<PAGE>
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 September 30, 1998
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 333-12995
FOX FAMILY WORLDWIDE, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 95-4596247
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10960 WILSHIRE BOULEVARD
LOS ANGELES, CALIFORNIA 90024
(Address of principal executive offices)
Registrant's Telephone Number, Including Area Code: (310) 235-5100
Former name, address and fiscal year, if changed since last report
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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: As of November 1, 1998,
there were 160,000 shares of Class A Common Stock outstanding and 15,840,000
shares of Class B Common Stock outstanding.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FOX FAMILY WORLDWIDE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30,
June 30, 1998
1998 (unaudited)
---------- ----------
(In thousands)
<S> <C> <C>
Assets:
Cash and cash equivalents..................................................... $ 82,313 $ 94,438
Restricted cash............................................................... 8,000 8,000
Accounts receivable, net...................................................... 132,053 142,132
Amounts receivable from related parties....................................... 58,043 69,375
Programming costs, net........................................................ 453,608 498,450
Property and equipment, net................................................... 60,805 63,020
Deferred income taxes......................................................... 39,779 39,779
Intangible assets, net........................................................ 1,594,286 1,584,066
Other assets, net............................................................. 87,137 75,727
---------- ----------
Total assets................................................................. $2,516,024 $2,574,987
========== ==========
Liabilities and stockholders' equity:
Accounts payable.............................................................. $ 37,668 $ 37,599
Accrued liabilities........................................................... 194,353 239,482
Deferred revenue.............................................................. 74,518 80,184
Accrued residuals and participations.......................................... 52,601 56,281
Income taxes payable.......................................................... 10,326 26,416
Deferred income taxes......................................................... 21,698 21,698
Bank and other debt........................................................... 1,746,510 1,757,801
Amounts payable to related parties............................................ 2,954 6,169
---------- ----------
Total liabilities............................................................ 2,140,628 2,225,630
Commitments and contingencies
Series A Mandatorily Redeemable Preferred Stock, $0.001 par value;
500,000 shares authorized; 345,000 shares issued and outstanding
($1,000 per share liquidation value)......................................... 345,000 345,000
Stockholders' equity:
Preferred Stock, $0.001 par value; 19,500,000 shares authorized; no shares
Issued or outstanding..................................................... -- --
Class A Common Stock, $0.001 par value; 16,000,000 shares
Authorized, 160,000 shares issued and outstanding......................... -- --
Class B Common Stock, $0.001 par value; 16,000,000 shares
Authorized, 15,840,000 shares issued and outstanding...................... 16 16
Contributed capital........................................................ 60,731 60,731
Accumulated comprehensive loss............................................. (1,201) (1,618)
Deficit.................................................................... (29,150) (54,772)
---------- ----------
Total stockholders' equity................................................. 30,396 4,357
---------- ----------
Total liabilities and stockholders' equity................................... $2,516,024 $2,574,987
========== ==========
</TABLE>
See accompanying notes
2
<PAGE>
FOX FAMILY WORLDWIDE, INC.,
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1997 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1997 1998
--------- --------
(In thousands)
<S> <C> <C>
Revenues..................................................... $122,946 $183,588
Costs and expenses:
Production and programming................................. 68,441 106,883
Selling, general and administrative........................ 25,195 38,378
Depreciation............................................... 2,049 2,182
Amortization of intangible assets.......................... 6,969 10,220
--------- --------
Operating income............................................. 20,292 25,925
Equity in loss of unconsolidated affiliate................... 1,184 1,721
Other (income) expense, net.................................. 282 (108)
Interest expense............................................. 18,814 41,730
--------- --------
Income (loss) before provision for income
taxes...................................................... 12 (17,418)
Provision for income taxes................................... 1,187 378
--------- --------
Net loss..................................................... $ (1,175) $(17,796)
======== ========
</TABLE>
See accompanying notes.
