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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1993.
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________.
Commission file number 1-4278
Capital Cities/ABC, Inc.
(Exact name of registrant as specified in its charter)
New York 14-1284013
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
77 West 66th Street, New York, N.Y. 10023-6298
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 456-7777
Securities registered pursuant to Section 12(b) of the Act:
(Name of each exchange
(Title of each class) on which registered)
Common Stock, $1.00 par value New York Stock Exchange
Pacific Stock Exchange
Preferred Share Purchase Rights New York Stock Exchange
Pacific Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
registrant is $8,752,000,000 as of February 28, 1994.
The number of shares outstanding of the issuer's common stock as of February 28,
1994: 15,338,311 shares, excluding 3,055,185 treasury shares.
Portions of Part I are incorporated herein by reference to the 1993 Annual
Report to Shareholders and the definitive Proxy Statement for the annual meeting
of shareholders to be held on May 19, 1994.
Part II and Part IV, with the exception of certain schedules and exhibits, are
incorporated herein by reference to the 1993 Annual Report to Shareholders.
Part III is incorporated herein by reference to the definitive Proxy Statement
for the annual meeting of shareholders to be held on May 19, 1994.
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PART I
Item 1. Business.
Capital Cities/ABC, Inc., directly or through its subsidiaries (the "Company"),
operates the ABC Television Network, eight television stations, the ABC Radio
Networks and 18 radio stations, and provides programming for cable television.
The Company, through joint ventures, is engaged in international broadcast/cable
services and television production and distribution. The Company also publishes
daily and weekly newspapers, shopping guides, various specialized and business
periodicals, books, provides research services and also distributes information
from data bases.
Employees
At December 31, 1993, the Company had approximately 19,250 full-time equivalent
employees: 10,000 in broadcasting operations, 9,000 in publishing operations and
250 in corporate activities.
Industry Segments
Information relating to the industry segments of the Company's operations is
included on page 37 of the Company's Annual Report to Shareholders and is hereby
incorporated by reference. In 1993, the Company derived approximately 85% and
70% of its broadcasting and publishing revenues, respectively, from the sale of
advertising. The remainder of the broadcasting revenues are principally derived
from subscriber-related fees and programming distribution activities. The
balance of publishing revenues are derived primarily from subscription and other
circulation receipts and the sale of books.
Broadcasting
Television and Radio Networks
The Company operates the ABC Television Network which as of December 31, 1993
had 228 primary affiliated stations reaching 99.9% of all U.S. television
households. A number of secondary affiliated stations add to the primary
coverage. The ABC Television Network broadcasts programs in "dayparts" and types
as follows: Monday through Friday early morning, daytime and late night, Monday
through Sunday Prime Time and News, Children's and Sports. The Company also
operates the ABC Radio Networks which served a total of approximately 3,400
affiliates as of December 31, 1993 through eight different program services,
each with its own group of affiliated stations. The ABC Radio Networks also
produces and distributes a number of radio program series for radio stations
nationwide.
Generally, the Company pays the cost of producing or purchasing the broadcast
rights for its network programming and pays varying amounts of compensation to
its affiliated stations for broadcasting the programs and commercial
announcements included therein. Substantially all revenues from network
operations are derived from the sale to advertisers of time in network programs
for commercial announcements. The ability to sell time for commercial
announcements and the rates received are dependent on the quantitative and
qualitative audience that the network can deliver to the advertiser.
The Company also produces television programs for the ABC Television Network and
for other exhibitors of television programs. For television programs it
produces, the Company pays the costs of production and typically receives a
license fee from the exhibitor for initial exhibition. Generally, the license
fees received are less than the costs of production. The Company then licenses
the programs it owns for foreign exhibition and, ultimately, for repeat
exhibition in the United States.
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Television and Radio Stations
The Company owns seven very high frequency (VHF) television stations, one ultra
high frequency (UHF) television station, nine standard (AM) radio stations and
nine frequency modulation (FM) radio stations. All television stations are
affiliated with the ABC Television Network and all radio stations, except as
noted, are affiliated with the ABC Radio Networks. Markets, frequencies and
other station details are set forth in the following tables:
<TABLE>
<CAPTION>
Television stations
Expiration Television
Station date of FCC market
and market Channel authorization ranking(1)
- ---------------------------- ---------- ------------- -------------------
<S> <C> <C> <C>
WABC-TV (New York, NY) ..... 7 June 1, 1994 1
KABC-TV (Los Angeles, CA) .. 7 (2) 2
WLS-TV (Chicago, IL) ....... 7 Dec. 1, 1997 3
WPVI-TV (Philadelphia, PA) . 6 Aug. 1, 1994 4
KGO-TV (San Francisco, CA) . 7 (2) 5
KTRK-TV (Houston, TX) ...... 13 (2) 10
WTVD (Durham-Raleigh, NC) .. 11 Dec. 1, 1996 32
KFSN-TV (Fresno, CA) ....... 30 (2) 57
</TABLE>
<TABLE>
Radio stations
Frequency Expiration Radio
Station AM-Kilohertz date of FCC market
and market FM-Megahertz authorization ranking(4)
- ---------------------------- ------------ -------------- -------------------
<S> <C> <C> <C>
WABC (New York, NY) ........ 770 K June 1, 1998 1
KABC (Los Angeles, CA) ..... 790 K (2) 2
WLS (Chicago, IL) .......... 890 K Dec. 1, 1996 3
KGO (San Francisco, CA) .... 810 K Dec. 1, 1997 4
WJR (Detroit, MI) .......... 760 K Oct. 1, 1996 6
WMAL (Washington, DC) ...... 630 K Oct. 1, 1995 7
WBAP (Fort Worth-Dallas, TX) 820 K Aug. 1, 1997 8
WKHX (Atlanta, GA) (3) ..... 590 K Apr. 1, 1996 12
KQRS (Minneapolis-St.Paul,
MN) ....................... 1440 K Apr. 1, 1997 17
WPLJ(FM) (New York, NY) .... 95.5 M June 1, 1998 1
KLOS(FM) (Los Angeles, CA) . 95.5 M (2) 2
WLS-FM (Chicago, IL) ....... 94.7 M Dec. 1, 1996 3
WHYT(FM) (Detroit, MI) ..... 96.3 M Oct. 1, 1996 6
WRQX(FM) (Washington, DC) .. 107.3 M Oct. 1, 1995 7
KSCS(FM) (Fort Worth-Dallas,
TX) (3) ................... 96.3 M Aug. 1, 1997 8
WKHX-FM (Atlanta, GA) (3) .. 101.5 M Apr. 1, 1996 12
WYAY(FM) (Atlanta, GA) (3) . 106.7 M Apr. 1, 1996 12
KQRS-FM (Minneapolis-St.
Paul, MN) ................. 92.5 M Apr. 1, 1997 17
</TABLE>
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(1) Based on Nielsen U.S. Television Household Estimates, 1993-1994 season.
(2) See "Licenses -- Federal Regulation of Broadcasting/Renewal Matters" below
for description of pending license renewal applications and other matters.
(3) No ABC network affiliation.
(4) Based on Arbitron Radio Market Survey Schedule and Population Rankings
(metro survey area) as of Fall 1993.
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Cable and International Broadcast
The Company's Cable and International Broadcast operations are principally
involved in the production and distribution of cable television programming, in
the licensing of programming to domestic and international markets and in joint
ventures in foreign-based television operations and television production and
distribution entities. Its primary services are:
ESPN, an 80%-owned cable sports programming service reaching 62,700,000
households domestically and 49,000,000 households in 90 countries
internationally; ESPN2 reaching 13,000,000 households. ESPN also owns 33% of
Eurosport, a pan-European satellite-delivered cable and direct-to-home sports
programming service reaching 48,700,000 households; and 20% of Japan Sports
Network reaching 910,000 households;
Arts & Entertainment Network, a 37 1/2%-owned cable programming service
devoted to cultural and entertainment programming and reaching 52,900,000
households;
Lifetime, a 33 1/3%-owned cable programming service devoted to women's
lifestyle programming and reaching 58,800,000 households;
Tele-Munchen Fernseh GmbH & Co., a 50%-owned Munich, Germany based television
and theatrical production/distribution company with interests in cinemas and a
minority interest in a Munich radio station;
RTL 2 Fernsehen GmbH & Co., a 20%-owned Cologne, Germany based general
entertainment commercial broadcasting company reaching 19,600,000 households;
Scandinavian Broadcasting System SA, a 24%-owned Luxembourg based company
operating television stations in Denmark reaching 1,300,000 households, and
satellite-delivered cable and direct-to-home general entertainment television
programming services in Sweden and Norway reaching 1,700,000 and 900,000
households, respectively;
Hamster Productions, S.A., 33 1/3%-owned, and Tesauro, S.A., 25%-owned,
television and theatrical production/distribution companies based in Paris,
France and Madrid, Spain, respectively; and
DIC Productions, L.P., a 95%-owned production/distribution venture of animated
and live action programming for the children's television and video markets,
and DIC Entertainment, L.P., a 100%-owned film library of similar type
programming.
Multimedia
In late 1993, the Company created a Multimedia Group with the mandate to explore
using video and print material to create new programming and software and to
explore investment opportunities in emerging multimedia and interactive
technologies. The division includes the Capital Cities/ABC Video Publishing
unit, which acquires rights to and produces programming for the home video
market.
Competition
The ABC Television Network competes for viewers with the other television
networks, independent television stations and other video media such as cable
television, multipoint distribution services ("MDS," which employ non-broadcast
frequencies to transmit subscription television services to individual homes and
businesses), satellite television program services and video cassettes; in the
sale of advertising time, it competes with the other television networks,
independent television stations, suppliers of cable television programs, and
other advertising media such as newspapers, magazines and billboards.
Substantial competition also exists for exclusive broadcasting rights for
television programming. The ABC Radio Networks likewise compete with other radio
networks and radio programming services, independent radio stations, and other
advertising media.
The Company's television and radio stations are in competition with other
television and radio stations, cable television systems, MDS, satellite
television program services, video cassettes and other advertising media such as
newspapers, magazines and billboards. Such competition occurs primarily in
individual market areas. Generally, a television station in one market does not
compete directly with
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other stations in other market areas. Nor does a group of stations, such as
those owned by the Company, compete with any other group of stations as such.
While the pattern of competition in the radio station industry is basically the
same, it is not uncommon for radio stations outside of a market area to place a
signal of sufficient strength within that area (particularly during nighttime
hours) to gain a share of the audience. However, they generally do not realize
significantly increased advertising revenues as a result.
The Company's Cable and International Broadcast operations compete with a number
of companies involved in developing and supplying program services for cable,
television syndication and theatrical distribution, and with conventional
television broadcasters. The Multimedia operations face competition from
numerous broadcast, cable, computer software, production and distribution
companies which are also pursuing opportunities in the new technologies. The
development of these businesses could adversely affect the future of
conventional television broadcasting.
In addition, the Company's broadcast operations face potential competition from
numerous new satellite, cable and telephone technologies and distribution
systems, and from signal-enhancing technologies such as high definition
television or, in radio, "digital audio" radio. Although most of these
technologies are in experimental phases, all have the potential to further
increase the entertainment and information alternatives available to consumers.
In some instances, the Company may itself participate in these new technologies.
Regulatory, technical and economic issues make it impossible to predict whether
or when, such technologies will become viable or competitive.
Licenses--Federal Regulation of Broadcasting
Television and radio broadcasting are subject to the jurisdiction of the FCC
under the Communications Act of 1934, as amended (the "Communications Act"). The
Communications Act empowers the FCC, among other things, to issue, revoke or
modify broadcasting licenses, determine the location of stations, regulate the
equipment used by stations, adopt such regulations as may be necessary to carry
out the provisions of the Communications Act and impose certain penalties for
violation of its regulations.
Renewal Matters
Broadcasting licenses are granted for a maximum period of seven years, in the
case of radio stations, and five years, in the case of television stations, and
are renewable upon application therefor. During certain periods when a renewal
application is pending, new applicants may file for the frequency and may be
entitled to compete with the renewal applicant in a comparative hearing, and
others may file petitions to deny the application for renewal of license.
Renewal applications are now pending for KABC(AM), KLOS-FM, KTRK-TV, KABC-TV,
KGO-TV and KFSN-TV. In the case of KABC(AM), KLOS-FM, KABC-TV, KGO-TV and KFSN-
TV, the time to file competing applications and petitions to deny has passed,
and no such filings have been made against these stations. In the case of KTRK-
TV, two petitions to deny have been filed. The Company believes both petitions
are without merit and is vigorously opposing them. All of the Company's other
owned stations have been granted license renewals by the FCC for regular terms.
On April 15, 1992, the U.S. District Court for the District of Columbia issued a
Memorandum Opinion and Order in Shepherd et al. v. American Broadcasting
Companies, Inc. et al., Civil Action No. 88-0954 (RCL), which entered a default
judgment against American Broadcasting Companies, Inc. and the Company on a
complaint alleging discrimination in employment practices at the ABC News Bureau
in Washington, DC, in violation of District of Columbia law. The default was
based on a conclusion that "the defendants impeded and obstructed the litigation
process by . . . destruction and alteration of a crucial document and through
the harassment of witnesses and filing false and misleading affidavits." On
September 3, 1993, the District Court issued a Memorandum Opinion on
reconsideration that withdrew many of the findings of misconduct previously made
but reaffirmed other such findings (as well as the default judgment) and called
for further proceedings with respect to damages.
The Company believes that the District Court's decision is factually and legally
incorrect, and it is seeking to obtain a review of the default judgment (and the
supporting findings of misconduct that remain) by the U.S. Court of Appeals for
the District of Columbia Circuit. However, the policies of the FCC call for the
agency to evaluate whether an adjudication of misconduct of the kind found in
Shepherd should bear on the qualifications of the licensee, even though the
adjudication is pending
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on appeal. The FCC has recently approved the Company's acquisition of radio
station WYAY(FM), Gainesville, GA without prejudice to any action the agency may
take in light of the ultimate outcome of the Shepherd decision. On January 14,
1994, the Company submitted to the FCC amendments to its pending license renewal
applications urging that it and its subsidiaries should be found fully qualified
to hold broadcast licenses, even if the misconduct findings of the District
Court were ultimately upheld. Pending FCC action on that issue the Company will
urge thc FCC to apply the Gainesville, GA precedent to permit the acquisition of
new stations, the sale of existing stations or the renewal of existing licenses.
Ownership Matters
The Communications Act prohibits the assignment of a license or the transfer of
control of a licensee without prior approval of the FCC, and prohibits the
Company from having any officer or director who is an alien, and from having
more than one-fifth of its shares owned of record or voted by aliens,
representatives of aliens, foreign governments, representatives of foreign
governments or corporations organized under the laws of foreign countries.
The FCC's "multiple ownership" rules impose a variety of restrictions on the
ownership or control of broadcast stations by a single party. The television
"duopoly" rule bars control or ownership of significant interests in two
television stations that serve the same area. Less severe restraints are
imposed on the control or ownership of AM and FM radio stations that serve the
same area; in a number of situations, a single party may control or own an AM
and/or an FM "duopoly" -- two AM and/or two FM stations -- in the same market
area. The rules also preclude the grant of applications for station
acquisitions that would result in the creation of new radio-television
combinations in the same market under common ownership, or the sale of such a
combination to a single party, subject to the availability of waiver. Under FCC
policy, waiver applications that involve radio-television station combinations
in the top 25 TV markets where there would be at least 30 separately owned,
operated and controlled broadcast licensees after the proposed combination will
generally be favorably received. Under present FCC rules, a single entity may
directly or indirectly own, operate or have a significant interest in up to
eighteen AM and eighteen FM radio stations, and up to twelve television stations
(VHF or UHF), provided that those television stations operate in markets
containing cumulatively no more than 25% of the television households in the
country. For this purpose, ownership of a UHF station will result in the
attribution of only 50% of the television households in the relevant market.
The Company owns eight television stations, of which seven are VHF, resulting in
a total penetration of the nation's television households, for purposes of the
multiple ownership rules, of 23.63%. The Company also owns nine AM and nine FM
radio stations.
Furthermore, under the FCC's rules, radio and/or television licensees may not
acquire new ownership interests in daily newspapers published in the same
markets served by their broadcast stations. The Company currently owns daily
newspapers in two markets in which it also holds radio licenses. For purposes
of these rules, The Oakland Press and WJR(AM) and WHYT(FM), licensed to Detroit,
are treated as in the same market, as are the Fort Worth Star-Telegram and
WBAP(AM) and KSCS(FM), licensed to Fort Worth. Absent an FCC waiver, the
Company could not under the rules acquire additional broadcast stations in these
markets nor could the current broadcast/newspaper combinations be transferred
together. In 1993, the Congress relaxed a restriction previously imposed on the
FCC so as to allow the FCC to grant waivers of the rules with respect to
newspaper/radio station cross-ownership in the top 25 markets where at least 30
independent broadcast voices would remain following a transfer if the FCC
determines that a waiver would serve the public interest. This new policy
creates potential new acquisition opportunities for the Company.
The FCC's rules also provide that television licensees may not own cable
television systems in communities within the service contours of their
television stations. In 1992, the FCC relaxed the rule that previously
prohibited common ownership of television networks and cable television systems
to permit such combinations subject to a national limit of 10% of "homes passed"
(i.e., homes within the service areas of cable systems) by cable as well as a
local limit of 50% of homes passed within any ADI (Area of Dominant Influence,
i.e., local television market area as defined by Arbitron Television Ratings).
The FCC's rules generally provide that an entity will have the licensee's
broadcast stations or newspapers attributed to it for purposes of the multiple
ownership rules only if it holds the power to vote or control the vote of 5% or
more of the stock of a licensee. Qualifying mutual funds, insurance
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companies, or bank trust departments may vote or control the vote of up to 10%
of the stock of a broadcast licensee before the licensee's stations would be
attributed to that entity.
Network Regulations
In May 1993, the FCC eliminated rules that previously restricted the ability of
the Company as well as CBS Inc. ("CBS") and National Broadcasting Company, Inc.
("NBC") to acquire financial interests in network television programs. In the
same proceeding, the FCC retained (subject to a complex two-year sunset
provision) rules that prevent the networks from engaging in active first-run or
"off-network" syndication of programs to television stations in the United
States, constrain the networks' discretion to determine when programs owned by
them will be made available for syndication, and prevent the networks from
acquiring from independent producers interests in first-run syndicated programs.
In September 1993, the FCC substantially denied petitions for reconsideration of
its May 1993 decision. The lawfulness of the regulations the agency has
retained, and of the 1993 modications, has been challenged in proceedings
currently pending in the United States Court of Appeals for the Seventh Circuit.
The Company is not able to predict the outcome of these proceedings. In
addition, other FCC rules effectively restrict the regular prime-time
programming schedules of ABC, CBS and NBC to three hours per night during the
period 7:00 P.M. to 11:00 P.M. on Monday through Saturday.
The Company's television network operations are subject to a consent judgment
(United States v. American Broadcasting Companies, Inc., 74-3600-RJK), in the
United States District Court for the Central District of California, entered
into and effective on November 14, 1980. Similar judgments have been entered
against CBS and NBC with respect to their television networks. In November 1993
the United States District Court, upon a joint motion by the United States
Department of Justice, the Company, CBS and NBC, modified the consent judgment
to eliminate those provisions which prohibited the acquisition of subsidiary
rights and interests in television programs produced by independent suppliers
and restricted the ability of the Company (as well as CBS and NBC) to engage in
the business of distributing programs directly to television stations in the
United States or overseas. The consent judgment continues to contain provisions
regulating for a period expiring in 1995 certain aspects of the Company's
contractual relationships with suppliers of entertainment programming and with
talent performers and other creative contributors to ABC Television Network
entertainment programming.
Cable Television and Other Competing Services
Cable television can provide more competition to a television station by making
additional signals available to the audience. In 1992, Congress enacted the
Cable Television Consumer Protection and Competition Act. The Act gives
television stations the right to elect "must carry" protection (including
protection on channel position) on local cable systems. (The FCC's "must
carry" rules require cable television systems generally to carry the signals of
television stations in whose service areas they operate.) In the alternative,
the Act permits local stations to negotiate with cable systems the terms and
conditions of "retransmission consent" to carry their signals and to withhold
their signals in the event that no consent on terms and conditions is reached.
The Act also reimposes cable system rate regulation and introduces new
regulations designed to ensure that MDS and other multi-channel video
programmers have access to programming to facilitate competition with cable
systems. The Act requires the FCC to conduct rulemaking proceedings to
establish national cable system ownership limits and limits on cable channels
devoted to video programmers in which the cable system has an interest, and to
prohibit coercive or discriminatory practices by cable operators in dealings
with video programmers (such as ESPN, ESPN2, Arts & Entertainment and Lifetime).
The FCC has adopted regulations implementing all of these statutory provisions.
Cable operators have filed lawsuits challenging many of the new Act's
provisions. The must carry, retransmission consent, rate regulation and program
access provisions have been upheld as constitutional in federal court decisions.
The decision relating to must carry is pending on appeal in the Supreme Court of
the United States. The decision relating to the Act's other provisions has been
appealed to the United States Court of Appeals for the District of Columbia
Circuit. The Company cannot predict the outcome of this litigation.
