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, 2000
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, 2000,
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
<TABLE>
<CAPTION>
FOX FAMILY WORLDWIDE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
June 30, September 30,
2000 2000
(audited) (unaudited)
------------- --------------
<S> <C> <C>
Assets:
Cash and cash equivalents................................ $ 89,674 $ 112,664
Restricted cash.......................................... 8,215 8,218
Accounts receivable, net................................. 146,103 119,468
Amounts receivable from related parties, net............. 56,753 57,130
Programming costs, net................................... 658,712 726,692
Property and equipment, net.............................. 51,874 49,031
Intangible assets, net................................... 1,481,189 1,471,058
Other assets, net........................................ 51,297 49,566
------------ -------------
Total assets........................................... $ 2,543,817 $ 2,593,827
============ =============
Liabilities and stockholders' deficit:
Accounts payable......................................... $ 65,023 $ 62,114
Accrued liabilities ..................................... 236,324 284,549
Deferred revenues........................................ 36,534 41,274
Accrued participations................................... 50,778 52,356
Deferred income taxes.................................... 14,888 14,888
Bank and other debt...................................... 1,744,134 1,766,065
Amounts payable to related parties, net.................. 21,243 21,620
------------- --------------
Total liabilities...................................... $ 2,168,924 $ 2,242,866
------------- --------------
Commitments and contingencies:
Series A Mandatorily Redeemable Preferred Stock,
$0.001 par value; 500,000 shares authorized;
345,000 shares issued and outstanding at
June 30, 2000 and September 30, 2000,
respectively
($1,000 per share liquidation value) .................. 345,000 345,000
------------- --------------
Minority interest........................................ 54,236 53,800
------------- --------------
Stockholders' deficit:
Preferred Stock, $0.001 par value; 2,000,000
shares authorized of which 500,000 shares are
designated as Series A Preferred Stock; no
shares issued or outstanding......................... -- --
Class A Common Stock, $0.001 par value; 2,000,000
shares authorized; 160,000 shares issued and
outstanding at June 30, 2000 and September 30,
2000, respectively................................... -- --
Class B Common Stock, $0.001 par value;
16,000,000 shares authorized, 15,840,000 shares
issued and outstanding at June 30, 2000 and
September 30, 2000, respectively..................... 16 16
Contributed capital.................................... 78,671 78,671
Accumulated other comprehensive loss................... (6,683) (7,424)
Accumulated deficit.................................... (96,347) (119,102)
------------- --------------
Total stockholders' deficit........................... (24,343) (47,839)
------------- --------------
Total liabilities and stockholders' deficit........... $ 2,543,817 $ 2,593,827
============= ==============
</TABLE>
See accompanying notes.
Page 2
<PAGE>
<TABLE>
<CAPTION>
FOX FAMILY WORLDWIDE, INC.,
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1999 AND 2000
(UNAUDITED)
(In thousands)
1999 2000
------------ -------------
<S> <C> <C>
Revenues........................................... $ 172,202 $ 156,955
------------- --------------
Costs and expenses:
Production and programming...................... 85,287 61,343
Selling, general and administrative............. 46,942 55,592
Depreciation.................................... 2,632 2,649
Amortization of intangibles..................... 10,131 10,131
------------- --------------
144,992 129,715
------------- --------------
Operating income................................... 27,210 27,240
Equity in loss of affiliates....................... 565 262
Minority interest share of losses.................. -- (443)
Other expense, net................................. 21 --
Interest expense, net............................. 43,334 42,350
------------- --------------
Loss before provision for income taxes............. (16,710) (14,929)
Provision for income taxes......................... 498 --
------------- --------------
Net loss........................................... $ (17,208) $ (14,929)
============= ==============
</TABLE>
See accompanying notes.