3
<PAGE>
FOX FAMILY WORLDWIDE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1997 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1998
----------- ---------
(In thousands)
<S> <C> <C>
OPERATING ACTIVITIES
Net loss................................................................................... $ (1,175) $ (17,796)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Amortization of programming costs....................................................... 57,633 96,120
Depreciation and amortization........................................................... 2,049 2,182
Amortization of intangible assets....................................................... 6,969 10,220
Cumulative translation adjustment....................................................... (74) (417)
Equity in loss of unconsolidated affiliate.............................................. 1,184 1,722
Non-cash interest expense............................................................... -- 15,972
Changes in operating assets and liabilities:
Accounts receivable................................................................. (6,026) (10,079)
Amounts receivable from related parties............................................. (1,311) (11,332)
Other assets........................................................................ (9,370) 10,494
Accounts payable and accrued liabilities............................................ 13,757 3,026
Accrued residuals and participations................................................ (733) 3,680
Income taxes payable and deferred income taxes...................................... 397 16,090
Deferred revenue.................................................................... (12,666) 5,666
----------- ---------
Net cash provided by operating activities.................................................. 50,634 125,548
INVESTING ACTIVITIES
Purchase of property and equipment......................................................... (1,156) (5,179)
Additions to programming costs............................................................. (68,516) (98,045)
Acquisition of International Family Entertainment, Inc..................................... (1,370,076) --
Sale of marketable securities.............................................................. 55,679 --
Cash acquired in acquisitions.............................................................. 19,241 --
Other...................................................................................... (35,916) (907)
----------- ---------
Net cash used in investing activities...................................................... (1,400,744) (104,131)
FINANCING ACTIVITIES
Proceeds from bank borrowings.............................................................. 1,281,654 610
Payments on bank borrowings................................................................ (205,491) (5,291)
Dividends on Preferred Stock............................................................... (5,189) (7,826)
Proceeds from NAHI Bridge Loan............................................................. 345,514 --
Issuance of common stock................................................................... 10 --
Advances from related parties.............................................................. 5,002 3,215
----------- ---------
Net cash provided by (used in) financing activities........................................ 1,421,500 (9,292)
----------- ---------
Increase in cash and cash equivalents...................................................... 71,390 12,125
Cash and cash equivalents at beginning of period........................................... 28,877 82,313
----------- ---------
$ 100,267 $ 94,438
=========== =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for: (in thousands)
Interest (net of amounts capitalized).................................................... $ 7,070 $ 11,018
Income taxes............................................................................. $ 385 $ 794
</TABLE>
See accompanying notes.
4
<PAGE>
FOX FAMILY WORLDWIDE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(UNAUDITED)
Note 1--Preparation of Consolidated Financial Statements
The accompanying unaudited condensed consolidated financial statements of
Fox Family Worldwide, Inc. (the "Company") have been prepared in accordance with
generally accepted accounting principles for interim financial information and
in accordance with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Certain prior year amounts have been reclassified to conform to the
current year presentation. Operating results for the three month period ended
September 30, 1998 are not necessarily indicative of the results that may be
expected for the year ended June 30, 1999.
These interim condensed consolidated financial statements and the notes
thereto should be read in conjunction with the audited consolidated financial
statements and notes thereto included in the Company's Annual Report on Form
10-K for the year ended June 30, 1998.
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the consolidated
financial statements, and the reported amounts of revenues and expenses during
the reporting period. Because of the use of estimates inherent in the financial
reporting process, actual results could differ from those estimates.
Note 2--Acquisition of International Family Entertainment, Inc.
In September 1997, the Company completed the acquisition of International
Family Entertainment, Inc. ("IFE"). The following unaudited pro forma
information for the three months ended September 30, 1997 reflects the results
of the Company's consolidated operations as if the acquisition occurred at the
beginning of the period presented. The unaudited pro forma consolidated
financial results are not necessarily indicative of the actual results that
would have been reported had the acquisition occurred at the beginning of each
period presented (in thousands).
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1997
----------------------------
<S> <C>
Revenues.......................................................................... $ 147,431
Operating income.................................................................. 24,617
Net loss.......................................................................... $ (13,243)
</TABLE>
5
<PAGE>
Note 3--Programming Costs
Programming costs, less accumulated amortization, are comprised of the
following:
<TABLE>
<CAPTION>
JUNE 30, 1998
----------------------------------------------------
(in thousands)
PROGRAMMING
COSTS, LESS
ACCUMULATED ACCUMULATED
COST AMORTIZATION AMORTIZATION
---------- ------------ ------------
<S> <C> <C> <C>
Children's programming............................. $1,081,397 $ 900,785 $180,612
Family programming, movies and mini-series......... 413,507 214,006 199,501
Projects in production............................. 67,070 -- 67,070
Development........................................ 6,425 -- 6,425
---------- ---------- --------
$1,568,399 $1,114,791 $453,608
========== ========== ========
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
----------------------------------------------------
(in thousands)
PROGRAMMING
COSTS, LESS
ACCUMULATED ACCUMULATED
COST AMORTIZATION AMORTIZATION
---------- ------------ ------------
<S> <C> <C> <C>
Children's programming............................. $1,110,442 $ 950,437 $160,005
Family programming, movies and mini-series......... 487,415 260,474 226,941
Projects in production............................. 105,010 -- 105,010
Development........................................ 6,494 -- 6,494
---------- ---------- --------
$1,709,361 $1,210,911 $498,450
========== ========== ========
</TABLE>
Interest amounting to $812,000 and $346,000 was capitalized to programming costs
for the three months ended September 30, 1998 and 1997, respectively.