Most cable television systems supply additional programming to subscribers that
is not originated on, or transmitted from, conventional television broadcasting
stations. Many of these services
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(including ESPN, ESPN2, Arts & Entertainment and Lifetime) are also being
distributed directly to viewers by means of satellite transmissions to home
satellite reception dishes.
The FCC also authorizes broadcast subscription television services and MDS, and
has expanded the number of frequencies available for MDS by allocating two
groups of four channels each for the so-called multichannel MDS, to be awarded
by lottery. The FCC has authorized licensees in the Instructional Television
Fixed Service to lease their excess capacity for commercial use, including
subscription television service, and has adopted rules facilitating direct
broadcast satellite operations. It has also created a new service of low power
television facilities to supplement existing conventional television broadcast
service.
The Company also faces potential competition to its broadcast and cable program
services and to its newspaper operations from telephone companies. Telephone
companies are seeking to expand their broadband networks to provide both data
transmission services ("electronic publishing") and video services to the home.
Until 1991, the regional Bell operating companies were prohibited from providing
information services by the Modified Final Judgment that governed the break-up
of American Telephone and Telegraph Company. While that prohibition has been
lifted, there is a provision in the Cable Act of 1984 that prohibits telephone
companies from providing video programming directly to their telephone
subscribers ("the telco/cable cross ownership ban"). A number of recent
developments may affect potential telephone company competition. First, the FCC
decided in 1991 and 1992 to permit telephone companies to offer "video dialtone"
distribution services to programmers on a common carrier basis without having to
obtain a municipal cable franchise. Appeals challenging this decision are
pending in the United States Court of Appeals for the District of Columbia
Circuit. Second, in a suit filed by Bell Atlantic Corporation, a U.S. District
Court ruled in August 1993 that the telco/cable cross ownership ban is
unconstitutional. The decision has been appealed to the United States Court of
Appeals for the Fourth Circuit. Finally, there are a number of legislative
proposals that would either eliminate or modify the telco/cable cross ownership
ban. The Company cannot predict the outcome of these developments or the
competitive effect of these services or potential services.
From time to time legislation may be introduced in Congress which, if enacted,
might affect the Company's operations or its advertising revenues. Proceedings,
investigations, hearings and studies are periodically conducted by Congressional
committees and by the FCC and other government agencies with respect to problems
and practices of, and conditions in, the broadcasting industry. The Company
cannot generally predict whether new legislation or regulations may result from
any such studies or hearings or the adverse impact, if any, upon the Company's
operations which might result therefrom.
The information contained under this heading does not purport to be a complete
summary of all the provisions of the Communications Act and the rules and
regulations of the FCC thereunder, or of pending proposals for other regulation
of broadcasting and related activities. For a complete statement of such
provisions, reference is made to the Communications Act, and to such rules,
regulations and pending proposals thereunder.
* * * * *
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Publishing
The Company publishes newspapers and shopping guides, various specialized and
business periodicals and books; provides research services and also distributes
information from data bases. Following is a summary of the Company's historical
operating performance, by type of publication, for the last five years (000's
omitted):
<TABLE>
<CAPTION>
Pro Forma (b)
---------------
1993 1992 1991 1990 1989 1993 1992
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Inches of advertising
Newspapers (a).............. 18,953 18,396 17,550 18,421 15,844 18,953 18,396
Specialized publications.... 3,055 3,004 2,921 3,399 3,603 2,878 2,920
Advertising revenue
Newspapers--ROP............. $310,429 $301,182 $291,592 $307,634 $290,545 $310,429 $301,182
Newspapers--inserts......... 58,732 55,278 51,695 49,800 44,694 58,732 55,252
Shopping guides............. 71,853 71,137 66,370 65,834 62,111 70,633 70,232
Specialized publications.... 277,077 270,885 267,974 307,686 310,169 265,243 259,209
Circulation revenue
Newspapers.................. $101,112 $ 96,226 $ 93,697 $ 85,933 $ 82,582 $101,112 $ 96,226
Specialized publications.... 51,182 47,253 53,024 59,471 65,882 45,800 45,016
Other operating revenue
Newspapers.................. $21,700 $ 18,200 $ 14,323 $ 10,813 $ 6,635 $ 18,540 $ 16,667
Shopping guides............. 4,851 4,220 3,589 4,171 4,337 4,663 4,220
Specialized publications
Books/Music............... 28,638 118,967 116,708 111,643 108,012 28,638 30,817
Research services,
data base and other...... 84,864 95,218 93,274 98,984 82,438 83,331 77,476
Total revenue
Newspapers.................. $491,973 $470,886 $451,307 $454,180 $424,456 $488,813 $469,327
Shopping guides............. 76,704 75,357 69,959 70,005 66,448 75,296 74,452
Specialized publications.... 441,761 532,323 530,980 577,784 566,501 423,012 412,518
Paid circulation at year-end
Newspapers (Daily).......... 751 754 741 769 891 751 754
Newspapers (Sun.)........... 1,008 992 966 958 930 1,008 992
Specialized publications.... 1,324 1,356 1,768 2,164 3,256 1,212 1,347
</TABLE>
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(a) Does not include inserts.
(b) Excludes 1993 and 1992 acquisitions, start-ups and disposals.
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Daily Newspapers
The Company publishes eight daily newspapers in eight communities (six of
which have Sunday editions). The daily newspapers and their paid circulation are
as follows:
<TABLE>
<CAPTION>
Daily Sunday
----- ------
<S> <C> <C> <C>
The Kansas City Star....................... Morning 297,000 431,000
Fort Worth Star-Telegram................... All Day 252,000 347,000
The Oakland Press (Pontiac, MI)............ Morning 70,000 81,000
Belleville News-Democrat (Belleville, IL).. Morning 51,000 61,000
The Times Leader (Wilkes-Barre, PA)........ Morning 47,000 79,000
Albany Democrat-Herald (Albany, OR)........ Evening 21,000
Milford Citizen (Milford, CT).............. Evening 7,000 9,000
The Daily Tidings (Ashland, OR)............ Evening 6,000
</TABLE>
Weekly Newspapers
The Company publishes weekly community newspapers in seven states. The
location by state, number of publications and aggregate circulation is set forth
below:
<TABLE>
<CAPTION>
Number of Aggregate
State Publications Circulation
- ----- ------------ -----------
<S> <C> <C>
Connecticut................................ 26 147,000
Illinois................................... 13 55,000
Massachusetts.............................. 16 53,000
Michigan................................... 12 187,000
Oregon..................................... 6 39,000
Pennsylvania............................... 1 11,000
Rhode Island............................... 4 22,000
</TABLE>
Shopping Guides and Real Estate Magazines
The Company distributes shopping guides and real estate magazines in
thirteen states. The location by state, number of publications and aggregate
circulation is set forth below:
<TABLE>
<CAPTION>
Number of Aggregate
State Publications Circulation
- ----- ------------ -----------
<S> <C> <C>
California................................. 6 1,956,000
Connecticut................................ 9 208,000
Illinois................................... 1 14,000
Kansas..................................... 1 144,000
Massachusetts.............................. 19 232,000
Michigan................................... 7 94,000
Missouri................................... 1 135,000
Nevada..................................... 4 114,000
Oregon..................................... 5 207,000
Pennsylvania............................... 3 89,000
Rhode Island............................... 1 23,000
Texas...................................... 2 57,000
Washington................................. 4 387,000
</TABLE>
K-10
<PAGE>
Specialized Publications
The Specialized Publications consists of three groups: the Diversified
Publishing Group, the Fairchild Publications Group, and the Financial Services
and Medical Group. Through these groups it is engaged in gathering and
publishing business news and ideas for industries covered by its various
publications; in the publishing of consumer, special interest, trade and
agricultural publications; and in research and data base services. All of the
publications are printed by outside printing contractors. Following are the
significant publications and services:
<TABLE>
<CAPTION>
Title Frequency Circulation
----- --------- -----------
<S> <C> <C>
Diversified Publishing Group
Agricultural Publishing Group
Farm Futures....................................... 10 times per year 225,000*
Feedstuffs......................................... Weekly 17,000
Tack 'n Togs Merchandising......................... 13 times per year 23,000*
<CAPTION>
In addition, the Agricultural Publishing Group publishes nineteen state and
regional farm magazines with an aggregate circulation of 947,000, serving 35
states.
<S> <C> <C>
Chilton Publications
American Metal Market.............................. Daily 10,000
Assembly........................................... 9 times per year 60,000*
Automotive Body Repair News........................ Monthly 60,000*
Automotive Industries.............................. Monthly 100,000*
Automotive Marketing............................... Monthly 40,000*
Cablevision........................................ Semimonthly 14,000*
CED (Communications Engineering and Design)........ Monthly 15,000*
Commercial Carrier Journal......................... Monthly 85,000*
Distribution....................................... Monthly 70,000*
Electronic Component News.......................... Monthly 121,000*
Energy User News................................... Monthly 40,000*
Food Engineering................................... Monthly 60,000*
Food Engineering International..................... 6 times per year 15,000*
Hardware Age....................................... Monthly 69,000*
I&CS (Instrument & Control Systems)................ Monthly 93,000*
IAN (Instrumentation & Automation News)............ Monthly 117,000*
IMPO (Industrial Maintenance & Plant Operations)... Monthly 127,000*
Industrial Paint & Powder.......................... Monthly 37,000*
Industrial Safety & Hygiene News................... Monthly 60,000*
Jewelers' Circular-Keystone........................ Monthly 29,000
Manufacturing Systems.............................. Monthly 115,000*
Metal Center News.................................. Monthly 15,000*
Motor Age.......................................... Monthly 134,000*
Multichannel News.................................. Weekly 15,000
New Steel.......................................... Monthly 18,000*
Outdoor Power Equipment............................ Monthly 22,000*
Owner Operator..................................... 9 times per year 93,000*
PIQ (Process Industries Quality)................... 6 times per year 42,000*
Product Design and Development..................... Monthly 161,000*
</TABLE>
K-11
<PAGE>
<TABLE>
<CAPTION>
Title Frequency Circulation
----- --------- -----------
<S> <C> <C>
Product Design and Development Europe.............. 4 times per year 50,000*
Quality............................................ Monthly 97,000*
Review of Optometry................................ Monthly 32,000*
Video Business..................................... Weekly 45,000*
Video Software Magazine............................ Monthly 22,000*
Warehousing........................................ 6 times per year 40,000*
Los Angeles.......................................... Monthly 156,000
<CAPTION>
The Diversified Publishing Group also includes: Chilton Enterprises which
publishes automotive repair, craft and hobby books, provides custom market
research and conducts trade shows; NILS Publishing Company, a data base
publisher of information on insurance laws and regulations; and Grupo
Editorial Expansion, S.A., acquired in 1993, which publishes Expansion, a
biweekly business magazine with a circulation of 29,000; Obras, a monthly
construction magazine with a circulation of 11,000; and various bulletins and
newsletters concerning Mexican business and legal issues.
<S> <C> <C>
Fairchild Publications Group
Children's Business................................ Monthly 13,000*
Daily News Record.................................. Daily 20,000
Footwear News...................................... Weekly 19,000
Golf Pro Merchandiser.............................. 8 times per year 12,000*
HFD--The Weekly Home Furnishings Newspaper......... Weekly 28,000
Home Fashions Magazine............................. 11 times per year 10,000*
Salon News......................................... Monthly 80,000*
SportStyle......................................... 18 times per year 25,000*
Supermarket News................................... Weekly 51,000
W.................................................. Monthly 258,000
W Fashion Europe................................... 10 times per year 20,000
Women's Wear Daily................................. Daily 55,000
Financial Services and Medical Group
Institutional Investor
Domestic Edition................................... Monthly 105,000*
International Edition.............................. Monthly 39,000*
Infrastructure Finance............................. Quarterly 17,000*
Selling............................................ 10 times per year 70,000
International Medical News Group
Clinical Psychiatry News........................... Monthly 33,000*
Family Practice News............................... Semimonthly 72,000*
Internal Medicine News............................. Semimonthly 101,000*
Ob. Gyn. News...................................... Semimonthly 32,000*
Pediatric News..................................... Monthly 36,000*
Skin & Allergy News................................ Monthly 18,000*
</TABLE>
- ----------
*All, or substantially all, controlled circulation.
Certain operations within the Publishing Group also publish philatelic
magazines, cable guides, books, visuals, journals and newsletters, and conduct
meetings and seminars.
K-12
<PAGE>
Competition
The Company's newspapers, specialized publications and shopping guides operate
in a highly competitive environment. In the Company's various news publishing
activities it competes with almost all other information media, including
broadcast media, and this competition may become more intense as new
technologies are developed. Magazines and many newspapers publish substantial
amounts of similar business news and information, and deal with the same or
related special interests or industries, as those covered by the Company's
specialized publications. The Company's newspapers, specialized publications
and shopping guides compete for advertising with all other advertising forms of
media.
Raw Materials
The primary raw materials used by the Company's Publishing Group are newsprint
and other paper stock, which are purchased from paper merchants, paper mills and
contract printers and are readily available from numerous suppliers.
Item 2. Properties.
The Company's headquarters building at 77 West 66th Street in New York City
houses the corporate offices and the television network administrative staff,
and is owned by the Company.
The Company owns the ABC Television Center adjacent to the Company's
headquarters building on West 66th Street and the ABC Radio Networks' studios at
125 West End Avenue in New York City. In Los Angeles, the Company owns the ABC
Television Center. The Company leases the ABC Television Network offices in Los
Angeles, the ABC News Bureau facility in Washington, DC and the computer
facility in Hackensack, NJ under leases expiring on various dates through 2034.
The Company's broadcast operations and engineering facility and local television
studios and offices in New York City are leased, but the Company has the right
to acquire such properties for a nominal sum in 1997. The Company's 80%-owned
subsidiary ESPN owns ESPN Plaza in Bristol, CT from which it conducts its
technical operations. The Company owns the majority of its other broadcast
studios and offices and broadcast transmitter sites elsewhere, and those which
it does not own are occupied under leases expiring on various dates through
2039.
The Company owns and leases publishing subsidiaries' executive, editorial and
other offices and facilities in various cities. For leased properties, the
leases expire on various dates through 2006. All of the significant premises
occupied by the newspapers are owned by the Company.
Item 3. Legal Proceedings.
All litigation pending during 1993 was routine and incidental to the business of
the Company. For a discussion of the relevance of one item of litigation in the
regulatory context, see "Licenses - Federal Regulation of Broadcasting" under
Item 1. Business.
Item 4. Submission of Matters to a Vote of Security Holders.
The information called for by this item is not applicable.
K-13
<PAGE>
Executive Officers of the Company
<TABLE>
<CAPTION>
Director Officer Title and positions during
Name Age since since the past five years
---- --- -------- ------ --------------------------
<S> <C> <C> <C> <C>
Thomas S. Murphy 68 1957 1958 Chairman of the Board of Directors and Chief Executive Officer. From June
1990 to February 1994 he was Chairman of the Board of Directors. Prior to
June 1990 he was Chairman of the Board of Directors and Chief Executive
Officer.
John B. Fairchild 67 1968 1968 Executive Vice President, Chairman of Fairchild Publications Group and
Director.
Robert A. Iger 43 1993 Executive Vice President (Senior Vice President from March 1993 to August
1993), and President of ABC Television Network Group. Prior to January 1993
he was President of ABC Entertainment since 1989. In 1988 and 1989 he was
Executive Vice President of ABC Television Network Group. Prior thereto he
was Vice President, Program Planning and Acquisition for ABC Sports.
Ronald J. Doerfler 52 1977 Senior Vice President and Chief Financial Officer.
Herbert A. Granath 65 1988 Senior Vice President, and President Cable and International Broadcast
Group. Prior to October 1993 he was Vice President, and President of Video
Enterprises.
Michael P. Mallardi 60 1986 Senior Vice President, and President of Broadcast Group.
Phillip J. Meek 56 1975 Senior Vice President, and President of Publishing Group.
Stephen A. Weiswasser 53 1986 Senior Vice President and General Counsel, and President of Multimedia
Group. From January 1993 to August 1993 he was Senior Vice President.
Prior to January 1993 he was Senior Vice President, and Executive Vice
President of ABC News. In 1991 he was Senior Vice President, and Executive
Vice President of ABC Television Network Group. Prior thereto he was Senior
Vice President and General Counsel.
David Westin 41 1991 Senior Vice President, and President of Production, ABC Television Network
Group. From March 1993 to August 1993 he was Senior Vice President and
General Counsel. From 1991 to March 1993 he was Vice President and General
Counsel. Prior to 1991 he was engaged in the practice of law as a partner in
the law firm of Wilmer,Cutler & Pickering.
Alan N. Braverman 46 1993 Vice President and Deputy General Counsel. Prior to November 1993 he was
engaged in the practice of law as a partner in the law firm of Wilmer,
Cutler & Pickering.
Allan J. Edelson 51 1981 Vice President and Controller.
David J. Vondrak 48 1986 Vice President and Treasurer.
</TABLE>
There is no relationship by blood, marriage or adoption among the officers. All
officers hold office at the pleasure of the Board of Directors.
K-14
<PAGE>
PART II
Item 5. Market for the Registrant's Common Stock and Related Security Holder
Matters.
The information called for by this item is included on page 41 of the 1993
Annual Report to Shareholders and is incorporated herein by reference.
Item 6. Selected Financial Data.
The information called for by this item is included on pages 26 and 27 of the
1993 Annual Report to Shareholders and is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The information called for by this item is included on pages 21 through 25 of
the 1993 Annual Report to Shareholders and is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data.
The information called for by this item is included on pages 28 through 41 of
the 1993 Annual Report to Shareholders and is incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
The information called for by this item is not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant.
Incorporated herein by reference to the Company's definitive Proxy Statement for
the annual meeting of shareholders to be held on May 19, 1994. Information
concerning the executive officers is included in Part 1, on page K-14.
Item 11. Executive Compensation.
Incorporated herein by reference to the Company's definitive Proxy Statement for
the annual meeting of shareholders to be held on May 19, 1994.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Incorporated herein by reference to the Company's definitive Proxy Statement for
the annual meeting of shareholders to be held on May 19, 1994.
Item 13. Certain Relationships and Related Transactions.
The information called for by this item is not applicable.
K-15
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) 1. & 2. Financial statements and financial statement schedules.
The financial statements and schedules listed in the accompanying index
to the consolidated financial statements are filed as part of this annual
report.
3. Exhibits.
The exhibits listed on the accompanying index to exhibits are filed as
part of this annual report.
(b) Reports on Form 8-K.
None filed during Fourth Quarter 1993.
K-16
<PAGE>
CAPITAL CITIES/ABC,INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
COVERED BY REPORT OF CERTIFIED PUBLIC ACCOUNTANTS
(Item 14(a) 1. & 2.)
<TABLE>
<CAPTION>
Reference
------------------------
Annual Report
to
Shareholders Form 10-K
------------ ---------
<S> <C> <C>
Consolidated balance sheet at December 31, 1993 and
December 31, 1992................................... 30
For the years ended December 31, 1993, 1992 and 1991
Consolidated statement of income.................... 28
Consolidated statement of cash flows................ 29
Consolidated statement of stockholders' equity...... 32
Notes to consolidated financial statements............ 33
Financial statement schedules for the years ended
December 31, 1993, 1992 and 1991
V --Property, plant and equipment................ K-20
VI --Accumulated depreciation and amortization of
property, plant and equipment............... K-21
VIII --Valuation and qualifying accounts............ K-20
X --Supplementary income statement information... K-21
</TABLE>
All other schedules have been omitted since the required information is not
applicable or is not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the consolidated
financial statements, including the notes thereto.
* * * * *
The consolidated financial statements of Capital Cities/ABC, Inc., listed in
the above index which are included in the Annual Report to Shareholders for the
year ended December 31, 1993, are hereby incorporated by reference. With the
exception of the Items referred to in Items 1, 5, 6, 7 and 8, the 1993 Annual
Report to Shareholders is not to be deemed filed as part of this report.
- --------------------------------------------------------------------------------
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report on Form
10-K of Capital Cities/ABC, Inc. for the year ended December 31, 1993 of our
report dated February 28, 1994, included in the 1993 Annual Report to
Shareholders of Capital Cities/ABC, Inc.
Our audits also included the financial statement schedules of Capital
Cities/ABC, Inc. listed in item 14(a). These schedules are the responsibility
of the Company's management. Our responsibility is to express an opinion based
on our audits. In our opinion, the financial statement schedules referred to
above, when considered in relation to the basic financial statements taken as a
whole, present fairly in all material respects the information set forth
therein.
We also consent to the incorporation by reference in the Registration
Statements Form S-8 No. 2-59014 for the registration of 287,195 shares of the
Company's common stock, Form S-8 No. 2-86863 for the registration of 300,000
shares, Form S-8 No. 33-2196 relating to the issuance of an indeterminate number
of shares, Form S-8 No. 33-11806 for the registration of 200,000 shares, Form
S-8 No. 33-16206 for the registration of 300,000 shares, Form S-8 No. 33-25918
for the registration of 200,000 shares, Form S-8 No. 33-33761 for the
registration of 200,000 shares, Form S-3 No. 33-38117 for the registration of
Debt Securities and Warrants to purchase Debt Securities, Form S-3 No. 33-39652
for the registration of Debt Securities and Warrants to purchase Debt
Securities, and Form S-8 No. 33-52563 for the registration of 60,000 shares, and
in the related Prospectuses and documents constituting Prospectuses, of our
above report.
