18
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.
TURNER BROADCASTING SYSTEM, INC.
By: /s/ William S. Ghegan
-------------------------------
William S. Ghegan
Vice President, Controller and
Chief Accounting Officer
Date: May 11, 1995
18
<PAGE> 1
EXHIBIT 4.6.6
FORM OF
AMENDMENT NO. 4
AMENDMENT NO. 4 dated as of December 5, 1994 between TURNER
BROADCASTING SYSTEM, INC., a Georgia corporation (the "Company"), the Banks (as
such term is defined below) party hereto and THE CHASE MANHATTAN BANK (NATIONAL
ASSOCIATION) ("Chase"), as agent (the "Agent").
The Company, certain lenders (the "Banks") and the Agent are
party to a Credit Agreement dated as of July 1, 1993 (as amended, supplemented
and otherwise modified and in effect to but excluding the date hereof, the
"Credit Agreement"). The Company has requested that the Banks agree, and the
Banks party hereto are willing, to amend certain provisions of the Credit
Agreement, all on the terms and conditions of this Amendment. Accordingly, in
consideration of the premises and the mutual agreements contained herein, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
Section 1. Definitions. Terms used but not defined
herein shall have the respective meanings ascribed to such terms in the Credit
Agreement.
Section 2. Amendments. Subject to the satisfaction of
the conditions to effectiveness specified in Section 4 hereof, but with effect
on and after the date hereof, the Credit Agreement shall be amended as follows:
A. Certain Defined Terms. Section 1.01 of the Credit
Agreement shall be amended:
(1) by adding a sentence at the end of the definition of
"Lien" therein reading as follows:
"For purposes of this Agreement, sales of accounts
receivable under any Permitted Receivables Facility shall not
be deemed to constitute Liens."; and
(2) by adding the following new definition and inserting
the same in the appropriate alphabetical location:
"Permitted Receivables Facility" shall mean a
receivables purchase facility entered into after December 5,
1994 pursuant to which the Company and/or one or more of its
Subsidiaries may at any time or from time to time sell, on
a non-recourse credit basis, accounts receivable arising in the
ordinary course of business.
Amendment No. 4
<PAGE> 2
-2-
B. Sale of Assets. Section 8.18 of the Credit Agreement
shall be amended:
(1) by deleting "and" at the end of paragraph (d) thereof;
(2) by replacing the period at the end of paragraph (e)
thereof with "; and"; and
(3) by adding a new paragraph (f) thereto reading as
follows:
"(f) so long as no Event of Default shall have
occurred and then be continuing, the Company and its
Subsidiaries may from time to time sell accounts receivable
arising in the ordinary course of business under Permitted
Receivables Facilities, provided that the aggregate face
amount of all such accounts receivable sold thereunder may not
exceed $300,000,000 at any one time outstanding."
C. Delivery of Permitted Receivables Facilities
Agreements. The Credit Agreement shall be amended by adding a new Section 8.20
thereto reading as follows:
"8.20 Delivery of Permitted Receivables Facilities
Agreements. On or prior to the date of effectiveness of the first
sale of accounts receivable under each Permitted Receivables Facility,
the Company shall give the Agent notice thereof (and the Agent shall
notify the Banks thereof promptly), and shall deliver to the Agent a
certified or conformed copy of each of the principal agreements
executed and delivered in connection therewith. Promptly following
each amendment, waiver and consent relating to a Permitted Receivables
Facility, the Company shall give the Agent notice thereof (and the
Agent shall notify the Banks thereof promptly), and shall deliver to
the Agent a certified or conformed copy of each such amendment, waiver
and consent."
Section 3. Representations and Warranties. The Company
represents and warrants to the Banks and the Agent that:
(a) this Amendment has been duly and validly executed and
delivered by the Company and constitutes the Company's legal, valid
and binding obligation, enforceable against the Company in accordance
with its terms; and
(b) after giving effect to this Amendment, (i) no Default
shall have occurred and be continuing and (ii) the representations and
warranties made by the Company in Section 7 of the Credit Agreement
are true and correct on
Amendment No. 4
<PAGE> 3
-3-
and as of the date hereof with the same force and effect as if made on
and as of such date (or, if any such representation or warranty is
expressly stated to have been made as of a specific date, as of such
specific date).