Page 3
<PAGE>
<TABLE>
<CAPTION>
FOX FAMILY WORLDWIDE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1999 AND 2000
(UNAUDITED)
(In thousands)
1999 2000
-------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss........................................................... $ (17,208) $ (14,929)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Amortization of programming costs............................ 75,065 50,444
Depreciation................................................. 2,632 2,649
Amortization of intangibles.................................. 10,131 10,131
Amortization of debt issuance costs.......................... 815 821
Equity in loss of affiliates................................. 565 262
Minority interest in share of losses......................... -- (443)
Non-cash interest expense.................................... 19,158 22,184
Changes in operating assets and liabilities:
Restricted cash........................................... (2) (3)
Accounts receivable, net.................................. 3,820 26,635
Amounts receivable from related parties, net.............. (11,197) (377)
Other assets.............................................. 4,657 (1,854)
Accounts payable and accrued liabilities.................. (55) 45,323
Accrued participations.................................... 7,504 1,578
Deferred revenues......................................... (5,808) 4,740
-------------- -------------
Net cash provided by operating activities........... 90,077 147,161
-------------- -------------
INVESTING ACTIVITIES:
Purchase of property and equipment................................. (1,268) (631)
Additions to production and programming costs...................... (63,808) (117,599)
Other.............................................................. (2) 1,761
-------------- -------------
Net cash used in investing activities............... (65,078) (116,469)
-------------- -------------
FINANCING ACTIVITIES:
Paydown on bank borrowings......................................... (15,371) (186)
Paydown on NAI Bridge Loan......................................... (67) (67)
Proceeds from Fox Subordinated Debt................................ 15,000 --
Dividends on Preferred Stock....................................... (7,823) (7,826)
Advances from related parties...................................... 15,000 377
-------------- -------------
Net cash provided by (used in) financing activities. 6,739 (7,702)
-------------- -------------
Increase in cash and cash equivalents.............................. 31,738 22,990
Cash and cash equivalents at beginning of period................... 46,858 89,674
-------------- -------------
Cash and cash equivalents at end of period......................... $ 78,596 $ 112,664
============== =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest (net of amounts capitalized)........................ $ 8,212 $ 6,967
Income taxes................................................. $ 498 $ 667
</TABLE>
See accompanying notes.
Page 4
<PAGE>
FOX FAMILY WORLDWIDE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
Note 1--Preparation of Condensed Consolidated Financial Statements
The accompanying unaudited condensed consolidated financial statements of
Fox Family Worldwide, Inc. (the "Company") have been prepared in accordance with
accounting principles generally accepted in the United States 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
in the United States 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, 2000 are not necessarily
indicative of the results that may be expected for the year ending June 30,
2001.
These interim unaudited 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, 2000.
The preparation of the unaudited condensed consolidated financial
statements in conformity with accounting principles generally accepted in the
United States requires management to make estimates and assumptions that affect
the amounts reported in the unaudited condensed consolidated financial
statements and accompanying notes, principally amortization of programming
costs. Actual results could differ from those estimates. Management periodically
reviews and revises its estimates of future broadcast airings and revenues, as
necessary, which may result in revised amortization of its programming costs.
Results of operations may be significantly affected by the periodic adjustments
in such amortization.
Note 2--Programming Costs
Programming costs, net of accumulated amortization, are comprised of the
following (in thousands):
<TABLE>
<CAPTION>
JUNE 30, 2000
--------------------------------------------------------
COST ACCUMULATED PROGRAMMING
AMORTIZATION COSTS, NET
---------------- ----------------- -----------------
<S> <C> <C> <C>
Children's programming.................... $ 1,446,229 $ 1,177,591 $ 268,638
Family programming, movies and mini-series 792,347 454,809 337,538
Projects in production.................... 44,818 -- 44,818
Development............................... 7,718 -- 7,718
---------------- ----------------- -----------------
$ 2,291,112 $ 1,632,400 $ 658,712
================ ================= =================
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 2000
--------------------------------------------------------
COST ACCUMULATED PROGRAMMING
AMORTIZATION COSTS, NET
---------------- ----------------- -----------------
<S> <C> <C> <C>
Children's programming.................... $ 1,503,684 $ 1,199,174 $ 304,510
Family programming, movies and mini-series 850,125 483,670 366,455
Projects in production.................... 47,330 -- 47,330
Development............................... 8,397 -- 8,397
---------------- ----------------- -----------------
$ 2,409,536 $ 1,682,844 $ 726,692
================ ================= =================
</TABLE>
Interest amounting to $1,431,000 and $703,000 was capitalized to
programming costs for the three months ended September 30, 2000 and 1999,
respectively. Depreciation amounting to $825,000 and $1,016,000 was capitalized
to programming costs for the three months ended September 30, 2000 and 1999,
respectively.
Page 5
<PAGE>
Note 3--Comprehensive Income (Loss)
Comprehensive income (loss) for the three months ended September 30, 2000
and 1999 are as follows (in thousands):
<TABLE>
<CAPTION>
1999 2000
------------- --------------
<S> <C> <C>
Net loss $ (17,208) $ (14,929)
Foreign currency translation adjustment 133 (741)
------------- --------------
Comprehensive loss $ (17,075) $ (15,670)
============= ==============
</TABLE>
Note 4--Business Segment Reporting
The Company's business units have been aggregated into two reportable
operating segments: production & distribution and broadcasting. The other column
includes corporate related items and income and expenses not allocated to the
reportable segments. The Company's reportable operating segments have been
determined in accordance with the Company's internal management structure, which
is organized based on operating activities. The Company evaluates performance
based upon several factors, of which the primary financial measure is segment
income (loss) before interest, income taxes, depreciation and amortization of
intangibles.