ERNST & YOUNG
New York, New York
March 14, 1994
K-17
<PAGE>
CAPITAL CITIES/ABC, INC.
INDEX TO EXHIBITS (Item 14 (a) 3.)
(3)(a) Restated Certificate of Incorporation of the Company, with amendments.
Incorporated by reference to Exhibit (3)(a) to the Company's Annual Report on
Form 10-K for 1989.
(3)(b) Current By-laws of the Company. Incorporated by reference to Exhibit
(3) to the Company's Quarterly Report on Form 10-Q for the period ended
September 30, 1990.
(4)(a) Capital Cities/ABC, Inc. Standard Multiple-Series Indenture Provisions
dated December 7, 1990. Incorporated by reference to Exhibit (4)(a) to
Registration Statement No. 33-38117.
(4)(b) Indenture, dated as of December 15, 1990, between the Company and
Manufacturers Hanover Trust Company (now Chemical Bank), as Trustee, with
respect to Senior Debt Securities. Incorporated by reference to Exhibit (4)(b)
to Registration Statement No. 33-38117.
(4)(c) Indenture, dated as of April 1, 1991 between the Company and
Manufacturers Hanover Trust Company (now Chemical Bank), as Trustee, with
respect to Subordinated Debt Securities. Incorporated by reference to Exhibit
(4)(c) to Registration Statement No. 33-39652.
(4)(d) Revolving Credit Agreement, dated as of January 3, 1986, as amended and
restated as of June 30, 1987, among the Company, Chemical Bank and certain other
banks. Incorporated by reference to Exhibit (4)(d) to the Company's Annual
Report on Form 10-K for 1987.
(4)(e) Second Amendment, dated as of June 30, 1989, to the Revolving Credit
Agreement set forth in Exhibit (4)(d) above. Incorporated by reference to
Exhibit 4(e) to the Company's Annual Report on Form 10-K for 1989.
(4)(f) Third Amendment, dated as of April 30, 1992, to the Revolving Credit
Agreement set forth in Exhibits (4)(d) and (4)(e) above. Incorporated by
reference to Exhibit 4(f) to the Company's Annual Report on Form 10-K for 1992.
(4)(g) Other instruments defining the rights of holders of long-term debt of
the Company and its consolidated subsidiaries are not being filed since the
total amount of securities authorized under any of such instruments does not
exceed 10 percent of the total assets of the Company and its subsidiaries on a
consolidated basis. The Company agrees to furnish a copy of any such instrument
to the Securities and Exchange Commission upon request.
(4)(h) Rights Agreement, dated December 14, 1989, between the Company and
Harris Trust Company of New York with respect to the Preferred Share Purchase
Rights. Incorporated by reference to Exhibit 1 to the Company's Form 8-K dated
December 15,1989.
(10)(a) Stock Purchase Agreement between the Company and Berkshire Hathaway
Inc., dated March 18, 1985. Incorporated by reference to Appendix B to the
Company's and American Broadcasting Companies, Inc.'s Joint Proxy Statement-
Prospectus dated May 10, 1985.
(10)(b) Stock Purchase Agreement among the Company, Berkshire Hathaway Inc.,
National Indemnity Company, National Fire and Marine Insurance Company, Columbia
Insurance Company, Nebraska Furniture Mart, Inc. and Cornhusker Casualty
Company, dated January 2, 1986. Incorporated by reference to Exhibit A to the
Schedule 13D dated January 8, 1986 filed by Berkshire Hathaway Inc. and others
in regard to the Company's common stock.
(10)(c) Amendment dated October 29, 1993 to the Stock Purchase Agreement set
forth in Exhibit (10)(b) above. Incorporated by reference to Exhibit 99(c) to
the Company's Schedule 13E-4 dated November 2, 1993.
*(10)(d) Supplemental Profit Sharing Plan of the Company, as amended through
April 9, 1992. Incorporated by reference to Exhibit (10)(c) to the Company's
Annual Report on Form 10-K for 1992.
*(10)(e) Benefit Equalization Plan of the Company, as amended through January
1, 1994.
*(10)(f) Incentive Compensation Plan of the Company, as amended through
December 9, 1993.
*(10)(g) Employee Stock Option Plan of the Company, as amended through December
15, 1987. Incorporated by reference to Exhibit (10)(f) to the Company's Annual
Report on Form 10-K for 1992.
*(10)(h) 1991 Stock Option Plan of the Company, as amended through March 19,
1991. Incorporated by reference to Exhibit (10)(g) to the Company's Annual
Report on Form 10-K for 1992.
*(10)(i) Contract dated January 2, 1968 between John B. Fairchild and Fairchild
Publications, Inc., as amended by contract of June 1977 between Mr. Fairchild
and Capital Cities Media, Inc. (a subsidiary of the Company) as successor to
Fairchild Publications, Inc. (Mr. Fairchild is an executive
K-18
<PAGE>
officer and a director of the Company.) Incorporated by reference to Exhibit
(10)(h) to the Company's Annual Report on Form 10-K for 1992.
*(10)(j) The Company's Retirement Plan for Nonemployee Directors, as adopted by
Board of Directors resolution dated March 20, 1990. Incorporated by reference
to Exhibit (10)(i) to the Company's Annual Report on Form 10-K for 1992.
(13) The Company's 1993 Annual Report to Shareholders. (This report, except
for the portions thereof which are incorporated by reference in this Form 10-K,
is furnished for the information of the Securities and Exchange Commission and
is not to be deemed "filed" as part of this Form 10-K.)
(21) Subsidiaries of the Company.
(99)(a) Form 11-K for the Company's Savings & Investment Plan for the year
ended December 31, 1993.
(99)(b) Undertakings.
- ----------
* Executive officers' and directors' compensation plans and arrangements.
K-19
<PAGE>
CAPITAL CITIES/ABC, INC.
PROPERTY, PLANT AND EQUIPMENT -- SCHEDULE V
(Thousands of Dollars)
<TABLE>
<CAPTION>
Balance at Operating Additions Retire- Other Balance
beginning companies at ments changes at close
of period acquired cost or sales (a) of period
---------- --------- --------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Year ended December 31, 1993:
Land and improvements..................... $ 333,816 $ 834 $ 1,561 $ (1,492) $ 334,719
Buildings and improvements................ 692,772 3,285 16,266 (4,421) 707,902
Broadcasting equipment.................... 576,431 550 51,093 (27,831) 600,243
Printing machinery and equipment.......... 178,877 1,319 13,324 (5,235) 188,285
Other, including construction-in-progress. 226,338 847 15,544 (3,865) 238,864
---------- ------ -------- --------- ----------
$2,008,234 $6,835 $ 97,788 $ (42,844) $2,070,013
========== ====== ======== ========= ==========
Year ended December 31, 1992:
Land and improvements..................... $ 403,482 $ 133 $ (69,799) $ 333,816
Buildings and improvements................ 633,859 38,816 (18,683) $38,780 692,772
Broadcasting equipment.................... 514,799 $ 296 69,657 (8,321) 576,431
Printing machinery and equipment.......... 174,718 50 12,382 (8,273) 178,877
Other, including construction-in-progress. 234,654 46 (6,252) (2,110) 226,338
---------- ------ -------- --------- ------- ----------
$1,961,512 $ 392 $114,736 $(107,186) $38,780 $2,008,234
========== ====== ======== ========= ======= ==========
Year ended December 31, 1991:
Land and improvements..................... $ 403,338 $ 221 $ (77) $ 403,482
Buildings and improvements................ 621,470 20,736 (8,347) 633,859
Broadcasting equipment.................... 450,807 68,911 (4,919) 514,799
Printing machinery and equipment.......... 171,714 $ 249 7,517 (4,762) 174,718
Other, including construction-in-progress. 213,731 51 23,613 (2,741) 234,654
---------- ------ -------- --------- ----------
$1,861,060 $ 300 $120,998 $ (20,846) $1,961,512
========== ====== ======== ========= ==========
</TABLE>
- ----------
(a) Represents adjustments related to the adoption of Financial Accounting
Standard No. 109 "Accounting for Income Taxes."
VALUATION AND QUALIFYING ACCOUNTS -- SCHEDULE VIII
(Thousands of Dollars)
<TABLE>
<CAPTION>
Additions Deductions
------------------ -----------------------
Balance at Operating Charged Operating Accounts Balance
beginning companies to companies written-off, at close
of period acquired expense disposed net of period
---------- --------- ------- --------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Deducted from accounts and notes receivable:
Year ended December 31, 1993................. $35,114 $490 $31,876 $(22,830) $44,650
Year ended December 31, 1992................. 38,302 24 48,458 $(8,680) (42,990) 35,114
Year ended December 31, 1991................. 37,840 51,941 (30) (51,449) 38,302
</TABLE>
K-20
<PAGE>
CAPITAL CITIES/ABC, INC.
ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY,
PLANT AND EQUIPMENT--SCHEDULE VI
(Thousands of Dollars)
<TABLE>
<CAPTION>
Balance at Retire- Balance
beginning Charged ments at close
of period to expense or sales of period
--------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Year ended December 31, 1993:
Land improvements................ $ 3,301 $ 448 $ (91) $ 3,658
Buildings and improvements....... 159,049 23,195 (2,006) 180,238
Broadcasting equipment........... 368,255 49,125 (25,871) 391,509
Printing machinery and equipment. 104,256 12,756 (5,074) 111,938
Other............................ 57,389 9,508 (2,954) 63,943
-------- ------- -------- --------
$692,250 $95,032 $(35,996) $751,286
======== ======= ======== ========
Year ended December 31, 1992:
Land improvements................ $ 2,790 $ 578 $ (67) $ 3,301
Buildings and improvements....... 141,876 23,691 (6,518) 159,049
Broadcasting equipment........... 326,314 49,852 (7,911) 368,255
Printing machinery and equipment. 97,262 12,294 (5,300) 104,256
Other............................ 49,995 9,249 (1,855) 57,389
-------- ------- -------- --------
$618,237 $95,664 $(21,651) $692,250
======== ======= ======== ========
Year ended December 31, 1991:
Land improvements................ $ 2,404 $ 386 $ 2,790
Buildings and improvements....... 124,663 22,964 $ (5,751) 141,876
Broadcasting equipment........... 275,749 51,253 (688) 326,314
Printing machinery and equipment. 89,093 12,140 (3,971) 97,262
Other............................ 47,560 9,294 (6,859) 49,995
-------- ------- -------- --------
$539,469 $96,037 $(17,269) $618,237
======== ======= ======== ========
</TABLE>
- ----------
Depreciation is computed on the straight-line method over the following
estimated useful lives: buildings and improvements--10 to 55 years;
broadcasting equipment--4 to 20 years; printing machinery and equipment--5 to
20 years.
SUPPLEMENTARY INCOME STATEMENT INFORMATION--SCHEDULE X
(Thousands of Dollars)
<TABLE>
<CAPTION>
Advertising
Royalties costs
--------- -----------
<S> <C> <C>
Year ended December 31, 1993............ $30,847 $136,817
Year ended December 31, 1992............ 70,203 135,157
Year ended December 31, 1991............ 66,191 133,018
</TABLE>
K-21
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this Annual Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
CAPITAL CITIES/ABC, INC.
(Registrant)
/s/ THOMAS S. MURPHY
------------------------
(Thomas S. Murphy)
Chairman of the Board and Chief Executive Officer March 14, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the date indicated:
<TABLE>
<CAPTION>
<S> <C>
Principal Executive Officer:
/s/ THOMAS S. MURPHY
- ---------------------------
(Thomas S. Murphy) March 14, 1994
Principal Financial Officer:
/s/ RONALD J. DOERFLER
- ---------------------------
(Ronald J. Doerfler) March 14, 1994
Controller:
/s/ ALLAN J. EDELSON
- ---------------------------
(Allan J. Edelson) March 14, 1994
Directors:
/s/ ROBERT P. BAUMAN
- ---------------------------
(Robert P. Bauman) March 14, 1994
/s/ NICHOLAS F. BRADY
- ---------------------------
(Nicholas F. Brady) March 14, 1994
/s/ WARREN E. BUFFETT
- ---------------------------
(Warren E. Buffett) March 14, 1994
/s/ DANIEL B. BURKE
- ---------------------------
(Daniel B. Burke) March 14, 1994
/s/ FRANK T. CARY
- ---------------------------
(Frank T. Cary) March 14, 1994
/s/ JOHN B. FAIRCHILD
- ---------------------------
(John B. Fairchild) March 14, 1994
/s/ LEONARD H. GOLDENSON
- ---------------------------
(Leonard H. Goldenson) March 14, 1994
/s/ FRANK S. JONES
- ---------------------------
(Frank S. Jones) March 14, 1994
/s/ ANN DIBBLE JORDAN
- ---------------------------
(Ann Dibble Jordan) March 14, 1994
/s/ JOHN H. MULLER, JR.
- ---------------------------
(John H. Muller, Jr.) March 14, 1994
/s/ THOMAS S. MURPHY
- ---------------------------
(Thomas S. Murphy) March 14, 1994
/s/ WYNDHAM ROBERTSON
- ---------------------------
(Wyndham Robertson) March 14, 1994
/s/ M. CABELL WOODWARD, JR.
- ---------------------------
(M. Cabell Woodward, Jr.) March 14, 1994
</TABLE>
K-22
<PAGE>
Exhibit (10)(e)
Restated to reflect
amendments adopted through
January 1, 1994
BENEFIT EQUALIZATION PLAN
OF
CAPITAL CITIES/ABC, INC.
I. Purpose of Plan
The purpose of this Plan is to provide a means of equalizing the
benefits of those employees participating in the Capital Cities/ABC, Inc.
Retirement Plan (the "Retirement Plan"), the Capital Cities/ABC, Inc. Savings &
Investment Plan (the "Savings Plan") and, after December 31, 1988, the Capital
Cities/ABC, Inc. Supplemental Pension Plan (the "Supplemental Plan") whose
funded benefits under the Retirement Plan, the Savings Plan, the Supplemental
Plan or any of them are or will be limited by application of Sections 415 and
401(a)(17) of the Internal Revenue Code of 1986 (the "Code").
The "Employing Corporation" means Capital Cities/ABC, Inc. (the
"Corporation") or any corporation participating in the Retirement Plan, the
Savings Plan or the Supplemental Plan which employs any member in the Plan.
<PAGE>
II. Administration of the Plan
The Pension Committee of the Retirement Plan shall administer the
Plan. The Committee shall have the authority, in its sole discretion, to
construe the Plan; to decide all questions relating to the eligibility of any
individual to participate in the Plan or to his or her entitlement to benefits
under the Plan; to prescribe, amend and rescind rules and regulations relating
to the Plan, and to make, amend or revoke all determinations and decisions
necessary or advisable for administering the Plan. The Committee may employ and
rely on such legal counsel, such actuaries, such accountants and such agents as
it may deem advisable to assist in the administration of the Plan. Decisions of
the Committee shall be conclusive and binding on all persons.
III. Participation in the Plan
Only employees who are members of the Retirement Plan and/or members
of the Savings Plan and/or members of the Supplemental Plan and (i) who are
officers of the Corporation or an Employing Corporation elected by the Board of
Directors of such corporations or (ii) who have the title of vice president or
higher or (iii) who are management employees designated to participate by the
Committee (and whose designation has not been revoked by the Committee) shall be
eligible to participate in this Plan whenever their benefits under the
Retirement Plan or the Savings Plan or the Supplemental Plan as from time to
time in effect would exceed the limitations on benefits and contributions
imposed by Section 415
2
<PAGE>
of the Code calculated from and after September 2, 1974 or would be limited by
the application of Section 401(a)(17) of the Code from and after January 1,
1989. Under clause (iii) above, the Committee may in its discretion designate
any management employee to participate in one or more of the Retirement Plan,
the Savings Plan and the Supplemental Plan and not in the remaining plan or
plans.
For purposes of this Plan, the benefits under the Retirement Plan, the
Savings Plan and/or the Supplemental Plan of a participant in this Plan shall be
determined without regard for any provision contained in such Plans
incorporating limitations imposed by Sections 415 and 401(a)(17) of the Code and
without regard to the effect of any qualified domestic relations order, as
described in Section 206(d) of the Employee Retirement Income Security Act of
1974, as amended, awarding any portion of such benefit to a former spouse or
qualified dependent.
IV. Equalized Benefits Related to the Retirement Plan
The Employing Corporation shall pay to each of its eligible members of
the Retirement Plan or their beneficiaries a supplemental pension benefit equal
to the benefit which would have been payable to them under the Retirement Plan,
without regard for any provision of the Retirement Plan incorporating
limitations imposed by Sections 415 and 401(a)(17) of the Code and without
regard for the provision of the Retirement Plan under which a member's benefit
is determined as the sum of a pre-1994 portion and a post-1993 portion in order
to mitigate the
3
<PAGE>
effect of the 1993 amendment to Code Section 401(a)(17), to the extent that such
benefit otherwise payable under the Retirement Plan exceeds the limitations
imposed by Sections 415 and 401(a)(17) of the Code. Such supplemental pension
benefits shall be payable in accordance with all the terms and conditions
applicable to the member's benefits under the Retirement Plan, including
whatever optional benefits he may have elected. If a member's benefits under
the Retirement Plan are to continue after his death for the benefit of his
spouse or a designated beneficiary, then any participant in this Plan shall have
the right at any time to change the recipient of the survivorship benefit
payable under this Plan; provided, however, any such change, if made after the
applicable deadline set forth in the Retirement Plan, shall not affect the
amount of the benefit payable under this Plan as originally calculated or the
term for which such benefit is payable, also as originally calculated.
V. Equalized Benefits Related to the Savings Plan
When the contributions for a member in the Savings Plan have met the
limitations imposed by Sections 415 and 401(a)(17) of the Code for any year, the
member shall no longer be permitted to make Tax Deferred Contributions or Taxed
Contributions to the Savings Plan or to participate in Company contributions
under the Savings Plan during that year.
The Corporation shall maintain a book account for each such member in
this Plan to which the Employing Corporation shall credit an amount
4
<PAGE>
equal to the amount which would have been credited, but was not credited, to the
member's account under the Savings Plan had he been permitted to make additional
matched Tax Deferred Contributions or matched Taxed Contributions to the Trust
Fund under the terms of the Savings Plan. Except as provided in the next
sentence, a member whose Tax Deferred Contributions or Taxed Contributions are
ended in any plan year after 1986 by reason of the limitations imposed by
Sections 415 and 401(a)(17) of the Code shall have amounts credited to his
account under this Article only if he shall have elected, at the time and in the
manner determined by the Committee, to have his salary otherwise payable to him
reduced on an after-tax basis, in the same manner as if he had made Taxed
Contributions into the Savings Plan. A member of the Savings Plan who has
received any credit under this Article for any period prior to 1987 shall have
amounts credited to his account under this Article after 1986 only if he shall
have elected, at the time and in the manner determined by the Committee, to have
his salary otherwise payable to him deferred under this Plan. The aggregate
amount of any salary reductions or deferrals shall be added to the member's book
account under this Plan, and the member's rights in such salary reductions or
deferrals shall be fully vested. The Corporation shall distribute to each
member in this Plan or his beneficiary an amount in cash equal to the value of
his book account attributable to his deemed Tax Deferred Contributions or Taxed
Contributions and the deemed contributions by the Employing Corporation for each
year at the same times and under the same terms and conditions as set forth in
the Savings Plan. If
5
<PAGE>
a member's benefits under the Savings Plan are to continue after his death for
the benefit of his spouse or a designated beneficiary, then the member shall
have the right at any time to change the recipient of the survivorship benefit
payable under this Plan; provided, however, any such change, if made after the
applicable deadline set forth in the Savings Plan, shall not affect the amount
of the benefit payable under this Plan as originally calculated or the term for
which such benefit is payable, also as originally calculated.
VI. Equalized Benefits Related to the Supplemental Plan
The Employing Corporation shall pay to each of its eligible members of
the Supplemental Plan or their beneficiaries a supplemental pension benefit
equal to the benefit which would have been payable to them under the
Supplemental Plan, without regard for any provision therein incorporating
limitations imposed by Sections 415 and 401(a)(17) of the Code, to the extent
that such benefit otherwise payable under the Supplemental Plan exceeds the
limitations imposed by Sections 415 and 401(a)(17) of the Code. Such
supplemental pension benefits shall be payable in accordance with all the terms
and conditions applicable to the member's benefits under the Supplemental Plan,
including whatever optional benefits he may have elected. If a member's
benefits under the Supplemental Plan are to continue after his death for the
benefit of his spouse or a designated beneficiary, then any participant in this
Plan shall have the right at any time to change the recipient of the
survivorship benefit payable under this Plan;
6
<PAGE>
provided, however, any such change, if made after the applicable deadline set
forth in the Supplemental Plan, shall not affect the amount of the benefit
payable under this Plan as originally calculated or the term for which such
benefit is payable, also as originally calculated.