Note 4--Comprehensive Income/(Loss)
In the current quarter, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income." Comprehensive income (loss) for the three months ended
September 30, 1998 and 1997 are as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended September 30,
1997 1998
---------------------------------
<S> <C> <C>
Foreign currency translation adjustment $ (74) $ (417)
Net loss (1,175) (17,796)
------- --------
Comprehensive income (loss) $(1,249) $(18,213)
======= ========
</TABLE>
Accumulated other comprehensive income (loss) at September 30, 1997 consisted of
foreign currency translation adjustments of $(877,000).
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
This filing contains statements that constitute "forward-looking statements"
within the meaning of Section 21E of the Securities Exchange Act of 1934, as
amended, and Section 27A of the Securities Act of 1933, as amended. The words
"expect", "estimate", "anticipate", "predict", "believe" and similar expressions
and variations thereof are intended to identify forward-looking statements.
These statements appear in a number of places in this filing and include
statements regarding the intent, belief or current expectations of the Company,
its directors or its officers with respect to, among other things: (a) trends
affecting the Company's financial condition or results of operations; (b) the
Company's programming on the Fox Family Channel; (c) the impact of competition;
and (d) the expansion of the Company's international channels and certain other
operations. The readers of this filing are cautioned that any such forward-
looking statements are not guarantees of future performance and involve risks
and uncertainties, and that actual results may differ materially from those
projected in this filing, including, without limitation, those risks and
uncertainties discussed under the headings "Factors That Could Impact Future
Results" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations," in the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1998 as well as the information set forth below. The
Company does not ordinarily make projections of its future operating results and
undertakes no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
Readers should carefully review the risk factors referred to above and the other
documents the Company files from time to time with the Securities and Exchange
Commission, including the Company's Annual Report on Form 10-K for the fiscal
year ended June 30, 1998, the quarterly reports on Form 10-Q filed by the
Company, and any current reports on Form 8-K filed by the Company.
RESULTS OF OPERATIONS
For the three-month period ended September 30, 1998, revenues increased
49.4% to $183.6 million as compared to $122.9 million for the same three-month
period of the prior year. On a pro forma basis, giving effect to the
International Family Entertainment Inc. ("IFE") acquisition as if it had
occurred on July 1, 1997, revenues increased $36.2 million or 24.6%. The
increase in revenues for the quarter results from a number of factors, including
the results of one additional month of operations for the Fox Family Channel
(the Company acquired a controlling interest in IFE on August 1, 1997, and
consequently, only two months were included for the Fox Family Channel for the
quarter ended September 30, 1997), increased domestic television sales of
library product and increased revenues from home video distribution. These
increases were offset, in part, by a decrease in foreign syndicated television
revenues. Domestic television revenues and direct to video revenues
increased approximately $39.5 million, principally resulting from the licensing
of library product and revenues from two direct-to-video releases (there were no
comparable revenues from home video sales during the first quarter of the prior
year). The market for direct-to-video features is currently quite competitive,
primarily due to an abundance of product in the marketplace.
On August 15, 1998, the Fox Family Channel was relaunched to the cable
households of America with new programming and a new schedule, including
children's programming from 7:00 a.m. until 6:00 p.m. daily, followed by evening
and late-night programming for the entire family. The Company utilizes its
library product along with other third party programming during the daytime
children's block. Prime time programming, on the other hand, consists
principally of original series, specials, and movies produced and licensed for
the Fox Family Channel. The process of repositioning a channel is challenging
and takes time to accomplish. Since the August 15, 1998 relaunch, overall
ratings compared to last year are lower. However, the Company introduced
various programming changes in October which have had a positive impact on
ratings and have improved important demographics. The Company continues to
pursue its long-term objective of attracting a broader audience with improved
advertiser demographics.