Summarized financial information concerning the Company's reportable
segments is shown in the following tables (in thousands):
<TABLE>
<CAPTION>
Production
and
Distribution Broadcasting Other Total
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
THREE MONTHS ENDED SEPTEMBER 30, 2000:
Revenues................................ $ 57,931 $ 99,003 $ 21 $ 156,955
Income (loss) before interest,
income taxes, depreciation and
amortization of intangibles........... $ 24,473 $ 20,610 $ (4,882) $ 40,201
THREE MONTHS ENDED SEPTEMBER 30, 1999:
Revenues................................ $ 75,255 $ 96,666 $ 281 $ 172,202
Income (loss) before interest,
income taxes, depreciation and
amortization of intangibles........... $ 23,486 $ 16,833 $ (932) $ 39,387
</TABLE>
The following table reconciles segment income before interest, income
taxes, depreciation and amortization of intangibles to the Company's condensed
consolidated statements of operations (in thousands):
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1999 2000
---------- ----------
<S> <C> <C>
Segment income before interest,
income taxes, depreciation
and amortization of
intangibles.......................... $ 39,387 $ 40,201
Amortization of intangibles............. (10,131) (10,131)
Interest expense, net................... (43,334) (42,350)
Depreciation............................ (2,632) (2,649)
Provision for income taxes.............. (498) --
---------- ----------
Net income (loss)....................... $ (17,208) $ (14,929)
========== ==========
</TABLE>
Note 5--New Accounting Pronouncements
For the quarter ended September 30, 2000, the Company adopted Statement of
Financial Accounting Standard ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities" which had no material effect on the
condensed consolidated financial statements.
Page 6
<PAGE>
In June 2000, the Accounting Standards Executive Committee ("AcSEC") of the
American Institute of Certified Public Accountants issued Statement of Position
00-2, "Accounting by Producers and Distributors of Films" ("SOP 00-2"), which
established new accounting standards for producers and distributors of films and
supersedes SFAS No. 53. SOP 00-2 requires that advertising and other
exploitation costs for theatrical and television product be expensed as
incurred. This compares to the Company's existing policy of capitalizing and
then expensing advertising cost for theatrical and television product over the
related revenue streams, as prescribed under SFAS No. 53. In addition, SOP 00-2
requires development cost for abandoned projects after three years and certain
indirect overhead costs to be charged directly to expense, instead of those
costs being capitalized to programming costs, which currently is required under
the existing accounting standard. SOP 00-2 is effective for financial statements
for fiscal years beginning after December 15, 2000, however, earlier application
is encouraged. The Company plans to adopt SOP 00-2 during the first quarter of
fiscal 2002, at which time it expects to record a one-time, non-cash, pre-tax
charge as a cumulative effect of a change in accounting principles, the amount
of which has not yet been determined.
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, 2000 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, 2000, 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
THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED WITH THREE MONTHS ENDED
SEPTEMBER 30, 1999
For the three-month period ended September 30, 2000, revenues decreased
8.8% to $157.0 million as compared to $172.2 million for the same three-month
period of the prior year. The revenue decrease of $15.2 million primarily
resulted from lower revenues at the Company's production and distribution
segment offset by slightly higher revenues at the Company's broadcast segment.
The Company's production and distribution segment posted lower revenues of $17.3
million primarily as a result of fewer deliveries of children's series in the
current quarter as compared to the prior quarter. Revenues for the Company's
broadcast segment increased $2.3 million. This segment posted higher domestic
cable and international subscription revenues and higher international ad sales
revenues partially offset by lower domestic cable and network ad sales revenues.
Production and programming costs for the three-month period ended September
30, 2000 decreased 28.1% to $61.3 million as compared to $85.3 million for the
same three-month period of the prior year. Production and programming costs as a
percentage of total revenues decreased to 39.0% for the three-month period ended
September 30, 2000 from 49.5% for the comparable prior year period. The decrease
in production and programming costs is attributable to lower amortization
expense due to the revenue decrease and the Company's mix of domestic revenues
as compared to the prior year. In addition, low cost acquired animation
programming ran heavily on the Fox Kids Network in the current quarter.