VII. Trigger Events
(a) For the purpose of this Plan, a "Trigger Event" shall
mean
(i) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of
the Securities Exchange Act of l934, as amended (the
"Exchange Act")) (a "Person"), other than Berkshire
Hathaway, Inc., a Delaware corporation ("Berkshire"),
or any Affiliate or Associate (as hereinafter defined)
of Berkshire (Berkshire and such Affiliate and
Associate being hereinafter referred to collectively as
the "Berkshire Group"), in one or more transactions, of
beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of an aggregate of
20% or more of either (x) the then outstanding shares
of common stock of the Corporation (the "Outstanding
Company Common Stock") or (y) the combined voting power
of the then outstanding voting securities of the
Corporation
7
<PAGE>
entitled to vote generally in the election
of directors (the "Outstanding Company Voting
Securities"); provided, however, that the following
acquisitions shall not constitute a Trigger Event: (A)
any acquisition directly from the Corporation
(excluding an acquisition by virtue of the exercise of
a conversion privilege), provided that the Person
acquiring such Outstanding Company Common Stock or
Outstanding Company Voting Securities beneficially owns
less than 5% of the Outstanding Company Common Stock
and the Outstanding Company Voting Securities
immediately prior to such acquisition, (B) any
acquisition by the Corporation, (C) any acquisition by
any employee benefit plan (or related trust) sponsored
or maintained by the Corporation or any Affiliate of
the Corporation or (D) any acquisition by any
corporation pursuant to a transaction described in
clauses (A), (B) and (C) of paragraph (iv) below; or
(ii) The acquisition by any one or more of the Berkshire
Group, in one or more transactions, of beneficial
ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of more than 30% (the
"Prohibited Percentage") of either the Outstanding
Company Common Stock or the Outstanding Company Voting
Securities,
8
<PAGE>
provided, however, that any such acquisition shall not
constitute a Trigger Event if the Berkshire Group shall
have attained the Prohibited Percentage (A) as the
result of an acquisition of Outstanding Company Common
Stock or Outstanding Company Voting Securities by the
Corporation which, by reducing the number of shares
outstanding, increases the proportionate number of
shares owned by the Berkshire Group to the Prohibited
Percentage or (B) with the consent of the Corporation's
Board of Directors in accordance with an Agreement
dated January 2, l986 between the Corporation and
Berkshire, provided however, that if the Berkshire
Group shall become the beneficial owner of more than
30% of such securities pursuant to clauses (A) or (B)
of this paragraph (ii), and shall thereafter acquire
any additional Outstanding Company Common Stock or
Outstanding Company Voting Securities other than
pursuant to clause (B) of this paragraph (ii), then
such acquisition shall constitute a Trigger Event; or
(iii) Individuals who constitute the Incumbent Board (as
hereinafter defined) cease for any reason to constitute
at least a majority of the Board of Directors of the
Corporation (the "Board"). "Incumbent Board" shall
mean individuals who as of December 14, l989,
constitute the Board and any
9
<PAGE>
individual who becomes a director subsequent to
December 14, l989, whose election, or nomination for
election by the Corporation's shareholders, is approved
by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent
Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as
a result of either an actual or threatened election
contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) or
other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the
Board; or
(iv) Approval by the shareholders of the Corporation of a
reorganization, merger or consolidation, in each case
unless, following such reorganization, merger or
consolidation, (A) all or substantially all of the
individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities
immediately prior to such reorganization, merger or
consolidation beneficially own, directly or indirectly,
more than 60% of, respectively, the then outstanding
shares of common stock and the combined voting
10
<PAGE>
power of the then outstanding voting securities
entitled to vote generally in the election of
directors, as the case may be, of the corporation
resulting from such reorganization, merger or
consolidation in substantially the same proportions as
their ownership, immediately prior to such
reorganization, merger or consolidation of the
Outstanding Company Common Stock and Outstanding
Company Voting Securities, as the case may be, (B) no
Person (excluding the Corporation, any employee benefit
plan (or related trust) of the Corporation and the
Berkshire Group) beneficially owns, directly or
indirectly, 20% or more, and the Berkshire Group does
not beneficially own, directly or indirectly, more than
30%, of, respectively, the then outstanding shares of
common stock of the corporation resulting from such
reorganization, merger or consolidation or the combined
voting power of the then outstanding voting securities
of such corporation and (C) at least a majority of the
members of the Board of Directors of the corporation
resulting from such reorganization, merger or
consolidation were members of the Incumbent Board at
the time of the execution of the initial agreement
providing for such reorganization, merger or
consolidation; or
11
<PAGE>
(v) Approval by the shareholders of the Corporation
of (x) a complete liquidation or dissolution of the
Corporation or (y) the sale or other disposition of all
or substantially all of the assets of the Corporation,
other than to a corporation with respect to which,
following such sale or other disposition, (A) more than
60% of, respectively, the then outstanding shares of
common stock of such corporation and the combined
voting power of the then outstanding voting securities
of such corporation entitled to vote generally in the
election of directors is then beneficially owned,
directly or indirectly, by all or substantially all of
the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities
immediately prior to such sale or other disposition in
substantially the same proportion as their ownership,
immediately prior to such sale or other disposition, of
the Outstanding Company Common Stock and Outstanding
Company Voting Securities, as the case may be, (B) no
Person (excluding the Corporation, any employee benefit
plan (or related trust) of the Corporation and the
Berkshire Group) beneficially owns, directly or
indirectly, 20% or more, and the Berkshire Group does
not beneficially own, directly or
12
<PAGE>
indirectly, more than 30% of, respectively, the then
outstanding shares of common stock of the corporation
resulting from such reorganization, merger or
consolidation or the combined voting power of the then
outstanding voting securities of such corporation and
(C) at least a majority of the members of the board of
directors of such corporation were members of the
Incumbent Board at the time of the execution of the
initial agreement or action of the Board providing for
such sale or other disposition of assets of the
Corporation.
For the purpose of this Section, the terms "Affiliate" and "Associate"
shall have the respective meanings ascribed to such terms in Rule
12b-2 of the General Rules and Regulations under the Exchange
Act, as in effect on December 14, l989.
(b) Upon the occurrence of a Trigger Event, as defined in
this Section VII, the following provisions of this
Section VII shall apply.
(c) All benefits under the Plan shall be completely
nonforfeitable.
(d) The amount of benefits to which a participant shall be
entitled under this Plan shall be the aggregate amount
determined under the foregoing Sections of this Plan as of
the date of the occurrence of the Trigger Event upon the
assumption that such
13
<PAGE>
participant's benefits under the Retirement Plan, the
Savings Plan and/or the Supplemental Plan were then fully
vested and nonforfeitable.
(e) All benefits to which a participant is entitled under this
Plan shall be paid to him or his designated
beneficiary(ies), as the case may be, in a single lump-sum
distribution immediately after the occurrence of the Trigger
Event.
VIII. Claims
If any claim for benefits under the Plan is denied for any reason,
written notice of such denial shall be given within 30 days thereafter to the
participant or beneficiary on whose behalf the claim is made. Upon the written
request of such participant or beneficiary delivered to the Committee within 60
days after such notice has been given, the Committee will fully review the
denial of such benefits and will cause due notice of the results of its review
to be given to the affected participant or beneficiary.
IX. Miscellaneous
This Plan may be terminated at any time by the Board of Directors of
the Corporation, in which event the rights of participants to their accrued
supplemental pension benefits and in their book accounts established under this
Plan (to the extent not otherwise vested under the provisions of Article V)
shall
14
<PAGE>
vest. This Plan may also be amended at any time by the Board of Directors
of the Corporation, except that no such amendment shall deprive any participant
of his supplemental pension benefit accrued at the time of such amendment or
reduce the amount then credited to his book account established under this Plan.
Benefits payable under this Plan shall not be funded and shall be paid
out of the general funds of the Employing Corporation.
This Plan shall be construed, administered and enforced according to
the laws of the State of New York.
15
<PAGE>
Exhibit (10)(f)
INCENTIVE COMPENSATION PLAN
OF
CAPITAL CITIES/ABC, INC.
(As amended through December 9, 1993)
I. PURPOSE OF PLAN
---------------
This Incentive Compensation Plan of Capital Cities/ABC, Inc. (the
"Corporation") is designed to provide an incentive for the key employees of the
Corporation and its present and future subsidiaries who are expected to make
substantial contributions to the growth and success of the Affiliated Group (as
hereinafter defined), by providing those employees with additional amounts of
compensation measured by the value of the shares of the Corporation's Common
Stock.
II. DEFINITIONS
-----------
(a) "Affiliated Group" means the Corporation and its subsidiaries. A
"subsidiary" is any corporation, more than 50% of the stock of which is owned by
the Corporation, its subsidiary or subsidiaries, or any combination of them.
(b) "Committee" means the Committee provided for in Section IV to
administer this Plan.
(c) "Common Stock" means the Common Stock, $1 par value, of the
Corporation.
-1-
<PAGE>
(d) "Designated Beneficiary" means the beneficiary(ies) designated by the
Participant for this Plan. If the Participant has not designated any
beneficiary or if no beneficiary designated by the Participant survives the
Participant, the Designated Beneficiary(ies) shall be deemed to be:
(i) the Participant's surviving spouse; or, if none
(ii) the Participant's surviving children, as equal
beneficiaries; or, if none
(iii) the Participant's surviving parents, as equal
beneficiaries; or, if none
(iv) the Participant's surviving brothers and sisters,
as equal beneficiaries; or, if none
(v) the Participant's estate.
The Committee shall be entitled to rely on a written statement by the
deceased Participant's personal representative(s) in determining the identity of
his Designated Beneficiary(ies).
If a Participant's Designated Beneficiary survives the Participant but
dies before receiving all payments to which such Designated Beneficiary is
entitled, the remaining payments shall be made to the Designated Beneficiary's
estate.
(e) "Determination Date" means, with respect to a given Unit Account
(and the related Interest Account), the earlier of
(i) the date of the termination of the Participant's
employment within the Affiliated Group; and
-2-
<PAGE>
(ii) the date the Participant completes five (5)
years of continuous employment with one or more
members of the Affiliated Group from and after the
date of grant of the Units in the Unit Account.
(f) "Disability" means the total inability of a Participant to
perform his assigned duties due to mental or physical disability established to
the satisfaction of his employer on the basis of competent medical evidence,
without regard to the degree of incapacity of such Participant.
(g) (i) "Fair Market Value" of one share of Common Stock means
(A) for the purpose of determining the amount of
benefits to which a Participant is entitled with respect to
the Units in a particular Unit Account, in accordance with
the provisions of Section IX(b)(i), where the Participant
has completed at least five (5) years of continuous
employment with one or more members of the Affiliated Group
from and after the date of grant of such Units, the average
of the closing prices of the Common Stock on the principal
securities exchange on which the Common Stock is traded
(1) on the date as of which Fair Market Value is
to be determined (the "Valuation Date") and
-3-
<PAGE>
(2) on the first trading day of each of the six
(6) calendar months commencing in the half-year
preceding the Valuation Date on which there was at
least one sale of Common Stock.
(B) for all other purposes of the Plan, the average of the
closing prices of the Common Stock on the principal
securities exchange on which the Common Stock is traded on
the Valuation Date and on the five (5) trading days next
preceding and the five (5) trading days next following the
Valuation Date on which there was at least one sale of
Common Stock.
(ii) If there are no sales of Common Stock on a
Valuation Date, the next previous trading day on
which there was at least one such sale shall be
the Valuation Date.
(iii) If the Common Stock is not listed on any
securities exchange on a date described in this
paragraph (g), the mean between the highest
closing bid and the lowest closing asked prices in
the over-the-counter market on such date shall be
substituted for the securities exchange closing
price of the Common Stock for such date.
(h) "Participant" means any individual who is selected by the
Committee to participate in the Plan.
-4-
<PAGE>
(i) "Plan" means this Incentive Compensation Plan of Capital
Cities/ABC, Inc.
(j) "Units" means the units granted to a Participant by the Committee
which are the basis for determining his benefits under the Plan. Each Unit
shall correspond and be equal to one share of Common Stock.
(k) The masculine gender shall include the feminine, and the singular
shall include the plural, unless the context otherwise requires.
III. MAXIMUM NUMBER OF UNITS SUBJECT TO GRANT
----------------------------------------
The number of Units which may be granted under the Plan shall not
exceed 1,100,000. Any expired Units as to which no benefits have been paid
shall again be available to be granted under the Plan.
IV. ADMINISTRATION OF THE PLAN
--------------------------
The Plan shall be administered by the Corporation's Compensation
Committee; provided, however, that the Board of Directors of the Corporation, in
its discretion, may appoint another and different committee to administer the
Plan; and provided, further, that
(i) any committee which administers the Plan
(including the Compensation Committee) shall at all
times comprise at least three individuals and
-5-
<PAGE>
(ii) all members of any such committee shall be
ineligible to participate in the Plan or any other plan
of any member of the Affiliated Group which entitles
participants to acquire stock, stock options or stock
appreciation rights of any member of the Affiliated
Group (and shall have been ineligible for such
participation for at least one year prior to becoming
members of the committee).
Subject to the express provisions of the Plan, the Committee shall
have the authority, in its sole discretion, to construe the Plan; to decide all
questions relating to the eligibility of any individual to participate in the
Plan or his entitlement to benefits under the Plan; to prescribe, amend and
rescind rules and regulations relating to the Plan; and to make, amend or revoke
all determinations and decisions necessary or advisable for administering the
Plan.
The Committee shall also have the authority, in its sole discretion,
to cause any part or all of the benefits due to any Participant under the Plan
to be paid to such Participant or his Designated Beneficiary(ies), as the case
may be, at such time and in such form as the Committee shall consider to be in
the best interests of the Corporation, notwithstanding any provision of the Plan
(other than Section XVI) or any election by the Participant which would require
such benefits to be paid at a different time or in a different form. The
Committee shall not have the authority to cause any benefits payable following
the occurrence of a Trigger Event
-6-
<PAGE>
(as defined in Section XVI) to be paid at any time or in any form other than as
prescribed in Section XVI.
All determinations and decisions of the Committee shall be made by a
majority of the Committee and shall be binding on all persons.
No member of the Committee shall incur any liability for anything done
or omitted to be done by him, excepting only for his own wilful misconduct. The
Corporation shall indemnify the members of the Committee and hold each of them
harmless for and against any liability which may be asserted against them or any
of them on account of their actions or omissions to act as Committee members.
In exercising the powers granted to it under the Plan, the Committee
may, but need not, consult with the Corporation's management. The Committee may
engage and consult with counsel of its choice and shall be fully protected in
relying or acting upon the opinion of such counsel.
V. SELECTION OF PARTICIPANTS
-------------------------
The Committee, in its sole discretion, shall determine the individuals
who are to be Participants in the Plan.
VI. INCENTIVE COMPENSATION LEDGER
-----------------------------
The Committee shall establish an appropriate record to be called the
"Incentive Compensation Ledger". Upon any grant of Units to a Participant by
the Committee, the Committee shall open a Unit Account and an Interest Account
in
-7-
<PAGE>
the Incentive Compensation Ledger for such Participant with respect to such
grant. A separate Unit Account and Interest Account shall be opened for each
grant of Units.
Each set of accounts shall indicate the name of the Participant; the
number of Units granted and their Fair Market Value from time to time and their
dollar floor (if any); the date such Units were granted; the amount accumulated
from time to time in the Interest Account; the number of Units as to which
benefits have been paid; the amount of such benefits; whether such benefits were
paid in cash, in Common Stock, or both; and such other information as the
Committee shall determine. If a Participant has more than one set of accounts
in the Incentive Compensation Ledger, each set shall be treated and considered
separately as if no other set of accounts existed for such Participant.
VII. GRANTS AND CREDITS UNDER THE PLAN
---------------------------------
(a) Upon the selection of any individual to be a Participant, the
Committee, acting in its sole discretion, shall grant to him such number of
Units as it shall determine and shall also determine the amount of the dollar
floor, if any, to be applicable to such Units. Such number of Units and/or
dollar floor amount may, in the sole discretion of the Committee, be the same as
or different than those with respect to the grant of Units to any other
individual. Such Units shall be recorded in the Unit Account opened in
accordance with the provisions of Section VI.
-8-
<PAGE>
(b) As at the December 31 immediately following the grant of Units to a
Participant and their recordation in a Unit Account, the Corporation shall make
a credit to the related Interest Account. Such credit shall be in an amount
equal to six (6%) percent of the excess (if any) of the then Fair Market Value
of the Units over their dollar floor (if any), multiplied by a fraction the
numerator of which is the number of days from the date of grant of the Units to
the December 31 immediately following it, and the denominator of which is 365.
(c) As at December 31 in each subsequent calendar year ending prior to
the Determination Date, the Corporation shall make a credit to the related
Interest Account in an amount equal to six (6%) percent of the excess (if any)
of the then Fair Market Value of the Units in the Unit Account (as to which
benefits have not been paid) over their dollar floor (if any).
(d) The last credit to an Interest Account under this Section shall be
made as at the end of the calendar month coinciding with or immediately
following the Determination Date with respect to the Units in the related Unit
Account. Such credit shall be in an amount equal to six (6%) percent of the
excess (if any) of the Fair Market Value of such Units as at the Determination
Date over their dollar floor (if any) multiplied by a fraction, the numerator of
which is the number of months from the January 1 coinciding with or immediately
preceding the Determination Date with respect to such Units to the date as of
which the credit under this paragraph is made, and the denominator of which is
12. This paragraph shall not
-9-
<PAGE>
apply if the Determination Date with respect to any Units occurs in the calendar
year in which such Units were granted.
(e) The percentage rate to be credited to Interest Accounts under this
Section may be changed at any time and from time to time by the Committee, in
its sole discretion.
(f) At any time after an original grant of Units to a Participant, the
Committee may grant to him such additional number of Units as it, in its sole
discretion, may determine.
VIII. NONFORFEITABILITY OF BENEFITS
-----------------------------
(a) A Participant shall have a nonforfeitable right in a percentage of
the benefits represented by the Units in a Unit Account based upon his number of
full years of continuous employment with one or more members of the Affiliated
Group from and after the date of grant of the Units, as follows:
Number of years of Nonforfeitable
employment percentage
-------------------- -----------------
less than one year zero
1 year 15%
2 years 30%
3 years 50%
4 years 75%
5 years 100%
-10-
<PAGE>
(b) A Participant shall not have a nonforfeitable right to any part of
the amount in an Interest Account until he has completed five (5) full years of
continuous employment with one or more members of the Affiliated Group from and
after the date of grant of the Units in the related Unit Account. Thereafter,
the Participant's right to the entire amount in the Interest Account shall be
entirely nonforfeitable.
(c) In the event that a Participant's employment within the Affiliated
Group is terminated for any reason other than voluntarily on his own part then,
notwithstanding the provisions of paragraphs (a) and (b) of this Section, the
Committee, in its sole discretion, may increase the percentage of the
Participant's nonforfeitable rights in the Units in any of his Unit Accounts
and/or the amount actually credited to any of his Interest Accounts as of the
end of the calendar month coinciding with or immediately following the date of
the Participant's termination of employment.
(d) In the event that a Participant's employment within the Affiliated
Group is terminated on account of his malfeasance then, notwithstanding the
provisions of paragraphs (a) and (b) of this Section, the Committee, in its sole
discretion, may declare forfeit the Participant's rights in the Units in any or
all of his Unit Accounts and/or in any or all of his Interest Accounts.
(e) No Participant shall have any rights to benefits under this Plan
except under the conditions set forth in this Section.
-11-
<PAGE>
IX. PAYMENT OF BENEFITS
-------------------
(a) Except as otherwise provided in Section X, the amounts to which a
Participant is entitled under paragraphs (b) and (c) with respect to a
particular Unit Account (and the related Interest Account) shall be paid to him
or his Designated Beneficiary(ies), as the case may be, in a single lump-sum
distribution within the sixty (60) day period following the end of the calendar
year in which the Determination Date occurs with respect to such accounts (the
"Determination Year"); provided, however, that the Committee may determine, in
its sole discretion, to cause such distribution to be made prior to the end of
the Determination Year.
(b) The amount of benefits to which a Participant shall be entitled with
respect to a particular Unit Account (and the related Interest Account) shall be
the sum of
(i) (A) the number of Units in the Unit Account, multiplied by
(B) the excess (if any) of the Fair Market Value of one
share of Common Stock on the Determination Date over the
dollar floor (if any) applicable to one Unit in the
particular Unit Account, multiplied by
(C) the Participant's nonforfeitable percentage with
respect to the Unit Account, as determined under Section
VIII(a), (c) and (d), plus
-12-
<PAGE>
(ii) (A) the amount credited to the related Interest Account
immediately after the most recent credit was made to it,
pursuant to Section VII (b) through (d), multiplied by (B)
the Participant's nonforfeitable percentage with respect to
the Interest Account, as determined under Section VIII(b),
(c) and (d).
(c) As at the end of each calendar month which begins after the
Determination Date with respect to a particular Unit Account (and the related
Interest Account), the Corporation shall make a credit to the Interest Account
in an amount equal to the product of:
(i) (A) the amount of benefits to which the Participant is
entitled with respect to such accounts, as determined under
Paragraph (b), minus
(B) any amount of benefits previously paid with respect to
such accounts, plus
(C) any amount(s) credited to the Interest Account under
this Paragraph (c) through the previous December 31, and
(ii) one-twelfth (1/12) of seventy-five (75%) percent of the
prime rate of interest at Citibank in New York City as of
the first business day of such month.