Production and programming costs for the three-month period ended September
30, 1998 increased 56.3% to $106.9 million as compared to $68.4 million for the
same three-month period of the prior year. These increased programming costs
are attributable principally to the inclusion of operations of IFE for three
months versus two months in the prior year, and by
7
<PAGE>
amortization of product and programming costs associated with the increased
television and home video revenues described above. Production and programming
costs as a percentage of total revenues increased to 58.2% for the three-month
period ended September 30, 1998 from 55.7% for the first quarter of the prior
year, due principally to increased amortization of production and programming
costs as a percentage of revenues on the Company's home video releases.
Selling, general and administrative expenses increased 52.4% to $38.4
million for the three-month period ended September 30, 1998, from $25.2 million
for the same three-months of the prior year. This increase is due principally to
various one-time costs incurred in connection with the launch of the new Fox
Family Channel and from the inclusion of three months of activity at IFE as
compared to two months in the prior year.
Amortization of intangible assets for the three-month period ended September
30, 1998 results from the acquisition of IFE. These intangible assets are being
amortized over 40 years. The increase results from three months of IFE activity
for the three-month period ended September 30, 1998 as compared to two months of
activity for the three-months ended September 30, 1997.
The equity in loss of unconsolidated affiliate represents the Company's
portion of the loss generated by TV 10, a cable network based in The
Netherlands. The Company acquired its initial interest in TV10 in March 1997.
The Company is currently in negotiations to sell 50% of its interest in TV10.
Interest expense increased by $22.9 million for the three-month period ended
September 30, 1998, as compared to the same period in 1997. The increase is
principally due to interest on the debt incurred in connection with the
acquisition of IFE.
The Company's provision for income taxes for the three-month period ended
September 30, 1998 reflects foreign withholding taxes.
Due primarily to the amount of interest expense and amortization of
intangible assets, the Company does not expect to report net income for fiscal
1999.
LIQUIDITY AND CAPITAL RESOURCES
In September 1997, the Company completed the acquisition of IFE (the "IFE
Acquisition"). The total consideration for the IFE Acquisition was
approximately $1.9 billion, including assumption of debt, and was financed by
(i) the borrowing of $1.25 billion under a credit facility (the "Old Credit
Facility"), (ii) the issuance of approximately $345 million of Series A
Preferred Stock to Liberty IFE, Inc. ("Liberty IFE") and (iii) the issuance of a
note to News America Incorporated in the amount of $345.5 million (the "NAHI
Bridge Note"). In October 1997, the Company completed an offering (the
"Offering") of 9 1/4% Senior Notes due 2007 and 10 1/4% Senior Discount Notes
due 2007 (collectively, the "Company Notes"), generating net proceeds to the
Company of approximately $830 million. Of the net proceeds from the Offering,
$215 million was used to repay a portion of the NAHI Bridge Note and the balance
of $615 million was used to repay indebtedness under the Company's Old Credit
Facility. Approximately $110.5 million (including accreted interest) was
outstanding under the NAHI Bridge Note at September 30, 1998; however, no
payments are due under the NAHI Bridge Note until March 2008.
In October 1997, as part of the Offering, the Company amended the Old Credit
Facility to the Amended Credit Facility which includes a $710 million facility,
comprised of a seven-year amortizing term loan and a seven-year reducing
revolving credit facility. The Amended Credit Facility is scheduled to
terminate September 29, 2004. Borrowings under the Amended Credit Facility bear
interest, through November 30, 1998, at the Company's option at a rate per annum
equal to either LIBOR plus a 1.5% interest rate margin or a base rate plus a .5%
interest rate margin. As of September 30, 1998, $75 million was available under
the Amended Credit Facility for additional borrowings.
As a result of the IFE Acquisition and the financing transactions described
above, the Company's principal liquidity requirements arise from interest and
dividend payments. The Company further anticipates certain seasonal working
capital needs related to the development, production and acquisition of
programming, the financing of accounts receivable and other related operating
costs. The Company on a regular basis has had, and intends to continue to
engage in, exploratory discussions
8
<PAGE>
concerning programming and other acquisition opportunities, and any such
acquisition could result in additional capital requirements.