Page 7
<PAGE>
Selling, general and administrative expenses increased 18.6% to $55.6
million for the three-month period ended September 30, 2000, from $46.9 million
for the same three months of the prior year. This increase is prmarily due to
various factors including the expansion of the international channels in Europe
and worldwide internet activities which resulted in a combined increase of $3.4
million plus higher marketing and affiliate relation expenses of $4.0 million at
the Fox Family Channel.
Amortization of intangible assets for the three-month period ended
September 30, 2000 results from the acquisition of International Family
Entertainment, Inc. ("IFE"). These intangible assets are being amortized over 40
years.
The equity in loss of unconsolidated affiliates represents the Company's
portion of the losses generated by the Company's international channels in The
Netherlands and Spain.
Minority interest primarily represents the minority interest share of
earnings (losses) of the Company's European subsidiary, Fox Kids Europe, N.V.
("FKE"), which completed its initial public offering in November 1999.
Interest expense decreased slightly for the three-month period ended
September 30, 2000, as compared to the same period in 1999. The decrease is
principally due to lower levels of the Company's bank facility borrowings
partially offset by higher levels of subordinated debt.
The Company's provision for income taxes for the three-month period ended
September 30, 1999 primarily reflects foreign withholding taxes. There were no
material foreign withholding taxes for the three-month period ended September
30, 2000.
LIQUIDITY AND CAPITAL RESOURCES
As a result of the various financing transactions utilized to fund the IFE
acquisition, which was completed in September 1997, the Company's principal
liquidity requirements arise from interest payments on both the Company's credit
facility (the "Credit Facility") and the 9 1/4% Senior Notes due 2007 and the
dividend payments on the Company's Series A Mandatorily Redeemable Preferred
Stock. 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 concerning programming and other acquisition opportunities, and any
such acquisition could result in additional capital requirements. The Company's
principal sources of liquidity include borrowings under the Credit Facility,
cash generated from operations and funding from the Company's stockholders.
In November 1999, FKE, the Company's indirect subsidiary, completed an
initial public offering of its ordinary shares in The Netherlands generating net
cash proceeds of approximately $153.0 million of which $100.0 million was
utilized to pay down the Credit Facility and the remaining amount was made
available for working capital purposes.
The Credit Facility is comprised of a seven-year amortizing term loan and a
seven-year reducing revolving credit facility. The maximum borrowings allowed
under the facility as of September 30, 2000 are $120.0 million for the term loan
and $355.0 million for the revolving credit facility. The Credit Facility is
scheduled to terminate September 29, 2004. Borrowings under the Credit Facility
bear interest, at the Company's option, at a rate per annum equal to either
LIBOR plus a .75% interest rate margin or the base rate. As of September 30,
2000, $30.0 million was available under the Credit Facility for additional
borrowings, subject to certain restrictions.
Net cash provided by operating activities of the Company for the three
months ended September 30, 2000 was $147.2 million as compared to $90.1 million
for the three months ended September 30, 1999. This increase is primarily due to
the collection of accounts receivable during the period as well as the increase
in accounts payable and accrued expenses due to timing of production,
programming and other payments.
Net cash used in investing activities of the Company during the three
months ended September 30, 2000 and 1999 was $116.5 million and $65.1 million,
respectively. The net cash flow used in investing activities for the three
months ended September 30, 2000 and 1999 primarily related to additions to
production and programming costs and purchases of property and equipment. The
three months ended September 30, 2000 reflected higher than normal production
and programming costs associated with the acquisition of several off network
series during the quarter. Payment of the license fees on such series are being
made in installments over the respective license periods. There were no such
large acquisitions made in the prior period.
Page 8
<PAGE>
Net cash (used in) provided by financing activities of the Company during
the three months ended September 30, 2000 and 1999 was ($7.7 million) and $6.7
million, respectively. The financing activities for the three months ended
September 30, 2000 relate to advances from related parties, payments of
dividends related to the Company's Series A Mandatorily Redeemable Preferred
Stock and paydown of bank borrowings, while the financing activities for the
three months ended September 30, 1999 related primarily to dividend payments,
proceeds from Fox subordinated debt, paydown of bank borrowings and advances
from related parties.
The Company's total unrestricted cash and cash equivalents balance at
September 30, 2000 was $112.7 million.
The Company believes that the available borrowings under the Credit
Facility, together with cash flows from operations, cash on hand and funding
from the Company's stockholders should be sufficient to fund its operations and
service its debt for the foreseeable future.