Section 4. Conditions To Effectiveness. The amendments
to the Credit Agreement set forth in Section 2 hereof shall become effective,
as of the date hereof, upon the receipt by the Agent of this Amendment, duly
executed and delivered by the Company, each of the Banks and the Agent.
Section 5. Documents Otherwise Unchanged. Except as
herein provided, the Credit Agreement shall remain unchanged and in full force
and effect, and each reference to the Credit Agreement and words of similar
import in the Credit Agreement, as amended hereby, and the Notes shall be a
reference to the Credit Agreement as amended hereby and as the same may be
further amended, supplemented and otherwise modified and in effect from time to
time.
Section 6. Counterparts. This Amendment may be executed
in any number of counterparts, each of which shall be identical and all of
which, when taken together, shall constitute one and the same instrument, and
any of the parties hereto may execute this Amendment by signing any such
counterpart.
Section 7. Binding Effect. This Amendment shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns.
Section 8. Governing Law. This Amendment shall be
governed by, and construed in accordance with, the law of the State of New
York.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed as of the day and year first above written.
TURNER BROADCASTING SYSTEM, INC.
By
------------------------------
Title:
Amendment No. 4
<PAGE> 4
-4-
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION)
By
--------------------------------
Title:
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By
--------------------------------
Title:
THE FIRST NATIONAL BANK OF BOSTON
By
--------------------------------
Title:
THE BANK OF CALIFORNIA, N.A.
By
-------------------------------
Title:
BANK OF MONTREAL
By
------------------------------
Title:
Amendment No. 4
<PAGE> 5
-5-
THE BANK OF NEW YORK COMPANY, INC.
By
-----------------------------
Title:
THE BANK OF NOVA SCOTIA
By
-----------------------------
Title:
BANK OF SCOTLAND
By
-----------------------------
Title:
BANQUE FRANCAISE DU COMMERCE
EXTERIEUR
By
-----------------------------
Title:
By
----------------------------
Title:
BARCLAYS BANK PLC
By
-----------------------------
Title:
Amendment No. 4
<PAGE> 6
-6-
CIBC INC.
By
----------------------------
Title:
CHEMICAL BANK
By
----------------------------
Title:
CITIBANK, N.A.
By
----------------------------
Title:
BANK OF AMERICA ILLINOIS
By
----------------------------
Title:
CREDIT LYONNAIS CAYMAN ISLAND
BRANCH
By
----------------------------
Title:
CREDIT SUISSE
By
----------------------------
Title:
By
----------------------------
Title:
Amendment No. 4
<PAGE> 7
-7-
THE FIRST NATIONAL BANK OF CHICAGO
By
----------------------------
Title:
THE FIRST UNION NATIONAL BANK OF
GEORGIA
By
----------------------------
Title:
THE INDUSTRIAL BANK OF JAPAN,
LIMITED
By
----------------------------
Title:
LTCB TRUST COMPANY
By
----------------------------
Title:
MELLON BANK, N.A.
By
----------------------------
Title:
THE MITSUBISHI TRUST AND BANKING
CORPORATION
By
----------------------------
Title:
Amendment No. 4
<PAGE> 8
-8-
NATIONSBANK OF TEXAS, N.A.
By
----------------------------
Title:
THE NIPPON CREDIT BANK, LTD.
By
----------------------------
Title:
ROYAL BANK OF CANADA
By
----------------------------
Title:
THE SAKURA BANK, LIMITED, ATLANTA
AGENCY
By
----------------------------
Title:
SOCIETE GENERALE
By
----------------------------
Title:
THE TOKAI BANK, LIMITED
By
----------------------------
Title:
THE TORONTO-DOMINION BANK
By
----------------------------
Title:
Amendment No. 4
<PAGE> 9
-9-
UNION BANK
By
----------------------------
Title:
THE YASUDA TRUST AND BANKING CO.,
LTD.