The last credit to an Interest Account under this paragraph shall be
made as at the end of the calendar month coinciding with or immediately
preceding
-13-
<PAGE>
the first date when the Participant has no further rights in any Units
in the Unit Account (whether because benefits have been paid with respect to
such Units or otherwise).
(d) In the discretion of the Committee, the benefits to which a
Participant is entitled with respect to a particular Unit Account (and the
related Interest Account) shall be paid either (i) entirely in cash (ii)
entirely in Common Stock or (iii) partly in cash and partly in Common Stock, the
proportions to be determined by the Committee in its discretion. If any part of
a Participant's benefits are to be paid in Common Stock, the number of shares to
be distributed in any calendar year shall be determined based on the Fair Market
Value of the Common Stock as at December 31 of the previous year. The amount of
cash to be distributed in any calendar year in payment of a Participant's
benefits shall equal the excess of
(i) the total amount of benefits to be distributed to the
Participant in such year over
(ii) the product of
(A) the number of shares of Common Stock to be
distributed to him in such calendar year, and
(B) the closing price of the Common Stock on the principal
securities exchange on which the Common Stock is traded on
the business day next preceding the date of distribution.
-14-
<PAGE>
(e) Notwithstanding the provisions of paragraph (d), no fractional shares
of Common Stock shall be delivered in payment of any benefit under the Plan.
The dollar value of any such fractional shares shall be paid in cash.
(f) Notwithstanding the provisions of paragraph (d), a Participant's
benefits which are payable on account of his death or the termination of his
employment because of Disability shall be paid entirely in cash.
X. OPTIONAL FORMS OF PAYMENT OF BENEFITS
-------------------------------------
(a) At any time up to the fifteenth (15th) day prior to the Determination
Date with respect to a particular Unit Account (and the related Interest
Account), a Participant may elect that the benefits to which he is entitled with
respect to the accounts:
(i) shall be paid in five (5) annual installments
commencing within sixty (60) days after the end of the
Determination Year,
(ii) shall be paid in a single lump-sum distribution
within the sixty (60) day period following the end of the
calendar year in which his termination of employment within
the Affiliated Group occurs (the "Employment Termination
Year"); provided, however, that the Committee may determine,
in its sole discretion, to cause such distribution
-15-
<PAGE>
to be made in December of the Employment Termination Year,
(iii) shall be paid in five (5) annual installments
commencing within sixty (60) days after the end of the
Employment Termination Year,
(iv) shall be paid (or commence to be paid) at such
other time and/or in such other form as the Committee, in
its sole discretion, may approve.
(b) The elections provided by this Section shall be subject to the
following rules:
(i) All elections shall be made (or revoked) in writing;
(ii) A Participant shall have the right to make any of
the elections provided by this Section separately for each
set of Unit and Interest Accounts in his name in the
Incentive Compensation Ledger;
(iii) Any election made under paragraph (a) may be
revoked and/or made again within the time provided by
paragraph (a);
(iv) Where a Participant has elected to receive his
benefits in installments, the amount of any installment
shall be the remaining balance due the Participant with
respect to the particular Unit Account (and the related
Interest Account)
-16-
<PAGE>
multiplied by a fraction the numerator of which is one (1)
and the denominator of which is the number of installments
remaining to be paid (inclusive of the installment then to
be paid);
(v) Any election made under paragraph (a) shall not be given
effect if, in the judgment of the Committee, the Participant
would be taxable on any part of his benefits in a year
earlier than the one in which he would receive such benefits
pursuant to his election;
(vi) No election with respect to a particular Unit Account (and
the related Interest Account) shall be given effect unless
the Participant completes five (5) years of continuous
employment with one or more members of the Affiliated Group
from and after the date of grant of the Units in the Unit
Account.
XI. NONALIENATION OF BENEFITS
-------------------------
No right or benefit under this Plan shall be subject to anticipation,
alienation, sale, assignment, pledge, encumbrance, charge, levy, attachment or
execution of judgments of any kind. No right or benefit under this Plan shall
in any manner be liable for or subject to the debts, contract liabilities or
torts of the person entitled to such rights or benefits.
-17-
<PAGE>
XII. INVESTMENT UNDERTAKING
----------------------
In connection with the grant of a Unit or the issuance of Common Stock
with respect to it, each Participant may be required to represent and agree, as
a condition precedent to such grant or issuance, that
(a) in the event any payment under the Plan is made in the form of shares
of Common Stock, such shares will be acquired for investment and not with a view
to their distribution, unless such shares shall be registered under an effective
registration statement under the Securities Act of 1933, as amended; and
(b) at the time of issuance of such shares he will, if so requested,
reconfirm in writing to the Corporation such investment undertaking.
The Corporation, if it deems it advisable, may place on the
certificates representing such shares an appropriate legend with respect to the
registration of the shares.
XIII. AMENDMENT AND TERMINATION OF PLAN
---------------------------------
The Board of Directors of the Corporation, in its discretion and at
any time, may terminate the Plan or adopt such amendments or modifications of
the Plan as it may deem advisable. No such amendment or modification shall
deprive any Participant of any right to which he has previously become entitled
under the Plan.
-18-
<PAGE>
XIV. APPROVAL OF SHAREHOLDERS
------------------------
No shares of Common Stock shall be issued under the Plan until and
unless the Plan has been approved by the shareholders of the Corporation. In
the event that, subsequent to the approval of the Plan by the shareholders, the
Plan shall be amended or modified by the Board of Directors of the Corporation
to increase the number of Units that may be granted under the Plan, no shares of
Common Stock shall be issued under the Plan with respect to such additional
Units until and unless the amendment or modification of the Plan with respect to
such additional Units has been approved by the shareholders of the Corporation.
XV. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
------------------------------------------
If the outstanding shares of Common Stock are increased, decreased,
changed into, or exchanged for a different number or kind of shares or other
securities of the Corporation or any other corporation through reorganization,
merger, consolidation, recapitalization, reclassification, combination, exchange
of shares, stock split-up, payment of a stock dividend or other capital
adjustment, an appropriate and proportionate adjustment shall be made in each
account in the Incentive Compensation Ledger with respect to the number of Units
granted to a Participant. Unless the context indicates to the contrary, all
references to the number of Units in this Plan shall mean such number as may be
adjusted pursuant to the provisions of this Section XV.
-19-
<PAGE>
Adjustments under this Section shall be made by the Committee, whose
determination as to what adjustments shall be made, and the extent thereof,
shall be final, binding and conclusive.
XVI. TRIGGER EVENTS
--------------
(a) For the purpose of this Plan, a "Trigger Event" shall mean
(i) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange
Act")) (a "Person"), other than Berkshire Hathaway, Inc., a
Delaware corporation ("Berkshire"), or any Affiliate or
Associate (as hereinafter defined) of Berkshire (Berkshire
and such Affiliate and Associate being hereinafter referred
to collectively as the "Berkshire Group"), in one or more
transactions, of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of an
aggregate of 20% or more of either (x) the then outstanding
shares of common stock of the Corporation (the "Outstanding
Company Common Stock") or (y) the combined voting power of
the then outstanding voting securities of the Corporation
entitled to vote generally in the election of directors (the
"Outstanding Company
-20-
<PAGE>
Voting Securities"); provided, however, that the following
acquisitions shall not constitute a Trigger Event: (A) any
acquisition directly from the Corporation (excluding an
acquisition by virtue of the exercise of a conversion
privilege), provided that the Person acquiring such
Outstanding Company Common Stock or Outstanding Company
Voting Securities beneficially owns less than 5% of the
Outstanding Company Common Stock and the Outstanding Company
Voting Securities immediately prior to such acquisition, (B)
any acquisition by the Corporation, (C) any acquisition by
any employee benefit plan (or related trust) sponsored or
maintained by the Corporation or any Affiliate of the
Corporation or (D) any acquisition by any corporation
pursuant to a transaction described in clauses (A), (B) and
(C) of paragraph (iv) below; or
(ii) The acquisition by any one or more of the Berkshire Group,
in one or more transactions, of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange
Act) of more than 30% (the "Prohibited Percentage") of
either the Outstanding Company Common Stock or the
Outstanding Company
-21-
<PAGE>
Voting Securities, provided, however, that any such
acquisition shall not constitute a Trigger Event if the
Berkshire Group shall have attained the Prohibited
Percentage (A) as the result of an acquisition of
Outstanding Company Common Stock or Outstanding Company
Voting Securities by the Corporation which, by reducing the
number of shares outstanding, increases the proportionate
number of shares owned by the Berkshire Group to the
Prohibited Percentage or (B) with the consent of the
Corporation's Board of Directors in accordance with an
Agreement dated January 2, 1986 between the Corporation and
Berkshire, provided however, that if the Berkshire Group
shall become the beneficial owner of more than 30% of such
securities pursuant to clauses (A) or (B) of this paragraph
(ii), and shall thereafter acquire any additional
Outstanding Company Common Stock or Outstanding Company
Voting Securities other than pursuant to clause (B) of this
paragraph (ii), then such acquisition shall constitute a
Trigger Event; or
(iii) Individuals who constitute the Incumbent Board (as
hereinafter defined) cease for any reason to constitute at
least a majority of the Board of Directors of the
-22-
<PAGE>
Corporation (the "Board"). "Incumbent Board" shall mean
individuals who as of December 14, 1989, constitute the
Board and any individual who becomes a director subsequent
to December 14, 1989, whose election, or nomination for
election by the Corporation's shareholders, is approved by a
vote of at least a majority of the directors then comprising
the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of either an
actual or threatened election contest (as such terms are
used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than
the Board; or
(iv) Approval by the shareholders of the Corporation of a
reorganization, merger or consolidation, in each case
unless, following such reorganization, merger or
consolidation, (A) all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock
-23-
<PAGE>
and Outstanding Company Voting Securities immediately prior
to such reorganization, merger or consolidation beneficially
own, directly or indirectly, more than 60% of, respectively,
the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as
the case may be, of the corporation resulting from such
reorganization, merger or consolidation in substantially the
same proportions as their ownership, immediately prior to
such reorganization, merger or consolidation of the
Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (B) no Person
(excluding the Corporation, any employee benefit plan (or
related trust) of the Corporation and the Berkshire Group)
beneficially owns, directly or indirectly, 20% or more, and
the Berkshire Group does not beneficially own, directly or
indirectly, more than 30%, of, respectively, the then
outstanding shares of common stock of the corporation
resulting from such reorganization, merger or consolidation
or the combined voting power of the then outstanding voting
securities of
-24-
<PAGE>
such corporation and (C) at least a majority of the members
of the Board of Directors of the corporation resulting from
such reorganization, merger or consolidation were members of
the Incumbent Board at the time of the execution of the
initial agreement providing for such reorganization, merger
or consolidation; or
(v) Approval by the shareholders of the Corporation of (x) a
complete liquidation or dissolution of the Corporation or
(y) the sale or other disposition of all or substantially
all of the assets of the Corporation, other than to a
corporation with respect to which, following such sale or
other disposition, (A) more than 60% of, respectively, the
then outstanding shares of common stock of such corporation
and the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in
the election of directors is then beneficially owned,
directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to
such sale or other
-25-
<PAGE>
disposition in substantially the same proportion as their
ownership, immediately prior to such sale or other
disposition, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be,
(B) no Person (excluding the Corporation, any employee
benefit plan (or related trust) of the Corporation and the
Berkshire Group) beneficially owns, directly or indirectly,
20% or more, and the Berkshire Group does not beneficially
own, directly or indirectly, more than 30% of, respectively,
the then outstanding shares of common stock of the
corporation resulting from such reorganization, merger or
consolidation or the combined voting power of the then
outstanding voting securities of such corporation and (C) at
least a majority of the members of the board of directors of
such corporation were members of the Incumbent Board at the
time of the execution of the initial agreement or action of
the Board providing for such sale or other disposition of
assets of the Corporation.
For the purpose of this Section, the terms "Affiliate" and "Associate"
shall have the respective meanings ascribed to such terms in Rule 12b-2 of the
-26-
<PAGE>
General Rules and Regulations under the Exchange Act, as in effect on December
14, 1989.
(b) For the purpose of this Plan, the "Trigger Event Fair Market
Value" shall be the higher of (x) the highest reported sales price, regular way,
of a share of Common Stock on the principal securities exchange on which the
Common Stock is listed during the sixty (60) day period prior to the date of the
occurrence of a Trigger Event and (y) if a Trigger Event occurs as the result of
a transaction or series of transactions described in paragraphs (i), (ii), (iv)
or (v) of the definition of "Trigger Event" set forth in this Section XVI, the
highest price per share of Common Stock paid in such transaction or series of
transactions (in the case of a Trigger Event described in paragraphs (i) or (ii)
of such definition), as reflected in a Schedule 13D filed by the person having
made the acquisition.
(c) Upon the occurrence of a Trigger Event, as defined in this
Section XVI, the following provisions of this Section XVI shall apply and
Sections VIII through X of this Plan shall not apply.
(d) All benefits represented by the Units in all Unit Accounts and
the amounts credited to all Interest Accounts shall be completely
nonforfeitable.
(e) The amount of benefits to which a Participant shall be entitled
with respect to the Units in a particular Unit Account (and the related Interest
Account) as to which the Determination Date occurred prior to the occurrence of
the Trigger Event shall be the sum of
-27-
<PAGE>
(i) (A) the number of Units in the Unit Account, multiplied by
(B) the excess (if any) of the Fair Market Value of one
share of Common Stock on the Determination Date over the
dollar floor (if any) applicable to one Unit in the
particular Unit Account, plus
(ii) the amount credited to the related Interest Account as of
the date of the occurrence of the Trigger Event.
(f) The amount of benefits to which a Participant shall be entitled
with respect to the Units in a particular Unit Account (and the related Interest
Account) as to which the Determination Date has not occurred prior to the
occurrence of the Trigger Event shall be the sum of
(i) (A) the number of Units in the Unit Account, multiplied by
(B) the excess (if any) of the Trigger Event Fair Market
Value over the dollar floor (if any) applicable to one Unit
in the particular Unit Account, plus
(ii) the amount credited to the related Interest Account as of
the date of the occurrence of the Trigger Event.
(g) All benefits to which a Participant is entitled with respect to
the Units in a particular Unit Account (and the related Interest Account) shall
be paid to
-28-
<PAGE>
him or his Designated Beneficiary(ies), as the case may be, in a single lump-sum
distribution immediately after the occurrence of the Trigger Event.
(h) All benefits shall be paid in cash.
XVII. MISCELLANEOUS
-------------
(a) The adoption and maintenance of the Plan shall not be deemed to
constitute a contract between a Participant and any member of the Affiliated
Group. Nothing herein contained shall be deemed to give to any Participant the
right to be retained in the employ of any member of the Affiliated Group or to
interfere with its right to discharge any Participant at any time.
(b) No Participant shall have any of the rights or privileges of a
shareholder of the Corporation with respect to any shares of Common Stock except
with respect to shares of such Common Stock actually issued to him under this
Plan.
(c) No trust shall be deemed created in favor of any Participant by the
establishment of a Unit Account or an Interest Account and the Corporation shall
have no obligation whatsoever to fund any of such Accounts. Participants'
rights under this Agreement shall be solely those of unsecured contractual
creditors.
(d) All questions pertaining to the Plan shall be determined under the
laws of the State of New York.
-29-
<PAGE>
EXHIBIT 13
Capital Cities/ABC, Inc.
- --------------------------------------------------------------------------------
1993
Annual Report & Form 10-K
<PAGE>
- --------------------------------------------------------------------------------
Decentralization is the cornerstone of our management philosophy. Our goal is to
hire the best people we can find and give them the responsibility and authority
they need to perform their jobs. Decisions are made at the local level,
consistent with the basic responsibilities of corporate management. Budgets,
which are set yearly and reviewed quarterly, originate with the operating units
that are responsible for them. We expect a great deal from our managers. We
expect them to be forever cost-conscious and to recognize and exploit sales
potential. But above all, we expect them to manage their operations as good
citizens and use their facilities to further the community welfare.
<PAGE>
- --------------------------------------------------------------------------------
Operating Highlights
<TABLE>
<CAPTION>
1993 1992
-------------- --------------
<S> <C> <C>
Net revenues $5,673,653,000 $5,344,127,000
-------------- --------------
Operating income $ 862,149,000 $ 721,805,000
Income before extraordinary charge
and cumulative effect of accounting
changes $ 467,379,000 $ 389,328,000
-------------- --------------
Income per share before extraordinary
charge and cumulative effect of
accounting changes $28.53 $23.45
-------------- --------------
Average shares outstanding 16,380,000 16,600,000
-------------- --------------
</TABLE>
[GRAPHIC APPEARS HERE]
[GRAPHIC APPEARS HERE]
<PAGE>
Capital Cities/ABC
- --------------------------------------------------------------------------------
A Message From The Chairman
[ART]
On February 4, 1994, Dan Burke, our President and Chief Executive Officer,
retired after almost 33 years with the Company.
The Company's progress since he joined Capital Cities in 1961 has been
remarkable by almost any measure. Its revenues have grown from $10 million
annually to $5.7 billion in 1993. Earnings per share have increased from $0.12
in 1961 to $28.53 in 1993 and the Company's stock price, $3 during the month he
started, closed at $670 on the day he left.
Dan Burke's leadership and judgment have been integral to these achievements.
He combines intelligence and a keen business sense with an unusual ability with
people. He is a gifted teacher. He is creative and a man of great personal
character and community dedication. He is also unpretentious and irreverent
and, he makes everything around him much more fun. All of this has left an
indelible mark on the Company.
While Dan was resolute in his wish to retire on his 65th birthday, we are
pleased he will continue to serve on our Board of Directors. The report that
follows is essentially Dan's, an appraisal of the final year of his three and
one-half year tenure as Chief Executive Officer. He leaves the Company in
exceptionally strong condition, and we are grateful for his contributions and
his continuing involvement.
THOMAS S. MURPHY
Chairman
2
<PAGE>
- --------------------------------------------------------------------------------
To Our Shareholders
In 1993, the Company reported record revenues and earnings per share as the
economy improved and its businesses rebounded. Earnings per share, on a
comparable basis, were $28.53, a 22 percent increase from 1992. During the
year, we accelerated our investments in television program production,
international media joint ventures, strategic acquisitions and start-up
operations. The year was also marked by significant relaxation of government
regulations resulting in greater opportunity and flexibility for the Company to
own and invest in programming. These investment activities and regulatory
developments, in conjunction with our substantial free cash flow and strong
balance sheet, position the Company to move forward as the economy improves.
Net revenues increased 6 percent over 1992. In 1993, our managers continued to
limit cost growth as they had during the recent years of soft advertising
demand. Operating expenses grew 4 percent, despite significantly higher
development costs and severance expense. Operating income rose 19 percent to
approximately $862,000,000. Of the $330,000,000 sales gain in 1993,
$140,000,000, or 42 percent, was converted to operating income.
A summary of the Company's results for 1993 compared with 1992 follows:
<TABLE>
<CAPTION>
Percent
(Dollars in millions) 1993 1992 change
---- ---- -------
<S> <C> <C> <C>
Net Revenues $5,673.7 $5,344.1 6%
-------- --------
Operating costs 4,655.2 4,464.6 4%
Depreciation 95.0 95.7 --
Amortization 61.3 62.0 --
-------- --------
Total Costs 4,811.5 4,622.3 4%
-------- --------
Operating income 862.2 721.8 19%
Interest/other, net (33.8) (35.9) (6)%
-------- --------
Income before taxes 828.4 685.9 21%
Income taxes (361.0) (296.6) 22%
-------- --------
Net Income* $ 467.4 $ 389.3 20%
======== ========
Income per share* $ 28.53 $ 23.45 22%
Average shares (000) 16,380 16,600 (1)%
</TABLE>
- ----------
*Before 1993 extraordinary charge and 1992 cumulative effect of accounting
changes.
Several factors which affected the 1993 to 1992 comparison are worth noting:
. On December 1, 1993, the Company completed a Dutch Auction tender offer for
1,100,000 common shares at $630 per share for a total cash outlay of
approximately $700,000,000. Earnings per share in 1993 benefited slightly
from the reduction in shares outstanding from 16,444,000 to 15,383,000; the
full year benefit would have been approximately $1.00 per share. Berkshire
Hathaway, our largest shareholder, tendered 1,000,000 shares and now owns
2,000,000 shares, or 13 percent of the Company.
. The Company's earnings per share were adversely affected by the increase
in corporate income tax rates required by the Omnibus Budget Reconciliation
Act of 1993. Without this tax rate increase, earnings per share would have
been $0.73 higher in 1993, or $29.26 per share.
. Net interest expense declined by approximately $29,000,000, primarily because
the Company redeemed an additional $500,000,000 of debt in early 1993. The
Company recorded an after-tax, extraordinary charge of $12,122,000, or $0.74
per share, as a result of the prepayment. Outstanding debt is now
$622,000,000, or 14 percent of total capital, down from $2,100,000,000, or 51
percent, at the time of the acquisition of ABC in 1986.
. The Company's earnings for 1992 included a significant net gain ($0.68 per
share) on the sale of its interest in a German television network. This was
partially offset by losses on the disposal of real estate.