Net cash provided by operating activities of the Company for the three
months ended September 30, 1998 was $125.5 million as compared to $50.6 million
for the three months ended September 30, 1997, reflecting the acquisition of IFE
described above. Three months of activity of IFE were included for the three
months ended September 30, 1998 as compared to two months of activity for the
three months ended September 30, 1997.
Net cash used in investing activities of the Company during the three months
ended September 30, 1998 and 1997 was $104.1 million and $1.401 billion,
respectively. The net cash flow used in investing activities for the three
months ended September 30, 1998 primarily related to additions to programming
costs. The Company's net cash flow used in investing activities for the three
months ended September 30, 1997 primarily related to the IFE Acquisition as
described above and additions to programming costs.
Net cash provided by (used in) financing activities of the Company during
the three months ended September 30, 1998 and 1997 was ($9.3) million and $1.422
billion, respectively. The financing activities for the three months ended
September 30, 1998 related to payments of dividends and paydown of bank
borrowings while the financing activities for the three months ended September
30, 1997 related to bank and other borrowings in connection with the IFE
Acquisition.
The Company's total unrestricted cash balances at September 30, 1998 were
$94.4 million.
The Company believes that the $75 million of available borrowings under the
Amended Credit Facility, together with cash flow from operations and cash on
hand, should be sufficient to fund its operations and service its debt for the
foreseeable future.
IMPACT OF YEAR 2000
The Year 2000 issue is the result of computer programs being written using
two digits instead of four to define the applicable year. Any of the Company's
computer programs that have time-sensitive software or facilities or equipment
containing embedded micro-controllers may recognize a date using "00" as the
year 1900 rather than the year 2000. This could cause a system failure or
miscalculations causing potential disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoices or
engage in similar normal business activities.
The Company's Year 2000 compliance project is divided into two areas:
information technology and non-information technology. The Company began its
Year 2000 information technology project in June 1997 and has completed its
assessment of the significant software applications and equipment used in the
Company's operations. The Company is in the process of modifying or replacing
portions of its software so that its computer systems will function properly
with respect to dates in the year 2000 and thereafter. The Company expects that
this phase of its Year 2000 project will be completed by the end of the calendar
year. The Company is also in the process of testing and implementing both
software and hardware changes where required. The Company expects that this
phase of the project will continue through the end of the first quarter of 1999.
With respect to the Company's Year 2000 project for non-information
technology, the Company has identified two areas which require attention:
engineering and operations. The Company has begun the assessment phase of the
engineering project and is in the initial stages of the assessment phase of the
operations project. The Company is currently in final negotiations with a
consulting firm which will be engaged to review all phases completed to date, to
assist the Company with testing and to help the Company build its contingency
plan. With the assistance of the consultant, the Company expects that
9
<PAGE>
all phases of its information technology and non-information technology project
will be completed by the end of the first calendar quarter of 1999.
Upon engagement by the Company of its consultant, the Company will begin the
process of contacting its key vendors and customers to determine if there are
any significant Year 2000 exposures which would have a material effect on the
Company. However, if the Company, its customers or vendors are unable to resolve
any Year 2000 compliance problems in a timely manner, it could result in a
material financial risk. Accordingly, management plans to devote the resources
it concludes are appropriate to resolve all significant Year 2000 problems in a
timely manner.
The Year 2000 project cost has not been material to date and, based on
preliminary information, is not currently anticipated to have a material adverse
effect on the Company's financial condition, results of operations or cash flow
in future periods.
Readers are cautioned that forward-looking statements contained in this Year
2000 disclosure should be read in conjunction with the Company's disclosures
under the heading "Factors That Could Impact Future Results" in the Company's
Annual Report on Form 10-K for the fiscal year ended June 30, 1998. The costs of
the project and the date on which the Company believes it will complete the Year
2000 modifications are based on management's best estimates, which were derived
utilizing numerous assumptions of future events, including the continued
availability of certain resources, third-party modification plans and other
factors. However, there can be no guarantee that these estimates will be
achieved, or that there will not be a delay in, or increased costs associated
with, the implementation of the Company's Year 2000 compliance project. Specific
factors that might cause such material differences include, but are not limited
to, the availability and cost of personnel trained in this area, the ability to
locate and correct all relevant computer codes, timely responses to and
corrections by third parties and suppliers, the ability to implement interfaces
between the new systems and the systems not being replaced, and similar
uncertainties. Due to the general uncertainty inherent in the Year 2000
readiness of third parties and the interconnection of national and international
businesses, the Company cannot ensure that its ability to timely and cost
effectively resolve problems associated with the Year 2000 issue will not affect
its operations and business, or expose it to third party liability.