By
----------------------------
Title:
BANKERS TRUST COMPANY
By
----------------------------
Title:
BANK OF HAWAII
By
----------------------------
Title:
BANQUE PARIBAS
By
----------------------------
Title:
CORESTATES BANK, N.A.
By
----------------------------
Title:
Amendment No. 4
<PAGE> 10
-10-
CRESTAR BANK
By
----------------------------
Title:
THE FUJI BANK, LTD.
By
----------------------------
Title:
THE HOKKAIDO TAKUSHOKU BANK LTD.
By
----------------------------
Title:
MIDLAND BANK, PLC
By
----------------------------
Title:
PNC BANK, NATIONAL ASSOCIATION
By
----------------------------
Title:
SHAWMUT BANK CONNECTICUT, N.A.
By
----------------------------
Title:
Amendment No. 4
<PAGE> 11
-11-
SWISS BANK CORPORATION,
NEW YORK BRANCH
By
---------------------------
Title:
By
---------------------------
Title:
THE BANK OF TOKYO TRUST COMPANY
By
---------------------------
Title:
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION)
as Agent
By
--------------------------
Title:
Amendment No. 4
<PAGE> 12
[EXECUTION COPY]
February 28, 1995
Turner Broadcasting System, Inc.
One CNN Center
Atlanta, Georgia 30348
Attn: Christian L. Becken
The Chase Manhattan Bank
(National Association), as
Agent for the Banks party
to the Credit Agreement
referred to below
Re: Amendment No. 4 to the Credit Agreement
Ladies and Gentlemen:
Reference is made to (1) the Credit Agreement dated as of July
1, 1993 (as amended, supplemented and otherwise modified and in effect from
time to time, the "Credit Agreement") between Turner Broadcasting System, Inc.
(the "Company"), the Banks party thereto and The Chase Manhattan Bank (National
Association), as Agent for said Banks (in such capacity, the "Agent"), and (2)
Amendment No. 4 dated as of December 5, 1994 ("Amendment No. 4") to the Credit
Agreement, a copy of which is attached hereto as Annex A.
This is to advise you that the undersigned, which anticipates
becoming a "Bank" party to the Credit Agreement on or prior to March 15, 1995,
hereby consents to Amendment No. 4, and to the amendments to the Credit
Agreement set forth therein, for all purposes of the Credit Agreement and the
Notes. The undersigned hereby ratifies the Agent's execution and delivery of
Amendment No. 4.
IN WITNESS WHEREOF, the undersigned has caused this instrument
to be duly executed as of the day and year first above written.
FIRST HAWAIIAN BANK
By /s/ Donald C. Young
-------------------------
Title: Media Finance Officer
<PAGE> 13
[EXECUTION COPY]
February 14, 1995
Turner Broadcasting System, Inc.
One CNN Center
Atlanta, Georgia 30348
Attn: Christian L. Becken
The Chase Manhattan Bank
(National Association), as
Agent for the Banks party
to the Credit Agreement
referred to below
Re: Amendment No. 4 to the Credit Agreement
Ladies and Gentlemen:
Reference is made to (1) the Credit Agreement dated as of July
1, 1993 (as amended, supplemented and otherwise modified and in effect from
time to time, the "Credit Agreement") between Turner Broadcasting System, Inc.
(the "Company"), the Banks party thereto and The Chase Manhattan Bank (National
Association), as Agent for said Banks (in such capacity, the "Agent"), and (2)
Amendment No. 4 dated as of December 5, 1994 ("Amendment No. 4") to the Credit
Agreement, a copy of which is attached hereto as Annex A.
This is to advise you that the undersigned, which became a
"Bank" party to the Credit Agreement subsequent to January 1, 1995, hereby
consents to Amendment No. 4, and to the amendments to the Credit Agreement set
forth therein, for all purposes of the Credit Agreement and the Notes. The
undersigned hereby ratifies the Agent's execution and delivery of Amendment
No. 4.