Pursuant to a Stock Ownership Agreement dated December 22, 1995, Fox
Broadcasting Sub, Inc. ("FBSI"), a wholly owned subsidiary of Fox Broadcasting
Company ("Fox Broadcasting") has an option to purchase, upon the occurrence of
certain events, all of the Class B Common Stock held by Haim Saban and the other
former stockholders of Saban Entertainment, Inc. (together, the "Saban
Stockholders"), and any of their transferees. The option may be exercised by
FBSI as follows: (i) for a period of one year following the death of Haim Saban,
if he dies prior to December 22, 2012; (ii) upon receipt by FBSI of written
notice from Haim Saban of his desire to cause FBSI to purchase all of the shares
of Class B Common Stock held by the Saban Stockholders; or (iii) upon delivery
of written notice by FBSI at any time on or after December 22, 2002, or before
December 22, 2012. In addition, under the terms of the Amended and Restated
Strategic Stockholders Agreement dated August 1, 1997, as amended, Haim Saban
has the right and option to cause Fox Broadcasting to purchase all of the Class
B Common Stock held by the Saban Stockholders, which option may be exercised by
Haim Saban as follows: (i) for a period of one year following the death of Haim
Saban, if he dies prior to December 22, 2012; (ii) upon a change in control of
Fox Broadcasting; (iii) on January 31, 2001 provided that Haim Saban gives
notice to Fox Broadcasting no later than December 31, 2000; and (iv) upon
delivery of written notice by Haim Saban at any time on or after December 22,
2002 and on or before December 22, 2012. The purchase price formula under the
options is based on the fair market value of the Company.
USE OF EBITDA
While many in the financial community consider earnings before interest,
income taxes, depreciation and amortization of intangibles ("EBITDA") to be an
important measure of comparative operating performance, it should be considered
in addition to, but not as a substitute for or superior to, operating income,
net income (loss), cash flow and other measures of financial performance
prepared in accordance with accounting principles generally accepted in the
United States. EBITDA does not reflect cash available to fund cash requirements,
and the items excluded from EBITDA, such as depreciation and non-film
amortization, are significant components in assessing the Company's financial
performance. Other significant uses of cash flows are required before cash will
be available to the Company, including debt service, taxes and expenditures for
production, distribution and broadcast assets. EBITDA eliminates the uneven
effect across business segments of depreciation and amortization primarily
resulting from the value of intangible assets acquired in business combinations
accounted for by the purchase method of accounting, including the Company's
August 1997 acquisition of IFE. The Company's calculation of EBITDA may be
different from the calculation used by other companies and, therefore,
comparability may be limited.
The following table sets forth the Company's revenues and earnings (loss)
before interest, income taxes, depreciation and amortization of intangibles for
the three-month period ended September 30, 1999 and 2000 (in thousands).
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1999 2000
----------- -----------
<S> <C> <C>
REVENUES:
Production and distribution................. $ 75,255 $ 57,931
Broadcasting................................ 96,666 99,003
Other....................................... 281 21
----------- -----------
Total revenues....................... $ 172,202 $ 156,955
=========== ===========
Page 9
<PAGE>
EBITDA:
Production and distribution................. $ 23,486 $ 24,473
Broadcasting................................ 16,833 20,610
Other....................................... (932) (4,882)
----------- -----------
Total EBITDA......................... 39,387 40,201
OTHER EXPENSE:
Interest expense, net....................... 43,334 42,350
Depreciation................................ 2,632 2,649
Amortization of intangibles................. 10,131 10,131
----------- -----------
Income (loss) before provision for income taxes. (16,710) (14,929)
Provision for income taxes...................... 498 --
----------- -----------
Net income (loss)............................... $ (17,208) $ (14,929)
=========== ===========
</TABLE>
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. On occasion, the Company may choose to manage
these market risks by using derivative financial instruments in accordance with
established policies and procedures. Currently, the Company does not use
derivative financial instruments for trading purposes. Additionally, the Company
maintains a mix of fixed and floating debt to mitigate its exposure to interest
rate fluctuations.
The Company had no interest rate swaps or other material derivative
financial instruments outstanding at September 30, 2000.
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 had no outstanding foreign exchange contracts at September 30,
2000.
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.
Page 10
<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.
Page 11
<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, 2000 /S/ MEL WOODS
--------------------------------------
Mel Woods
President, Chief Operating Officer and
Chief Financial Officer (Principal
Financial Officer)
Page 12
<PAGE>
EXHIBIT INDEX
ITEM EXHIBIT PAGE
---- ------- ----
27.1 Financial Data Schedule 14
Page 13