10
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company's primary market risks include fluctuations in interest rates,
variability in interest rate spread relationships (i.e., prime to LIBOR spreads)
and exchange rate variability. The Company manages these market risks by using
derivative financial instruments in accordance with established policies and
procedures. The Company does not use derivative financial instruments for
trading purposes.
When the Company licenses its programming outside the United States, the
majority of transactions are denominated in U.S. dollars. Channel subscription
fees are denominated in local currencies. For those transactions denominated in
foreign currencies, to the extent possible, sales and purchases in specific
currencies are offset against each other. The foreign currencies in which the
Company has the most significant exchange rate exposure are the British pound,
French franc, German mark and Canadian dollar. To manage these exposures, the
Company periodically initiates hedging activities by entering into currency
exchange agreements, consisting primarily of currency forward contracts, to
minimize cost variations which could result from fluctuations in currency
exchange rates. The currency exchange agreements which provide hedge coverage
typically mature within one year of origination, consistent with the underlying
purchase or sales commitment.
The Company maintains a mix of fixed and floating debt to mitigate its
exposure to interest rate fluctuations.
The Company's management believes that fluctuations in interest rates and
currency exchange rates in the near term would not materially affect the
Company's consolidated operating results, financial position or cash flows as
the Company has limited risks related to interest rate and currency exchange
rate fluctuations.
11
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company currently and from time to time is engaged in litigation in the
ordinary course of its business. The Company is not currently a party to any
lawsuit or proceeding which, in the opinion of management, if decided adversely
to the Company, would be likely to have a material adverse effect on the
Company's financial condition and results of operations.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
--------
27.1 Financial Data Schedule.
(b) Reports on Form 8-K:
-------------------
None.
12
<PAGE>
SIGNATURE
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.
FOX FAMILY WORLDWIDE, INC.
Date: November 13, 1998 /s/ Mel Woods
-------------
Mel Woods
President, Chief Operating Officer and
Chief Financial Officer
13
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
ITEM EXHIBIT PAGE
- ---- ------- ----
<C> <S> <C>
27.1 Financial Data Schedule
</TABLE>
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FOX FAMILY
WORLDWIDE, INC.'S FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS (AMOUNTS IN THOUSANDS)
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> JUN-30-1997 JUN-30-1998
<PERIOD-START> JUL-01-1997 JUL-01-1998
<PERIOD-END> SEP-30-1997 SEP-30-1998
<CASH> 108,267<F1> 102,438<F1>
<SECURITIES> 0 0
<RECEIVABLES> 167,226 213,443
<ALLOWANCES> (1,410) (1,936)
<INVENTORY> 384,550 498,450
<CURRENT-ASSETS> 0<F2> 0<F2>
<PP&E> 86,043 85,967
<DEPRECIATION> (11,184) (22,947)
<TOTAL-ASSETS> 2,502,633 2,574,987
<CURRENT-LIABILITIES> 0<F2> 0<F2>
<BONDS> 0 886,631
345,000 345,000
0 0
<COMMON> 16 16
<OTHER-SE> 77,826 4,341
<TOTAL-LIABILITY-AND-EQUITY> 2,502,633 2,574,987
<SALES> 122,946 183,588
<TOTAL-REVENUES> 122,946 183,588
<CGS> (68,441) (106,883)
<TOTAL-COSTS> (102,654) (157,663)
<OTHER-EXPENSES> (1,466) (1,613)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (18,814) (41,730)
<INCOME-PRETAX> 12 (17,418)
<INCOME-TAX> (1,187) (378)
<INCOME-CONTINUING> (1,175) (17,796)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,175) (17,796)
<EPS-PRIMARY> 0<F3> 0<F3>
<EPS-DILUTED> 0<F3> 0<F3>
<FN>
<F1>INCLUDES RESTRICTED CASH OF $8.0 MILLION.
<F2>THE COMPANY HAS ELECTED TO PRESENT AN UNCLASSIFIED BALANCE SHEET.
<F3>EPS IS NOT APPLICABLE AS THE COMPANY HAS NO PUBLICLY TRADED EQUITY.
</FN>
</TABLE>