IN WITNESS WHEREOF, the undersigned has caused this instrument
to be duly executed as of the day and year first above written.
THE DAI-ICHI KANGYO BANK, LTD.
By /s/
-------------------------
Title: Joint General Manager
<PAGE> 1
EXHIBIT 4.7.1
[EXECUTION COUNTERPART]
FORM OF
AMENDMENT NO. 1
AMENDMENT NO. 1 dated as of December 5, 1994 between TURNER
BROADCASTING SYSTEM, INC., a Georgia corporation (the "Company"), the Banks (as
such term is defined below) party hereto and THE CHASE MANHATTAN BANK (NATIONAL
ASSOCIATION) ("Chase"), as agent (the "Agent").
The Company, certain lenders (the "Banks") and the Agent are
party to a Credit Agreement dated as of September 7, 1994 (as amended,
supplemented and otherwise modified and in effect to but excluding the date
hereof, the "Credit Agreement"). The Company has requested that the Banks
agree, and the Banks party hereto are willing, to amend certain provisions of
the Credit Agreement, all on the terms and conditions of this Amendment.
Accordingly, in consideration of the premises and the mutual agreements
contained herein, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
Section 1. Definitions. Terms used but not defined herein
shall have the respective meanings ascribed to such terms in the Credit
Agreement.
Section 2. Amendments. Subject to the satisfaction of the
conditions to effectiveness specified in Section 4 hereof, but with effect on
and after the date hereof, the Credit Agreement shall be amended as follows:
A. Certain Defined Terms. Section 1.01 of the Credit
Agreement shall be amended:
(1) by adding a sentence at the end of the definition of
"Lien" therein reading as follows:
"For purposes of this Agreement, sales of accounts
receivable under any Permitted Receivables Facility shall not
be deemed to constitute Liens."; and
(2) by adding the following new definition and inserting
the same in the appropriate alphabetical location:
"Permitted Receivables Facility" shall mean a
receivables purchase facility entered into after December 5,
1994 pursuant to which the Company and/or one or more of its
Subsidiaries may at any time or from time to time sell, on a
non-recourse credit basis, accounts receivable arising in the
ordinary course of business.
Amendment No. 1
<PAGE> 2
- 2 -
B. Sale of Assets. Section 8.18 of the Credit Agreement
shall be amended:
(1) by deleting "and" at the end of paragraph (d) thereof;
(2) by replacing the period at the end of paragraph (e)
thereof with "; and"; and
(3) by adding a new paragraph (f) thereto reading as
follows:
"(f) so long as no Event of Default shall have
occurred and then be continuing, the Company and its
Subsidiaries may from time to time sell accounts receivable
arising in the ordinary course of business under Permitted
Receivables Facilities, provided that the aggregate face
amount of all such accounts receivable sold thereunder may not
exceed $300,000,000 at any one time outstanding."
C. Delivery of Permitted Receivables Facilities
Agreements. The Credit Agreement shall be amended by adding a new Section 8.20
thereto reading as follows:
"8.20 Delivery of Permitted Receivables Facilities
Agreements. On or prior to the date of effectiveness of the first
sale of accounts receivable under each Permitted Receivables Facility,
the Company shall give the Agent notice thereof (and the Agent shall
notify the Banks thereof promptly), and shall deliver to the Agent a
certified or conformed copy of each of the principal agreements
executed and delivered in connection therewith. Promptly following
each amendment, waiver and consent relating to a Permitted Receivables
Facility, the Company shall give the Agent notice thereof (and the
Agent shall notify the Banks thereof promptly), and shall deliver to
the Agent a certified or conformed copy of each such amendment, waiver
and consent."