. The Company's 1993 operating results included the funding of $80,000,000 of
pre-tax losses for domestic start-ups and international media joint ventures,
3
<PAGE>
Capital Cities/ABC
- --------------------------------------------------------------------------------
compared with $57,000,000 of such losses in 1992. The after-tax loss from our
share of these activities in 1993 and 1992 was approximately $3.00 and $2.00
per share, respectively.
In recognition of the future direction of Capital Cities/ABC, the Company
reorganized in 1993 into five operating groups, including two new ones. The
Cable and International Broadcast Group, formerly called Video Enterprises, was
created to recognize the dramatic growth of our cable programming ventures and
the potential of our international broadcasting and production investments. The
Multimedia Group was established to exploit opportunities in emerging
technologies, particularly those created by the development of digital
television and related businesses. These two groups join the existing ABC
Television Network Group, Broadcast Group and Publishing Group.
Pursuing new business opportunities is a vital part of the Company's strategy.
1993 through early 1994 was an active period for all operating divisions:
. ESPN2 premiered on October 1, with much assistance from the Company's
television stations. The Cable Television Consumer Protection and Competition
Act of 1992 ("Cable Act") offered television stations the opportunity to
negotiate compensation from cable system operators in exchange for permitting
them to carry their signals. As an alternative to cash payments, and in
return for guaranteed station channel position, the Company's television
stations offered to accept cable carriage of ESPN2 in exchange for the
carriage rights. Commitments were received from 19 of the top 20 cable system
owners for an accelerated rollout of ESPN2 over the next six years. By the
end of 1993, ESPN2 was carried in 13,000,000 homes. This represents one of
the most successful launches ever for a new cable network.
. Early in 1994, the ABC Television Network entered into an agreement in
principle with Brillstein-Grey Entertainment for a joint venture that would
develop programming for network television, as well as videocassettes, radio,
pay-per-view and interactive television.
. The network's ABC Productions unit doubled its prime-time programming
development during the year, producing 89 hours, primarily for the ABC
Television Network.
. Under the FCC's recently revised rules relaxing radio station ownership, the
Company purchased a second FM station in Atlanta, signed a purchase agreement
for a second FM station in Minneapolis and reached an agreement in principle
for another AM station in Los Angeles.
. The Cable and International Broadcast Group acquired a 20 percent interest in
a new German television network, RTL 2, which debuted in March 1993. Also, in
early 1993, the group merged its sports programming service, The European
Sports Network, into Eurosport, its primary competitor. It now owns 33
percent of Eurosport. The combined sports network reaches almost 50,000,000
households throughout Europe.
. During late 1993 and early 1994, the Company purchased a 24 percent interest
in Scandinavian Broadcasting System SA, a well-positioned broadcaster with
television networks in Norway, Sweden and Denmark.
. The Publishing Group acquired Grupo Editorial Expansion, S.A., Mexico's
leading business publisher, whose operations include magazines, newsletters
and regulatory bulletins.
There were several favorable regulatory developments in 1993. During the year,
4
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the FCC relaxed the financial interest and syndication rules that had been in
place since 1970. Also, a U.S. District Court lifted certain of the consent
decree restrictions which paralleled these rules. Both developments afford the
Company greater flexibility in developing, owning and investing in entertainment
programming. That opportunity was identified years ago as a top priority. These
changes were long overdue, and now that they are in place the Company plans to
take full advantage of them.
ABC Television Network earnings rose dramatically in 1993 due in part to a
steady improvement in advertiser demand during the year. Reports that industry
revenue grew in 1993 by only 1 percent, in fact, understated the improvement.
Excluding more than $800,000,000 in 1992 Winter and Summer Olympic advertising
on other networks, the television network marketplace grew by 8 percent in 1993.
ABC's competitive ratings throughout the broadcast day are as strong as they
have been for several seasons, and this performance has allowed the network to
capitalize on the improved advertising marketplace. In prime time, ABC finished
the 1992-93 season as the most popular network among adults 18-49. In the fourth
quarter of 1993, ABC won 7 of 14 weeks in household ratings and ranked first
among the 18-34, 18-49 and 25-54 adult demographic groups, the network's best
competitive performance since the 1979-80 season. ABC consistently won four
nights of the week and placed six programs among the ten most popular adult 18-
49 programs.
Most other dayparts were as competitive and added to the improved near-term
sales outlook. Good Morning America was the top-rated early morning program for
the fourth consecutive year. ABC Daytime, rated first among women 18-49 and 25-
54, had three of its serial dramas ranked among the top four shows in the
daypart for those demographic groups. ABC Sports' NFL Monday Night Football was
the eighth most popular prime-time program in the fall, and first among men 18-
49. College football was also among the most highly rated programming for young
male viewers. ABC Sports operated at a profit in 1993 for the first time in
several years.
ABC News had another outstanding year in 1993. During the average week, ABC News
programming reaches 68 percent of all U.S. television households, or
approximately 115,000,000 people, more than any other news source. World News
Tonight with Peter Jennings was the number one-rated evening news broadcast for
the fifth consecutive year. PrimeTime Live and 20/20 achieved higher ratings and
consistently won their respective time periods. Nightline distinguished itself
in the intensely competitive late night time period, finishing first in
household ratings 11:30 pm to midnight on an annual basis for the first time
since its March 1978 premier. Early in 1994, ABC News will add a fourth news
magazine program, Turning Point, to prime time.
The Broadcast Group had a good year in 1993 with revenue and profit gains better
than anticipated. The owned television stations generally maintained their
excellent ratings position, especially in early and late evening news. The
stronger than expected revenue growth was especially gratifying because 1992
results included significant political advertising from national and local
elections. Radio industry revenue growth rebounded after a weak 1992, and both
the radio stations and radio networks benefited. The ABC Radio Networks achieved
record profits in 1993, and the stations achieved significantly higher profits.
The Cable and International Broadcast Group is one of the Company's fastest
growing operations, and all elements performed well in 1993, especially the
basic cable networks. ESPN had an
5
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Capital Cities/ABC
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exceptional 1993, with significant earnings growth, even after a sizable loss in
the last year of a four-year Major League Baseball contract and substantial
start-up losses for ESPN2. ESPN also continued to grow internationally during
the year, expanding its coverage in Asia, Latin America, and in early 1994, the
Middle East and Africa. ESPN is now seen in approximately 90 countries, making
it the most widely distributed program service in the world. Arts &
Entertainment Network (A&E) and Lifetime reported record revenues and profits.
A&E is scheduled to launch the History Channel in the fall of 1994. The group's
international joint ventures performed better in 1993 and are positioned for
further growth as the European economy improves.
The newly established Multimedia Group is currently evaluating opportunities in
the emerging technologies. The group has entered into a number of joint ventures
designed to evaluate consumer demand for certain interactive services and other
video-on-demand programming. It expects to expand those activities and has begun
to explore opportunities emerging in disc, on-line, cartridge and out-of-the-
home markets, as well.
For the Publishing Group, business conditions showed modest improvement in 1993.
Newspaper and shopping guide operations posted their seventh consecutive year of
increased profits on a small revenue increase. Although improved results were
achieved by the majority of its publications, weak business conditions in the
fashion and medical publications resulted in an overall Specialized Publications
Group profit decline. Developmental expenses increased significantly, largely
because of the launch of a yellow pages directory in Wichita, the start-up of
Selling magazine and a conversion to CD-ROM technology for Chilton's
professional automobile books.
The Company continued its long-standing commitment to both Project Learning U.S.
(PLUS) and the Partnership For a Drug Free America. PLUS's campaign, Never Stop
Learning, has strong national awareness and drew attention this past year to
innovative learning and educational techniques under the theme, Common Miracles.
The Partnership For a Drug Free America is responding to an alarming resurgence
of drug use among children and young adults for the first time in a decade by
strengthening its prevention message. Capital Cities/ABC is the Partnership's
strongest corporate supporter, contributing over $30,000,000 of media time and
space in 1993 and $225,000,000 over the last seven years.
There were several important senior management changes in 1993. Robert A. Iger,
President, ABC Television Network Group, was promoted to Executive Vice
President of Capital Cities/ABC, Inc. Herbert A. Granath was promoted to
President, Cable and International Broadcast Group and to Senior Vice President
of the Corporation. Stephen A. Weiswasser was promoted to President, Multimedia
Group and reassumed General Counsel responsibilities. David Westin was promoted
to President of Production, ABC Television Network Group.
We are pleased to report that Nicholas F. Brady, former Secretary of the United
States Department of the Treasury, was elected to our Board of Directors in
1993.
Capital Cities/ABC's near-term strategy will vary little. A talented group of
managers is in place and will provide the Company's next generation of
leadership. Our stable free cash flow and strong balance sheet give us
confidence that the Company is stronger and healthier than it has ever been. The
core broadcasting, cable and publishing businesses, combined with the
initiatives outlined above, have us well-positioned for future growth. We are
confident that the Company has the resources and determination to compete
profitably in a changing media industry.
6
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We would like to thank our directors and employees, as well as our shareholders,
for their contributions and support during the years. We look forward to the
opportunities the future will bring.
THOMAS S. MURPHY
Chairman of the Board and
Chief Executive Officer
DANIEL B. BURKE
Retired President and
Chief Executive Officer
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Capital Cities/ABC
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Broadcasting
The Company's broadcasting operations, which consist of the ABC Television
Network Group, the Broadcast Group, the Cable and International Broadcast Group
and the Multimedia Group, had 1993 net revenues of $4,663,200,000, an increase
of 9 percent, or $397,600,000 from 1992. Operating earnings of $778,100,000 in
1993 increased $158,800,000, or 26 percent, from the prior year. Broadcasting's
1993 and 1992 results are summarized as follows:
<TABLE>
<CAPTION>
(Dollars in millions) 1993 1992
-------- --------
<S> <C> <C>
Net revenues $4,663.2 $4,265.6
-------- --------
Operating costs 3,763.0 3,523.2
Depreciation 75.4 76.4
Amortization 46.7 46.7
-------- --------
Total costs 3,885.1 3,646.3
-------- --------
Operating income $ 778.1 $ 619.3
======== ========
</TABLE>
ABC Television Network Group
In virtually all phases of its operation, the television network experienced a
strong year in 1993. Its sharp rise in revenues and profits was due to an
improvement in national advertising, competitive ratings strength across all
program dayparts and effective cost control. Revenues increased approximately 9
percent to $2,730,000,000, and operating income doubled to over $180,000,000.
[GRAPHIC APPEARS HERE]
Network television industry revenue growth of 1 percent in 1993 was better than
anticipated because 1992 revenues included over $800,000,000 in Olympic
advertising, and post-Olympic years have historically resulted in a revenue
decline for the industry. The ABC Television Network's 1993 business outlook
had anticipated another year of soft national advertising as well. As the year
progressed, however, the economy stabilized and scatter pricing strengthened.
In the second half of 1993, ABC Television Network revenues rose in excess of 10
percent, which is better growth than has been experienced in over three years.
ABC was able to profit from this cyclical improvement on every level. Audience
gains in prime time, combined with consistently top-rated audience delivery
throughout most of the remaining broadcast day, attracted an increased share of
network television advertising expenditures. Over 180,000,000 people watched
ABC on a regular weekly basis during 1993, more than any other network. Even
more important to national advertisers, the ABC Television Network was rated
first among adults 18-49 in virtually every daypart.
Profits would not have grown in 1993 without management focus on cost control.
The network avoided overpaying for expensive
[GRAPHIC APPEARS HERE]
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sports rights, carefully monitored program inventory, and in the process
streamlined its operations. While operating costs increased 5 percent in 1993,
they were largely the result of a higher level of internally-produced
programming which should yield important revenue benefits in the future, and
increased provisions for reductions in staffing.
The ABC Television Network believes that ownership and control of software is
critical to its future success, and in 1993, steps were taken to increase the
amount of ABC-owned product in all dayparts. Here are some examples of this
effort:
. The network produced or shared a financial interest in 194 hours of prime-
time entertainment programming in 1993, up from 154 hours in 1992. ABC
Productions produced approximately half of those hours in both years.
. ABC News added a third weekly magazine program, Day One, to the prime-time
schedule in 1993, and a fourth, Turning Point, will be added early in 1994.
During 1993, the News division provided 142 hours of news magazine programming
as well as 30 hours of special broadcasts and expanded its international
newsgathering capabilities.
. ABC Daytime, which owns its four serial dramas, produced several
videocassettes of highlights from past productions. More than 400,000 copies
were distributed through Capital Cities/ABC Video Publishing, a new unit of
the Company.
. The network entered into an agreement in principle with Brillstein-Grey
Entertainment early in 1994 for a joint venture to develop programming for
network television and other distribution outlets.
. ABC Entertainment's first series co-production with Matt Williams, creator of
Roseanne and Home Improvement, is scheduled for broadcast in the first quarter
of 1994.
ABC was the only network to improve its prime-time ratings during the 1992-93
season, and it made further gains in the fourth quarter of 1993. During both
periods, ABC was the most popular network among adults 18-34, 18-49 and 25-54.
ABC's NFL Monday Night Football was the leading program for male viewers 18-49
in the fourth quarter, averaging a 14.5 rating and 38 share for that group.
Appearing on Tuesday, Roseanne and Coach are the second and fifth ranked
programs in prime-time household delivery. NYPD Blue, the season's highest-
rated new drama, premiered on Tuesday night in the fall and contributed to the
network's first-place finish for the night. ABC consistently won Wednesday
night as well, primarily because of Home Improvement, the season's number one-
rated show, and Grace Under Fire, the highest-rated new situation comedy of the
season, which ranked sixth in household ratings. ABC's Thursday night ratings
improved 9 percent over last season. That growth was led by PrimeTime Live,
which ranked 14th among all prime-time programs, with ratings up 9 percent over
last season. Friday has been ABC's most successful night for several seasons,
and the network continued to win every half hour in households and adults 18-49
ratings. The 8-10 pm comedy block improved its household ratings by 12 percent.
Saturday continued to be difficult for ABC to schedule between 8:00 pm and 10:00
pm, although The Commish delivered 4 percent more adults 18-49 in the 10-11 pm
period than it did last season.
ABC Daytime maintained its leadership in the key demographic categories of women
18-49 and 25-54, viewers with strong advertiser appeal. During 1993, ABC
Daytime posted a 14 percent gain in its delivery of households. Its delivery of
women 18-49 increased 11 percent; delivery of women 25-54 was up 13 percent.
ABC also had three of the four top-rated programs among women 18-49. All My
Children ranked number one, General Hospital number three and One Life To Live
number four. Good Morning
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Capital Cities/ABC
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America won the early morning time period for the fourth consecutive year. The
show's lively, well-paced news and information features were top-rated among
women 18-49 and 25-54.
ABC News contributed substantially to the network's improved results in 1993 and
is an important part of future growth. World News Tonight with Peter Jennings
was the nation's most-watched evening news program for the fifth consecutive
year. Nightline, hosted by Ted Koppel, had its best household ratings since
1988, finishing first in household ratings on an annual basis. The importance
of these two news broadcasts to the network cannot be overestimated, especially
during late-breaking domestic and international news stories, because more
Americans turn to ABC than to any other network during these times. PrimeTime
Live and 20/20 are the two highest-rated hour-length programs on ABC's prime-
time schedule. Day One's ratings improved slightly as the 1993-94 season
progressed. The Barbara Walters Specials and This Week with David Brinkley also
contributed to ABC News' comprehensive, award-winning coverage of the major
events, issues and personalities of 1993. Through the division's ownership of
Worldwide Television News and its recent arrangement with the BBC, ABC News'
international newsgathering potential has grown dramatically.
ABC Sports' future is brighter now than it has been for some time. The division
was profitable in 1993 for the first time since 1987, as sports advertising
improved steadily during the year, especially in the fourth quarter.
Professional and college football coverage and the U.S. Open and British Open
golf tournaments highlighted ABC's year. In 1994, ABC Sports will broadcast
Major League Baseball, including the World Series. The division's revenue
sharing agreement with Major League Baseball avoids upfront rights fees and is,
we believe, an innovative and prudent approach to acquiring sports rights for
network television. ABC will also broadcast World Cup Soccer, held in America
for the first time, in the summer of 1994.
The ABC Television Network's 1993 operating performance was gratifying. To
sustain this growth, the network plans to continue to keep its programming
popular and relevant to audiences and advertisers and to ensure that costs do
not rise as rapidly as revenues in a healthier advertising marketplace. It also
plans to channel every available resource to program ownership and other new
business opportunities.
Two executive changes were announced at the network in 1993. Patricia K. Fili-
Krushel was named President of Daytime Entertainment, responsible for all Monday
to Friday daytime product, including our very successful daytime serials.
Jeanette B. Trias was promoted to President of Children's Programming, and will
supervise the Saturday morning schedule, as well as the ABC Afterschool
Specials.
In 1993, the network received over 150 awards, including 31 Emmys. 20/20 won an
Alfred I. duPont-Columbia University Journalism Award for The Gift of Life, a
profile of a Vietnam veteran and the doctor who saved his life during the war,
and PrimeTime Live won the George Polk Award for its investigative report on the
rise of neo-Nazism in Germany. Roseanne won the George Foster Peabody Award for
significant and meritorious achievement in television programming.
Broadcast Group
The newly reorganized Broadcast Group, which previously included the Company's
cable and international broadcast activities, continues as Capital Cities/ABC's
major profit center. Now consisting of television station, radio station and
radio network operations, the group generated revenues of $1,170,000,000,
exceeding 1992's performance by approximately 6 percent and slightly
outperforming the record level reached by these businesses in 1990.
At the same time, the group's profits grew in 1993 by approximately 12 percent
after two
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consecutive down years. While still falling short of 1990's record performance,
these results were the best recorded in three years and the first double-digit
profit increase since 1988. The rebound in profits also saw profit margins
expand by two percentage points.
The year's foremost challenge came from the federal government's legislative
effort to re-regulate the cable industry and ensure the economic viability of
free local television broadcasting. Ratified in the closing days of 1992, the
Cable Television Consumer Protection and Competition Act of 1992 ("Cable Act")
afforded broadcasters the ability either to guarantee cable carriage for
themselves or to develop a secondary revenue source.
The pre-eminent market positions of our television stations and our ownership of
ESPN, the cable industry's foremost sports network, enabled us to obtain cable
carriage for ESPN2 in exchange for giving cable system operators the right to
carry our stations' signals. Cable companies found this alternative an
acceptable way to provide value for carriage rights. The Company was thus able
to receive significant economic value for its stations' signals and avoided the
kind of confrontation with cable operations that others encountered when they
sought only cash for carriage. The successful conclusion of this process in
part validated the Company's diversification into cable programming.
Television Stations
Although 1993 will be remembered by television station operators because of the
challenge and distractions of a new regulatory relationship with their cable
counterparts, it was also a year that saw most broadcasters emerge from the
effects of a recessionary economy. Revenues at our eight television stations
increased approximately 5 percent, slightly exceeding the previous record high
of 1990, and station profits rebounded nicely.
A benefit which materialized in the last quarter of the year also contributed to
the profit increase. It involved the resolution of the long-standing dispute
between ASCAP, the music performance rights society, and the All-Industry
Committee, which represented the interests of our stations as well as most of
the industry. A Federal District Court established an alternate and more
flexible fee structure that will now put the licensing of music performance
rights for television stations on a more equitable basis. In addition, the
court fixed the liability for past years' claims at levels lower than had been
previously anticipated. While there is no guarantee that this 12-year industry-
wide effort will lead to the resolution of a similar dispute with BMI, the other
major music licensing organization, the potential for a comparable settlement
does exist and could produce a similar future benefit.
Another event had long-term implications about service quality and price
integrity for the industry. The Arbitron Company announced its intention to
abandon its local television market rating service and leave the field to a sole
service provider, Nielsen Media Research. The immediate consequence of
Arbitron's decision will be a reduction of research expenses; however, the
absence of competition in an area vital to the television industry raises
questions for the future. Moreover, two of our stations that previously
employed Arbitron as their primary audience measurement and selling tool may
well sustain revenue losses in excess of any cost benefits.
The Company's television stations continue as the nation's most profitable
station group and maintain their pre-eminent audience ratings in most of their
markets. The average sign-on to sign-off ratings achieved during the four 1993
Nielsen sweep surveys show six of our stations maintaining their number one
positions. The other two share the top spot with competitors. KTRK-TV, a long-
time ratings powerhouse and perennial number one in Houston, has recently lost
ground in the ratings and faces a real struggle to regain its leadership
position. At the station group, all dayparts, including those committed to
carrying network programs, are vigorously
11
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Capital Cities/ABC
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contested, so we take nothing for granted. The challenges that face us are real
and the competition intense.
As noted above, the inherent market strength of our television stations
permitted us to utilize the retransmission consent provisions of the new Cable
Act to create significant penetration for ESPN2. That penetration went well
beyond the service areas of our owned stations. While the results of the
negotiation primarily benefited ESPN2, other significant objectives were
achieved in the negotiation process. Six-year agreements were entered into with
cable operators that ensured the carriage of virtually all our station signals
on our designated over-the-air channel positions-thereby ensuring uniform
promotability in the preferred VHF band. In addition, we gained some
preferential opportunities for additional channel space to accommodate the
eventual broadcast of high definition television. All in all, we generated
value for our signals by the creation of a new basic cable service with
significant market penetration, and we assured cable carriage in 99.4 percent
of the homes attributed to our markets.