Section 3. Representations and Warranties. The Company
represents and warrants to the Banks and the Agent that:
(a) this Amendment has been duly and validly executed and
delivered by the Company and constitutes the Company's legal, valid
and binding obligation, enforceable against the Company in accordance
with its terms; and
(b) after giving effect to this Amendment, (i) no Default
shall have occurred and be continuing and (ii) the representations and
warranties made by the Company in Section 7 of the Credit Agreement
are true and correct on
Amendment No. 1
<PAGE> 3
- 3 -
and as of the date hereof with the same force and effect as if made on
and as of such date (or, if any such representation or warranty is
expressly stated to have been made as of a specific date, as of such
specific date).
Section 4. Conditions To Effectiveness. The amendments to
the Credit Agreement set forth in Section 2 hereof shall become effective, as
of the date hereof, upon the receipt by the Agent of this Amendment, duly
executed and delivered by the Company, each of the Banks and the Agent.
Section 5. Documents Otherwise Unchanged. Except as herein
provided, the Credit Agreement shall remain unchanged and in full force and
effect, and each reference to the Credit Agreement and words of similar import
in the Credit Agreement, as amended hereby, and the Notes shall be a reference
to the Credit Agreement as amended hereby and as the same may be further
amended, supplemented and otherwise modified and in effect from time to time.
Section 6. Counterparts. This Amendment may be executed in
any number of counterparts, each of which shall be identical and all of which,
when taken together, shall constitute one and the same instrument, and any of
the parties hereto may execute this Amendment by signing any such counterpart.
Section 7. Binding Effect. This Amendment shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns.
Section 8. Governing Law. This Amendment shall be governed
by, and construed in accordance with, the law of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed as of the day and year first above written.
TURNER BROADCASTING SYSTEM, INC.
By
-------------------------
Title:
Amendment No. 1
<PAGE> 4
- 4 -
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION)
By
------------------------------------
Title:
CREDIT LYONNAIS CAYMAN ISLAND
BRANCH
By
------------------------------------
Title:
THE LONG-TERM CREDIT BANK OF JAPAN,
LTD.
By
------------------------------------
Title:
THE TORONTO-DOMINION BANK
By
------------------------------------
Title:
BANK OF AMERICA ILLINOIS
By
------------------------------------
Title:
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By
------------------------------------
Title:
Amendment No. 1
<PAGE> 5
- 5 -
BANK OF MONTREAL
By
----------------------------------
Title:
THE BANK OF NEW YORK COMPANY, INC.
By
----------------------------------
Title:
THE BANK OF NOVA SCOTIA
By
----------------------------------
Title:
CHEMICAL BANK
By
----------------------------------
Title:
CREDIT SUISSE
By
----------------------------------
Title:
By
----------------------------------
Title:
THE FIRST NATIONAL BANK OF BOSTON
By
----------------------------------
Title:
Amendment No. 1
<PAGE> 6
- 6 -
THE FIRST NATIONAL BANK OF CHICAGO
By
--------------------------------
Title:
FIRST UNION NATIONAL BANK OF
GEORGIA
By
--------------------------------
Title:
THE INDUSTRIAL BANK OF JAPAN,
LIMITED, ATLANTA AGENCY
By
--------------------------------
Title:
THE MITSUBISHI TRUST AND BANKING
CORPORATION
By
--------------------------------
Title:
NATIONSBANK OF TEXAS, N.A.
By
--------------------------------
Title:
ROYAL BANK OF CANADA
By
--------------------------------
Title:
SHAWMUT BANK CONNECTICUT, N.A.
By
--------------------------------
Title:
Amendment No. 1
<PAGE> 7
- 7 -
SOCIETE GENERALE
By
----------------------------------
Title:
UNION BANK
By
----------------------------------
Title:
THE BANK OF CALIFORNIA, N.A.
By
----------------------------------
Title:
BANK OF HAWAII
By
----------------------------------
Title:
CIBC INC.
By
----------------------------------
Title:
THE FUJI BANK, LTD.
By
----------------------------------
Title:
MIDLAND BANK, PLC
By
----------------------------------
Title:
Amendment No. 1
<PAGE> 8
- 8 -
PNC BANK, NATIONAL ASSOCIATION
By
----------------------------------
Title:
CRESTAR BANK
By
----------------------------------
Title:
THE NIPPON CREDIT BANK, LTD.
By
----------------------------------
Title:
SWISS BANK CORPORATION,
NEW YORK BRANCH
By
----------------------------------
Title:
By
----------------------------------
Title:
THE TOKAI BANK, LIMITED
By
----------------------------------
Title:
THE YASUDA TRUST AND BANKING CO.,
LTD.
By
----------------------------------
Title:
Amendment No. 1
<PAGE> 9
- 9 -
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION),
as Agent
By
--------------------------------
Title:
Amendment No. 1
<PAGE> 1
EXHIBIT 11
TURNER BROADCASTING SYSTEM, INC.
COMPUTATION OF PRIMARY EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, 1995
------------------
<S> <C>
Net income applicable to common stock $ 21,990
========
Weighted average number of shares outstanding during the period 205,777
Add: Common equivalent shares issuable assuming conversion of
Class C Convertible Preferred Stock 74,382
Shares issuable upon exercise of stock options 15,935
Subtract: Shares which would have been purchased with proceeds
from exercise of such stock options 13,727
--------
Weighted average number of common stock, common stock
equivalents and converted shares outstanding 282,367
========
Weighted average number of Class A common shares and common
stock equivalents 68,330
========
Weighted average number of Class B common shares and common
stock equivalents 214,037
========
Earnings per share and common stock equivalent of Class A
and Class B Common Stock $ 0.08
========
</TABLE>
<PAGE> 2
EXHIBIT 11 (cont.)
TURNER BROADCASTING SYSTEM, INC.
COMPUTATION OF FULLY-DILUTED EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, 1995
------------------
<S> <C>
Net income applicable to common stock $ 21,990
========
Add: Interest expense on zero coupon subordinated convertible
notes due 2007 4,432
Interest expense on 6.5% convertible notes 473
Subtract: Additional income taxes (2,060)
--------
Adjusted net income applicable to common stock $ 24,835
========
Primary weighted average number of shares outstanding 282,367
Add: Common equivalent shares issuable assuming conversion of
convertible notes due 2007 7,440
Change in shares due to options assumed converted using the
end of period market value 77
Shares issuable assuming conversion of 6.5%
convertible notes 1,661
--------
Weighted average number of common stock, common stock
equivalents and convertible shares, assuming full dilution 291,544
========
Weighted average number of Class A common shares and common
equivalents and convertible shares, assuming full dilution 68,330
========
Weighted average number of Class B common shares and common
equivalents and convertible shares, assuming full dilution 223,214
========
Earnings per share and common stock equivalent of Class A
and Class B Common Stock $ 0.09
========
</TABLE>
This calculation is submitted in accordance with the rules and regulations of
the Securities and Exchange Commission. Under generally accepted accounting
principles this presentation would not be made because it is anti-dilutive.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 38,856
<SECURITIES> 0
<RECEIVABLES> 640,509
<ALLOWANCES> 31,959
<INVENTORY> 0
<CURRENT-ASSETS> 1,271,734
<PP&E> 543,776
<DEPRECIATION> 230,958
<TOTAL-ASSETS> 4,087,774
<CURRENT-LIABILITIES> 643,545
<BONDS> 2,523,616
<COMMON> 12,863
0
260,438
<OTHER-SE> 88,158
<TOTAL-LIABILITY-AND-EQUITY> 4,087,774
<SALES> 710,315
<TOTAL-REVENUES> 710,315
<CGS> 403,742
<TOTAL-COSTS> 621,364
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 6,232
<INTEREST-EXPENSE> 50,708
<INCOME-PRETAX> 38,243
<INCOME-TAX> 16,253
<INCOME-CONTINUING> 21,990
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,990
<EPS-PRIMARY> 0.08
<EPS-DILUTED> 0
</TABLE>