Radio
1993 was a record year for the Radio Division, with both revenues and profits
reaching new highs. Our radio stations improved considerably on several fronts
and appear to be well-positioned for the future. Underperforming facilities in
New York and Chicago made real turnarounds, and the benefits of a reshaped and
more focused portfolio of stations became more evident. Combined with an
improving economy, the effect was significant: revenue increased by
approximately 9 percent, and operating profits increased dramatically.
At year-end, the group consisted of 18 stations, three less than the 21 stations
operated by the Company at the end of 1992. In keeping with a strategy designed
to take advantage of liberalized radio ownership rules and to focus our efforts
on acquiring additional properties in the larger markets where we already own
stations, the group divested its AM/FM station combinations in Denver and
Providence and acquired a third station in Atlanta. The Company's current 18
station portfolio (nine AM and nine FM) reaches 24.1 percent of the United
States as indicated in the following chart:
<TABLE>
<CAPTION>
#of
stations
Station Market in % of
and Market rank market U.S.
- ---------- ------ -------- ----
<S> <C> <C> <C>
WABC-AM/WPLJ-FM 1 48 6.6%
(New York)
KABC-AM/KLOS-FM 2 48 4.6%
(Los Angeles)
WLS-AM/FM 3 37 3.2%
(Chicago)
KGO-AM 4 48 2.5%
(San Francisco)
WJR-AM/WHYT-FM 6 30 1.7%
(Detroit)
WMAL-AM/WRQX-FM 7 30 1.6%
(Washington, DC)
WBAP-AM/KSCS-FM 8 32 1.6%
(Fort Worth-Dallas)
WKHX-AM/FM
WYAY-FM 12 19 1.3%
(Atlanta)
KQRS-AM/FM 17 20 1.0%
(Minneapolis-St. Paul)
----
Total 24.1%
----
</TABLE>
Source: Arbitron, Fall 1993 Radio Market Survey
Schedule & Population Rankings
Metro persons 12+
The acquisition of WYAY-FM represents our first experience with a duopoly
operation, a circumstance which offers radio operators the opportunity to
consolidate costs and enhance sales. While it is too early to be certain that
this plan will succeed in Atlanta, the combined operations of WKHX-AM/FM and
WYAY-FM have exceeded our expectations and seem to offer real promise. Clearly,
the right combination of variables is a prerequisite for duopoly operations to
work, and acquisition cost is key. Based upon what we have seen so far, and
under the right circumstances, we will pursue duopolies as a strategy for growth
in our larger markets. In
12
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this connection, we have recently signed an agreement to purchase KRXX-FM,
Minneapolis and have reached an agreement in principle to acquire KMPC-AM in Los
Angeles. We hope to conclude these acquisitions during 1994.
Duopoly combinations also offer a number of strategic programming benefits; for
example, the ability to protect successful formats by programming to a
compatible audience in the same genre. What can work for us, however, can also
work for our competition, so it is more important than ever that we protect
successful franchises and use our current facilities to their best advantage.
It is gratifying to see our efforts begin to succeed at WABC-AM and WPLJ-FM in
New York and WLS-AM/FM in Chicago, where patience and commitment to a format and
to talented people have contributed to the reversal of fortunes. Equally
noteworthy, WMAL-AM in Washington, DC weaned itself away from a long-standing
relationship with a major sports franchise, the Washington Redskins. It
repositioned itself competitively, saw its audience expand and enjoyed an
outstanding year.
The ABC Radio Networks had an exceptional year in 1993. Profits rebounded from
a down year and increased significantly to reach a new high. Revenues increased
by approximately 6 percent, as a number of traditional advertisers returned to
network radio, and the networks maintained their share of the market. Effective
cost management also contributed significantly to the year's results, with
operating expenses declining for the third consecutive year as the network
relocated and consolidated more of its operations in Dallas, Texas.
The ABC Radio Networks remain the country's largest radio network operation and
serve approximately 3,400 affiliates nationwide. Providing stations and
listeners with a wide range of programming and featuring the services of ABC
News, the networks reach almost 100,000,000 listeners each week. They broadcast
17 of the top 20 and 42 of the top 50 programs in network radio. Moreover, Paul
Harvey, America's most prominent and popular commentator and ABC Radio's
foremost personality, continues his hold on the radio audience. His daily
program reaches 24,000,000 people each week, and his programs consistently rank
at the top of news personality surveys.
The radio networks recently signed Tom Joyner, a popular Chicago radio
personality, to produce a morning and weekend "countdown" show aimed at African-
American music listeners. The networks also launched into syndication "Moby in
the Morning," a feature of our owned station in Atlanta, WKHX-FM, where Moby is
the number one country music host.
The ABC Radio Networks also expanded their horizons internationally. They
acquired a minority interest in Satellite Media Services, Ltd., a U.K. company,
to develop radio formats for distribution in Europe, and established a
Hong Kong-based partnership, called ABC Radio Partners. This Hong Kong venture
will launch a Chinese radio network to serve that huge and increasingly dynamic
market.
Cable and International Broadcast Group
As a result of the growing importance of the Company's involvement in cable
programming, international broadcasting and cable services, and program
distribution, the Cable and International Broadcast Group was established in
1993. The group is more readily identified with its successful domestic cable
activities--80%-owned ESPN, 37 1/2%-owned Arts & Entertainment (A&E) and 33
1/3%-owned Lifetime. It is also involved in program distribution through its ABC
Distribution operation, and has an increasing presence in the international
marketplace. In 1993, operating income increased significantly on a 15 percent
increase in revenues.
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ESPN, the premier cable sports network in the country, represents the group's
most significant business activity. It ended the year as America's largest
cable network and is currently available in 62,700,000 homes which represent 67
percent of U.S. television households. ESPN International broadened its
programming distribution to 90 countries broadcast in 11 languages with 24-hour
customized satellite networks for Asia, Latin America, and in early 1994, the
Middle East and Africa.
Once again, ESPN achieved record revenues and earnings in 1993, despite a
significant loss in the last year of its initial contract with Major League
Baseball. Major League Baseball coverage was renewed for six more years at
substantially lower rights fees and a reduction in coverage from six to three
games per week. ESPN also renewed its Sunday night NFL contract for four more
years at slightly higher rights fees.
ESPN launched ESPN2 in October with coverage by year-end reaching 13,000,000
cable homes. By the end of 1996, ESPN2 expects to be in 30,000,000 homes.
Programming will focus on the entertainment appeal of sports and will be
targeted to men and women 18-34. ESPN also acquired Ohlmeyer Communications
Corporation, a sports programming and production company.
The group's interests in A&E and Lifetime cable networks continue as very
successful investments. Both A&E and Lifetime, which reach 56 percent and 62
percent of U.S. television homes, respectively, again had excellent years and
continue to show growth in revenue, earnings and subscribers.
The group also acquired assets of DIC Animation City, Inc., a successful
producer and distributor of animated and live action children's programming.
Currently, DIC produces series for the ABC Television Network, CBS, Fox, various
cable channels and syndication.
ABC Distribution sells the ABC Television Network's owned programming
internationally and, because of changes in the financial interest rules,
domestically to all purchasers except television stations. It had a particularly
good year in 1993 syndicating ABC News product in Europe.
The Company continued to invest in international broadcasting joint ventures
in 1993, acquiring equity interests in several new ventures:
. RTL 2 - a new German television general entertainment network. The Company
directly, and through its German joint venture, Tele-Munchen, owns 20 percent
of RTL 2, which has now achieved over 50 percent penetration of its market in
its first year of operation.
. Scandinavian Broadcasting System SA - a broadcasting company with television
networks in Norway, Sweden and Denmark. Capital Cities/ABC now owns
approximately 24 percent.
. Eurosport - the pan-European sports network. In 1993, The European Sports
Network, which had been 50 percent-owned by ESPN, was merged with its
competitor, Eurosport. ESPN owns 33 percent of the combined service, which
reaches almost 50,000,000 households.
The group's other international interests performed better on an aggregate basis
in 1993, narrowing their operating losses. The near-term operating outlook for
all of our joint ventures should benefit from further privatization of the
broadcasting industry throughout Europe, improvement in cable and satellite
distribution, and a healthier business climate.
Results for ESPN, DIC and ABC Distribution are consolidated in the broadcasting
business segment. Results of A&E, Lifetime and the group's international joint
ventures are accounted for on the equity
14
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basis (the proportionate share of income or loss is recorded as other income or
expense). As a consequence, the results of these activities are not reflected in
the operating results of the broadcasting segment.
Multimedia Group
The Multimedia Group was established in 1993 with the broad mandate of properly
positioning the Company with respect to emerging new media and technologies.
The group's financial results for 1993 -- and perhaps for the next few years--
reflect the uncertain and emergent nature of the various markets in which it
will operate. With the exception of Capital Cities/ABC Video Publishing's home
video activities, the group's businesses may not be profitable in the near
future.
In the longer term, the group's primary mission is to ensure that the core
businesses of the ABC Television Network and the Company's television stations
are protected in the new environment that may be created by the development of
mega-channel cable systems and video-on-demand fiber optic services offered by
both cable and telephone companies. The Company believes that, in many
respects, the near-term potential of compressed digital television (which is the
basis among other things for national video-on-demand information and
entertainment "superhighways") may prove to be overstated. Changes in the
television system in the United States are likely to be evolutionary, not
revolutionary, and will reflect the tastes and needs of the audience rather than
the hopes of regulators or the investments of service providers.
Nonetheless, the emerging video-by-wire services and other technologies can be
expected significantly to increase viewing choices and are thus both a threat to
and an opportunity for the Company's core businesses. In the shorter term,
therefore, the Company believes that it can both protect itself and create new,
significant business opportunities by playing a meaningful role as a content
provider for the full range of developing technologies. To that end, the
Company expects to utilize its archives, libraries, production expertise and
knowledge of the video marketplace to create new video and data-based products.
Of the distribution possibilities available, the market which is most fully
developed is home video. Since its inception in early 1993, Capital Cities/ABC
Video Publishing has distributed through retail or special markets approximately
850,000 units, including titles that were based on successful ABC Television
Network programs (such as Daytime's Greatest Weddings series) and titles that
were acquired or originally produced which did not grow out of ABC resources.
1994 should see a significant increase in the number of units distributed.
Titles will include several direct-to-video motion pictures, exercise and
special interest cassettes (such as Bad Golf Made Easier, an original title
starring actor Leslie Nielsen that was released at the end of 1993 and has made
several best-seller lists). Titles will also be based on the programming of ABC
News, ABC Sports, ABC/Kane Productions, ABC Daytime, ABC Productions and ESPN.
The Multimedia Group's other activities will focus on a number of other markets
where the Company's strengths in the ownership and production of informational
and entertainment products (both print and video) are likely to provide it with
significant opportunities. The activities will include:
. Experimentation with on-line, cable and telephone company exhibition of video
and text-based materials, including the time-shifting of ABC Television
Network programs and the creation of news-on-demand and other interactive
products designed for those distribution channels;
. Creation of interactive video entertainment and information for the disc,
cartridge and
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Capital Cities/ABC
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"on-line" computer markets. These markets offer significant prospects for
expansion, as technology improves and as equipment and software aimed at broad
demographic groups can be developed;
. Exploration of "location-based" entertainment facilities, located in tourist
centers, shopping malls and elsewhere, that have many of the qualities of
motion picture theaters, themed amusement parks and arcades.
In each of these markets, the Company will seek to participate as a provider of
content, and it may well create joint ventures with partners who offer
significant expertise and experience in the development of the hardware,
software and other technologies that are critical to these businesses.
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Publishing
Revenues for the Company's Publishing Group declined 6 percent in 1993 primarily
due to the absence of Word, Inc. which was divested late in 1992. Operating
income declined 8 percent principally because of a substantial increase in
development expenses associated with new product launches. Publishing's 1993
and 1992 results are summarized below:
<TABLE>
<CAPTION>
(Dollars in millions) 1993 1992
-------- --------
<S> <C> <C>
Net revenues $1,010.4 $1,078.6
-------- --------
Operating costs 851.8 908.8
Depreciation 18.4 18.1
Amortization 14.6 15.3
-------- --------
Total costs 884.8 942.2
-------- --------
Operating income $ 125.6 $ 136.4
======== ========
</TABLE>
On a more comparable basis, excluding the effect of 1992 and 1993 acquisitions,
dispositions and development activities, 1993 revenues and expenses increased 3
percent and 4 percent respectively, and operating income was 1 percent lower.
The newspaper and shopping guide operations posted their seventh consecutive
year of increased profits. Improved results among the majority of the Company's
specialized publications were unable to offset weakness in certain other areas,
especially in the medical publications which are dependent on declining
pharmaceutical advertising. The increase in development expenses was largely
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attributable to the launching of Selling magazine, an accelerated conversion to
CD-ROM technology for Chilton's professional automotive books, and the
introduction in Wichita, Kansas, of the Company's first yellow pages directory.
Newspapers and Shopping Guides
Newspaper and shopping guide revenues were up 4 percent in 1993, and expenses
increased 5 percent, resulting in a small increase in operating income.
Excluding the start-up expenses of the yellow pages directory in Wichita,
operating income increased 2 percent over 1992 levels. Newsprint prices rose an
average of 5 percent for the full year. This was a smaller than anticipated
increase and reflected heavy discounting in the second half of 1993. Many of
the Company's newspapers are involved in a variety of new initiatives, including
audiotext, videotext, alternate delivery, cable guides, real estate publications
and total market coverage supplements.
The Kansas City Star posted record revenues and substantial circulation gains in
1993. The Star ranked 11th among major U.S. newspapers in average daily
circulation growth for the six months ending September 30, 1993, according to
the Audit Bureau of Circulation. Operating income decreased slightly from
record levels in 1992.
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Capital Cities/ABC
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The Star launched community newspapers in two suburban areas. The news and
advertising content of both newspapers, which are home-delivered with The Star,
is completely community-based. Largely as a result of the intense local focus,
The Star enjoyed substantial circulation increases in both areas and attracted a
wide range of new advertisers.
The newspaper initiated a data base marketing program targeting advertisers who
utilize direct mail. The program offers a turn-key direct marketing service to
advertisers that coordinates newspaper and direct mail advertising. Revenues
from the program, which has generated additional run of press and insert
business for the newspaper, covered development costs.
The Star's interactive telephone information system, Startouch, experienced
explosive growth in 1993, receiving approximately 15,000 calls a day. Call
count for the year increased by approximately 70 percent. The newspaper's
alternate delivery program also expanded dramatically and now serves 265,000
households.
Revenues and expenses at the Fort Worth Star-Telegram increased slightly over
1992. Operating income was down slightly because of the cost effect of a second
daily edition targeted at northeastern Tarrant County and a reduction in the
weekday single copy price from $0.50 to $0.25 in the newspaper's home market for
competitive reasons.
The newspaper now publishes three geographic editions daily: one in northeast
Tarrant County, one in Arlington and the third covering Fort Worth and the
balance of the circulation area. Front page and local news decisions are made
by three separate editorial staffs, and the number of pages in the local news
sections varies among the editions depending on relative demand for zoned local
advertising. Over 100 additional employees are required to execute this massive
targeting effort. Reaction from readers and advertisers has been very positive.
Once again the Star-Telegram was honored with awards for excellence. The
newspaper won nine first-place awards in the prestigious Dallas Press Club
statewide competition.
The Michigan publishing group, centered around the daily Oakland Press, had
record revenues and operating profit in 1993. Operating income was slightly
affected by the start up of an audiotext system and a substantially expanded
alternate delivery system at the daily. The semi-weekly Lapeer County Press was
named "Michigan's Best" newspaper in its circulation group by judges of the
Michigan Press Association.
Revenues and operating income at the Belleville News-Democrat Group were at
record levels in 1993. The daily newspaper, which achieved record results in
1993, was also recognized widely for continuing journalistic excellence. The
weekly group, which had a satisfactory year, was augmented by the purchase of
the Waterloo, Illinois, Republic-Times. Legal Communications Corporation,
publishers of legal newspapers in St. Louis and its environs, experienced a
downturn in legal advertising.
In Wilkes-Barre, the last city in Pennsylvania with separately-owned competing
daily newspapers, operating income grew 35 percent at The Times Leader on a
revenue gain of 16 percent. In the second half of 1993, the newspaper ran 62
percent of all in-paper advertising in the market and 90 percent of all pre-
printed advertising inserts. Circulation of the Sunday edition grew 27 percent
to 79,000 copies after the closure in May of a competing Sunday newspaper.
Substantial additions to staff and capital equipment during 1993 have positioned
the newspaper for continued profit growth in 1994 and beyond.
The New England Newspaper Group, which distributes almost 700,000 copies weekly
in Connecticut, Massachusetts and Rhode Island, had essentially flat results
with the previous year. Savings from several title closures and expense
reductions were
18
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partially offset by increases in the number of advertising sales personnel.
A slight profit decline at the Oregon newspapers was more than offset by another
record year for the Nickel Publications. These advertising-only tabloids posted
an overall increase in 1993 operating income of 12 percent, following a 22
percent increase in 1992. Over 650,000 "Nickels" are distributed weekly through
racks in supermarkets, convenience stores and other locations in Seattle-Tacoma,
Spokane, Portland and Las Vegas. Glenn Cushman, who headed the Company's
Northwest Publishing operations since the 1980 purchase of the Oregon Newspaper
Group, retired in March. He was succeeded by Richard Anderson, formerly the
group's General Manager.
The PennySavers, headquartered in Vista, California, had record operating income
and profit margin in 1993. The soft California economy kept advertising
revenues basically flat. However, sales increases in northern California,
combined with production efficiencies in southern California resulting from the
first full year in a new 90,000 square foot facility, helped generate the record
earnings. The PennySavers distributes 2,000,000 copies of its publications in
California each week.
Profits improved for the second consecutive year at Pennypower, which
distributes 280,000 shoppers weekly in Wichita, Kansas, and Springfield,
Missouri. A new yellow pages telephone directory was launched in Wichita and
distributed in October to over 220,000 households.
Specialized Publications
The Company's specialized publishing operations consist of three units: the
Diversified Publishing Group, Fairchild Publications and the Financial Services
and Medical Group. Despite favorable results at many publications and excluding
increased development expenses and dispositions, operating income declined 6
percent.
The Diversified Publishing Group reported increased revenues and operating
income for 1993. The group essentially completed a repositioning and marked the
year with the strategic acquisition of Grupo Editorial Expansion, S.A., the
leading business publisher in Mexico.
Chilton Publications reorganized its magazines into five publishing groups to
better serve its readers and advertisers. The new groups are Communications,
Materials, Manufacturing, Retail, and Automotive/Transport. Four of the five
groups reported increased revenues and operating income.
Expansion, acquired in 1993, publishes the biweekly business magazine Expansion,
a monthly construction magazine and various bulletins and newsletters dealing
with Mexican business and legal issues. This acquisition also gives Chilton
Publications a platform to expand other publications in Latin America. Product
Design and Development Europe, Warehousing and Commperspectives were new
ventures begun in 1993, with four new publications planned for 1994.
Chilton Enterprises' research arm reorganized into four industry specialty
groups: Healthcare, Consumer Products, Business and Industrial Services, and TEC
(Telecommunications/ Entertainment/Computers). The automotive book division is
completing the development of a CD-ROM version of its popular Chilton repair
manuals and is currently demonstrating a promotional version in the marketplace.
The Agricultural Publishing Group showed increased revenues and operating income
in many of its publications as well as in its insurance and farm shows. The
year featured a successful launch of the annual outdoor Farmer Stockman show
near Lubbock, Texas. An increase in agriculture data base clients and an
investment in classified telemarketing also contributed to revenue growth.
19
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Capital Cities/ABC
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Despite a continuing soft local economy, Los Angeles magazine moved forward
aggressively by introducing a cover-to-cover graphic makeover in September.
Enthusiastic response to the new look contributed to a year-to-year increase of
16 percent in national advertising during the fourth quarter. The magazine also
launched its first annual Environmental Pride Awards, a charitable event
honoring outstanding achievements by local businesses and individuals.
National Insurance Law Service (NILS) surpassed all revenue and operating income
expectations and delivered another record year. In 1993, NILS introduced a
network version of its popular CD-ROM INSource service and formed a partnership
to publish English translations of foreign laws.
Operating income at Fairchild Publications declined in 1993 due to continuing
revenue softness in several key markets and expenses associated with the
successful conversion of W to a sophisticated tabloid format. In addition to
the format change, W reduced its frequency from 26 issues a year to 12. The
reaction to the new W has been extremely positive, and newsstand sales have
significantly increased. A modification of the new W product will be introduced
in Europe this year, supplanting W Fashion Europe, which will result in
substantial savings. Salon News, with a controlled circulation of 80,000, is
expected to become profitable in its first full year of publication.
Operating income at the Financial Services and Medical Group declined by more
than one-third. Significant gains at Institutional Investor, Inc. were more
than offset by a substantial decline in operating income at the International
Medical News Group.
Institutional Investor magazine received more awards for journalistic excellence
than ever before. It launched two newsletters focusing upon defined
contribution retirement plans and emerging markets. The Journal of Derivatives
was created, and The Journal of Real Estate Finance was acquired. In late 1993,
Bankstat, a unit of Bankers Trust Company, was purchased. Bankstat provides
credit information on banks to financial institutions worldwide on CD-ROM. The
first issue of Selling, a new magazine for professional salespeople, was
published in July. Early indications from readers and advertisers have been
positive.
As a consequence of the increasing pressure on the pharmaceutical industry to
reduce prices to HMOs and other wholesale purchasers, pharmaceutical companies
substantially reduced spending on advertising and marketing. While the
International Medical News Group publications gained share in a declining
market, revenues fell by more than 20 percent.
Capital Cities Capital
Early in 1993, Capital Cities Capital was established, and George M. Cain was
named President. This unit, which reports to the President of the Publishing
Group, seeks to exchange advertising time and space in any Company media
property for equity interests in emerging growth companies. The acquisition of
equity interests is made at market rates for the advertising provided. The
goals of Capital Cities Capital are to help companies to grow and prosper
through the intelligent use of advertising, to cultivate new customers for the
Company's media properties and to earn a "venture capital" type of return.
Two transactions have been completed so far involving interests in Yes!
Entertainment, a toy company, and Alpha Software, a software company. Several
more investments are in the "letter of intent" stage. A number of additional
transactions are under review, and the overall market response to the Capital
Cities Capital concept has been quite favorable.
20
<PAGE>
Capital Cities/ABC
- --------------------------------------------------------------------------------
Financial Overview
Management's Discussion and
Analysis of Results of Operations
and Financial Condition
Results of Operations--
1993 Compared to 1992
Consolidated net revenues for 1993 were $5,673,653,000, an increase of 6% from
the $5,344,127,000 reported in 1992. Most of the Company's advertiser-supported
businesses were positively affected by increased demand and an improvement in
the economic environment. Broadcasting net revenues for 1993 were
$4,663,215,000, compared with $4,265,561,000 in 1992, a 9% increase. Net
revenues for the ABC Television Network increased moderately, principally due to
an improved advertising marketplace, the absence of the telecast of the Winter
and Summer Olympics on other networks, and higher sales of internally-produced
product. ESPN reported significant revenue increases, primarily due to
increased growth in both advertising sales and subscription fees, while
television station and radio revenues increased moderately. Publishing
revenues, excluding the effect of 1992 and 1993 acquisitions, dispositions and
start-ups, increased 3% with gains at the newspaper operations and most of the
specialized publications.
Total costs and expenses for 1993 were $4,811,504,000, compared with
$4,622,322,000 in 1992, a 4% increase. Broadcasting costs in 1993 increased 7%
from 1992. Costs and expenses for the ABC Television Network increased
moderately in 1993, primarily as a result of increased provisions for
reductions in staffing, a higher level of internally-produced programming and
higher rights costs. Costs at ESPN increased significantly due to higher
programming expenses and the start-up of ESPN2. Increased costs at the Company's
television stations for programming and news were partially offset by the
reversal of excess provisions for music license fees upon the resolution of a
long-standing dispute with ASCAP. Radio expenses were up slightly in 1993.
Excluding the effect of 1992 and 1993 acquisitions, dispositions and start-ups,
Publishing Group expenses increased 4% from 1992. Higher newsprint and
circulation expenses at the newspaper operations, and slight increases at the
specialized publications contributed to the increase.
Operating income for 1993 was $862,149,000 compared with $721,805,000 in 1992, a
19% increase. The ABC Television Network reported a significant increase in
operating earnings as did the radio operations and ESPN. The television stations
reported a moderate increase in earnings. Excluding acquisitions, dispositions
and start-ups, publishing operating earnings decreased 1% from the prior year.
Net financial expense (interest expense less interest income) for 1993 decreased
$28,929,000 from 1992. Interest expense decreased $44,237,000 primarily as a
result of a reduction of outstanding long-term debt. Interest income was
$15,308,000 lower in 1993 due primarily to the use of cash for long-term debt
redemptions and substantially lower rates of return on invested cash. Interest
of $10,283,000 and $12,511,000 was capitalized in 1993 and 1992, respectively.
Miscellaneous income decreased $26,822,000
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Capital Cities/ABC
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in 1993, mainly as a result of the absence of the nonrecurring net gain recorded
in 1992 on the sale of the Company's interest in a German television network,
partially offset by losses provided for or incurred on the disposal of certain
nonoperating assets. The Company's effective tax rate was 43.6% in 1993 and
43.2% in 1992. The 1993 results include an increase in the federal tax provision
of $12,000,000 ($0.73 per share) to reflect the requirements of the Omnibus
Budget Reconciliation Act of 1993 ("Tax Act").
Consolidated net income before an extraordinary charge in 1993 and the
cumulative effect of accounting changes in 1992 was $467,379,000 for the full
year of 1993, compared with $389,328,000 earned in 1992. Earnings per share
before these items were $28.53 in 1993, an increase of 22% from the $23.45
reported in 1992. Excluding the additional tax provision of $0.73 per share,
1993 earnings per share would have been $29.26, an increase of 25% from 1992.
Average shares outstanding in 1993 were 16,380,000 compared with 16,600,000 in
1992. The decline reflected repurchases of the Company's common stock during
1992 and 1993.
During 1993, an extraordinary charge (after-tax) of $12,122,000, or $0.74 per
share, was recorded relating to early debt redemptions. Results for 1992
included an after-tax noncash charge of $143,235,000, or $8.63 per share, to
reflect the adoption of Financial Accounting Standard No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions" and Financial
Accounting Standard No. 109, "Accounting for Income Taxes."
Results of Operations--
1992 Compared to 1991
Consolidated net revenues for 1992 were $5,344,127,000, down slightly from the
$5,381,989,000 reported in 1991. Many of the Company's advertiser-supported
businesses continued to be affected adversely by the weak economic environment.
Broadcasting net revenues for 1992 were $4,265,561,000 compared with
$4,329,743,000 in 1991, a 1% decrease. Net revenues for the ABC Television
Network were down slightly from 1991 principally because of the absence of
revenues from the 1991 telecasts of Super Bowl XXV and four NFL postseason
playoff games, as well as the continued weak marketplace, particularly in prime
time. Television station revenues were up slightly, while those for the radio
operations decreased moderately. Video operations reported revenue increases,
primarily due to continued growth at ESPN. Publishing Group net revenues
increased 3%, from $1,052,246,000 in 1991 to $1,078,566,000 in 1992, primarily
because of increases at the newspaper operations.
Total costs and expenses of $4,622,322,000 for 1992 were flat with the
$4,620,756,000 reported in 1991. Broadcasting costs in 1992 decreased slightly
from 1991. Expenses for the ABC Television Network decreased 4%, primarily as a
result of the absence of rights and production costs associated with the 1991
telecasts of the Super Bowl and NFL postseason playoff games. Excluding these
items, television network costs were flat with 1991. Costs at ESPN increased
modestly as a result of increased programming expenses. Costs for the
television stations were also up modestly because of increases for syndicated
programming and news coverage. Radio operating costs were down slightly in
1992. Costs and expenses in 1992 for the Company's publishing operations
increased 1% from 1991. Continued declines in newsprint pricing and overall
cost containment were responsible for the slight increase.
Operating income for 1992 was $721,805,000 compared with $761,233,000 in 1991, a
5% decline. Broadcasting operating income decreased 8% from 1991, with the ABC
Television Network reporting a substantial decline in operating earnings. The
television station and radio operations also reported small earnings declines in
1992, while ESPN showed a modest increase in
22
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Capital Cities/ABC
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earnings. Publishing earnings increased 11% in 1992 with increases reported at
both the newspaper and specialized publishing operations.
Net financial expense (interest expense less interest income) for 1992 decreased
$28,512,000 from 1991. Interest expense decreased $75,338,000, primarily because
of a net reduction of approximately $735,000,000 of outstanding long-term debt.
Interest income was $46,826,000 lower in 1992, due to substantially lower
interest rates on invested cash and the use of cash for long-term debt
reductions. Interest of $12,511,000 and $13,557,000 was capitalized in 1992 and
1991, respectively. Miscellaneous income increased $34,648,000 in 1992 mainly as
a result of a gain on the sale of the Company's interest in a German television
network. This gain was partially offset by losses provided for or incurred on
the disposal of nonoperating real estate in New York City, together with the
write-down of certain other nonoperating assets. The Company's effective tax
rate was 43.2% in 1992 and 43.4% in 1991.
Consolidated income before the cumulative effect of accounting changes in 1992
and an extraordinary charge in 1991 was $389,328,000 for 1992, compared with
$374,696,000 earned in 1991. Income per share before the cumulative effect of
accounting changes and the extraordinary charge was $23.45 in 1992, an increase
of 5% from the $22.33 reported in 1991. Average shares outstanding in 1992 were
16,600,000 compared with 16,780,000 in 1991. The decline reflected repurchases
of the Company's common stock during 1991 and 1992.
During the fourth quarter and retroactive to January 1, 1992, the Company
adopted two statements of Financial Accounting Standards which are required to
be implemented by 1993. Financial Accounting Standard No. 106, "Employers'
Accounting for Postretirement Benefits Other than Pensions" requires that the
Company provide for postretirement benefits, other than pensions, over the
service lives of employees rather than on a cash basis as the benefits are paid.
The Company recorded an after-tax, noncash charge of $54,817,000, or $3.30 per
share, to recognize the accumulated obligation for eligible active and retired
employees as of January 1, 1992. The adoption of Financial Accounting Standard
No. 109, "Accounting for Income Taxes" which requires a change to the liability
method of accounting for deferred income taxes, required the provision of a
noncash charge of $88,418,000, or $5.33 per share, to account for its deferred
tax liability at January 1, 1992. Except for the cumulative effect of adopting
the Standards as of January 1, 1992, these accounting changes did not have a
material effect on previously reported quarters of 1992. The fourth quarter of
1991 included an extraordinary charge of $31,203,000 (net of income taxes), or
$1.86 per share, relating to the cost of redeeming long-term debt prior to
maturity.
Cash and Cash Flows
Net cash provided by operating activities was $641,257,000, an increase of
$233,513,000 from the $407,744,000 reported in 1992. The increase was primarily
attributable to higher 1993 income before the effect of an extraordinary charge
and the cumulative effect of accounting changes and a decrease in net program
licenses and rights, partially offset by changes in other working capital
accounts.
Net cash provided by investing activities was $145,769,000, an increase of
$11,119,000 from the $134,650,000 provided in 1992. The increase in cash
provided by investing activities was a result of a substantial decrease in
short-term investments in 1993, favorable net changes in noncurrent assets and
liabilities, and lower capital spending. This was offset by increased
acquisition activity in 1993 as well as the absence of sales of real estate and
equity investments in the current year.
23
<PAGE>
Capital Cities/ABC
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Net cash used in financing activities was $1,209,671,000, an increase of
$628,160,000 from the $581,511,000 used in 1992. The increase was primarily
attributable to greater repurchases of the Company's common stock in 1993.
At December 31, 1993, cash and short-term cash investments were $264,283,000, a
decrease of $422,645,000 from the prior year. However, after the inclusion of
short-term investments, the balance at December 31, 1993 aggregated
$438,106,000, a decrease of $759,667,000 from $1,197,773,000 at December 31,
1992. The Company's policy is very conservative with respect to investment of
its cash. At December 31, 1993, all of the Company's cash was invested in highly
liquid United States Government instruments with a weighted average life to
maturity of 135 days. The Financial Accounting Standards Board requirements
arbitrarily define cash equivalents as those investments with maturities at the
date of purchase of three months or less. At December 31, 1993, $173,823,000 of
the Company's investments did not meet the definition of a cash equivalent and
are therefore classified in the consolidated financial statements as short-term
investments. The Company believes that this distinction is not meaningful with
respect to the statement of its cash and cash equivalents position.
Capital Expenditures and Program Commitments
In 1993, capital expenditures amounted to $97,788,000, down from the
$114,736,000 spent in 1992. The largest portion of the 1993 spending was in the
Company's broadcasting operations where $78,500,000 was spent. Broadcasting
capital expenditures included $13,400,000 for facilities improvements and
$65,100,000 for broadcast equipment to support current operations. In 1993, the
Publishing Group spent $3,400,000 for facilities improvements and $15,300,000
for equipment for ongoing operations.
The Company anticipates that 1994 capital expenditures will approach
$145,000,000, approximately $50,000,000 of which was deferred spending from
1993. Total anticipated capital spending includes $30,000,000 for facilities
improvements and $115,000,000 for broadcast and publishing equipment to support
ongoing operations.
As the operator of the ABC Television Network, ESPN and eight television
stations, the Company expects to continue to enter into programming commitments
to purchase the broadcast rights for various feature films, sports and other
programming. Total commitments to purchase broadcast programming were
approximately $3,702,000,000 at the end of 1993. This amount is substantially
payable over the next four years. The Company plans to fund its operations and
commitments from internally generated funds and, if needed, from various
external sources of funds which are available.
Capital Structure
The Company's capital structure is made up of four components: stockholders'
equity, interest-bearing debt, minority interest and deferred income tax
liabilities.
Stockholders' equity amounted to $3,572,116,000 at December 31, 1993, a
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decrease of $233,626,000 from the 1992 year-end total of $3,805,742,000. The
decrease was attributable to repurchases of $715,010,000 of common stock,
partially offset by $455,257,000 of net income and $29,365,000 from common stock
issued under employee stock plans.
At December 31, 1993, total interest-bearing debt was $621,960,000, a net
decrease of $494,023,000 from 1992. As more fully described in Note 2 to the
Consolidated Financial Statements, total interest-bearing debt at December 31,
1993 includes $100,000,000 of commercial paper supported by a $1,000,000,000
bank revolving credit agreement, $500,000,000 of public notes and debentures
with an aggregate average maturity of just under 17 years and $21,960,000 of
other long-term debt. At December 31, 1993, the weighted average interest rates
of the commercial paper and of the other public instruments was 3.4% and 8.8%,
respectively. The Company plans to fund the repayment of its debt from
internally generated funds and, if needed, from various external sources of
funds which are available.
The Company's debt to total capital ratio at the end of each of the last five
years was as follows:
<TABLE>
<CAPTION>
Total
(Dollars in millions) Debt capital Ratio
-------- ------- -----
<S> <C> <C> <C>
1993................. $ 622.0 $4,531.4 14%
1992................. 1,116.0 5,255.5 21%
1991................. 1,602.3 5,521.2 29%
1990................. 1,947.4 5,542.5 35%
1989................. 1,695.1 5,221.9 32%
</TABLE>
The Company's return on average stockholders' equity improved to 12.1% in 1993
from 10.4% in 1992.
Since 1988, the Board of Directors of the Company has authorized the repurchase
of up to 3,000,000 shares of the Company's common stock. The repurchases are
made from time to time in the open market at prices then prevailing. As of
February 28, 1994, the Company has repurchased 2,032,100 of its common stock
under these authorizations for a total cost of $930,300,000, at an average cost
of $458 per share. In addition to open market repurchases, on December 1, 1993,
through a tender offer, the Company repurchased 1,095,000 shares of common stock
at $630 per share.
Intangible Assets
At December 31, 1993, the Company's intangible assets, before accumulated
amortization, totaled approximately $2,564,000,000, which accounted for
approximately 41% of the Company's total assets.
Intangible assets represent the excess of the purchase price over the underlying
fair market value of tangible assets acquired. In accordance with Accounting
Principles Board Opinion No. 17, the Company amortizes substantially all
intangible assets over periods of up to 40 years. This practice is arbitrarily
mandated by Opinion No. 17 without regard to whether these assets have declined
in value.
All of the Company's intangible assets have resulted from the acquisition of
broadcasting and publishing properties. Historically, such intangible assets
have substantially increased in value and have long and productive lives. We
believe that the Company's intangible assets have appreciated in value, and
that the requirements of Opinion No. 17, when applied to such broadcasting and
publishing assets, understate net income and stockholders' equity. The
amortization of intangible assets had the effect of reducing 1993 net income by
approximately $57,800,000, or $3.53 per share. Historically, the amortization of
substantially all intangible assets recorded prior to August 1993 was not
deductible in computing income taxes to be paid. Subsequent to this date, under
the Tax Act of 1993, directly acquired intangible assets will be deductible for
income tax purposes over 15 years.
25
<PAGE>
Capital Cities/ABC
- --------------------------------------------------------------------------------
Financial Summary 1983-1993
<TABLE>
<CAPTION>
(Dollars in thousands except per share data) 1993 1992 1991
- -------------------------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
RESULTS FOR THE YEAR
Net revenues
Broadcasting............................ $4,663,215 $4,265,561 $4,329,743
Publishing.............................. 1,010,438 1,078,566 1,052,246
---------- ---------- ----------
Total................................. 5,673,653 5,344,127 5,381,989
---------- ---------- ----------
Operating income
Broadcasting............................ $ 778,077 $ 619,317 $ 669,708
Publishing.............................. 125,647 136,389 122,905
---------- ---------- ----------
Income from operations................ 903,724 755,706 792,613
General corporate expense............... (41,575) (33,901) (31,380)
---------- ---------- ----------
Total................................. 862,149 721,805 761,233
---------- ---------- ----------
Income before extraordinary items and
cumulative effect of accounting
changes (a).............................. $ 467,379 $ 389,328 $ 374,696
Income per share before extraordinary
items and cumulative effect of
accounting changes (a)................... $28.53 $23.45 $22.33
Cash dividends per common share........... $ 0.20 $ 0.20 $ 0.20
Average shares (000's omitted)............ 16,380 16,600 16,780
Return on average stockholders'
equity (b)............................... 12.1% 10.4% 10.7%
========== ========== ==========
SELECTED CASH FLOW DATA
Cash provided
Operations, before changes in operating
assets and liabilities................. $ 643,499 $ 502,882 $ 512,882
Proceeds from issuance of long-term debt -- -- 253,922
Proceeds from dispositions of operating
companies and equity investments....... 12,500 150,168 1,228
---------- ---------- ----------
Cash applied
Acquisition of operating companies and
equity investments..................... $ 133,294 $ 2,432 $ 48,733
Common stock purchased for treasury..... 715,010 118,410 83,714
Capital expenditures.................... 97,788 114,736 120,998
Payments of long-term debt.............. 504,873 486,327 599,302
Dividends............................... 3,238 3,321 3,346
========== ========== ==========
AT YEAR-END
Working capital........................... $1,121,411 $1,637,763 $1,656,781
Total assets.............................. 5,792,618 6,522,159 6,695,712
Long-term debt............................ 621,960 1,115,983 1,602,259
Stockholders' equity...................... 3,572,116 3,805,742 3,654,833
Number of shares outstanding (000's
omitted)................................. 15,383 16,444 16,639
Price range of common stock
Closing market price.................... $619 1/2 $507 3/4 $433 1/2
High for the year....................... 643 3/4 521 503 1/2
Low for the year........................ 476 410 1/8 357 1/2
========== ========== ==========
</TABLE>
(a) Extraordinary items amounted to charges of $12,122,000 ($0.74 per share) in
1993 and $31,203,000 ($1.86 per share) in 1991, and gains of $265,746,000
($16.35 per share) in 1986 and $7,585,000 ($0.58 per share) in 1984.
Cumulative effect of accounting changes amounted to a charge of $143,235,000
($8.63 per share) in 1992.
(b) Income before extraordinary items and cumulative effect of accounting
changes, divided by average stockholders' equity.
26
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1990 1989 1988 1987 1986 1985 1984 1983
- ---------- ---------- ----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
$4,283,633 $3,899,989 $3,749,557 $3,433,749 $3,153,619 $ 378,297 $ 348,106 $ 302,785
1,101,969 1,057,405 1,023,896 1,006,597 970,755 642,583 591,616 459,510
- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
5,385,602 4,957,394 4,773,453 4,440,346 4,124,374 1,020,880 939,722 762,295
- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
$ 830,457 $ 836,149 $ 722,171 $ 632,910 $ 474,535 $ 150,970 $ 144,182 $ 124,696
132,371 130,444 129,720 146,717 158,999 138,512 133,179 104,034
- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
962,828 966,593 851,891 779,627 633,534 289,482 277,361 228,730
(39,613) (44,081) (35,862) (33,637) (30,856) (11,981) (9,849) (8,366)
- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
923,215 922,512 816,029 745,990 602,678 277,501 267,512 220,364
- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
$ 477,780 $ 485,727 $ 387,076 $ 279,078 $ 181,943 $ 142,222 $ 135,193 $ 114,704
$27.71 $27.25 $22.31 $16.46 $11.20 $10.87 $10.40 $8.53
$ 0.20 $ 0.20 $ 0.20 $ 0.20 $ 0.20 $ 0.20 $ 0.20 $0.20
17,240 17,825 17,350 16,950 16,250 13,080 13,000 13,455
14.3% 15.4% 14.7% 13.4% 9.7% 17.5% 19.9% 19.6%
========== ========== ========== ========== ========== ========== ========== ==========
$ 672,705 $ 701,269 $ 558,633 $ 468,380 $ 268,162 $ 223,296 $ 196,600 $ 169,363
250,500 2,200 500 -- 1,350,507 493,329 18,065 202,527
5,018 7,490 19,072 -- 703,378 7,222 5,000 3,200
- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
$ 61,983 $ 81,465 $ 18,143 $ 13,248 $3,162,661 $ 51,109 $ 146,843 $ 22,016
446,724 232,849 3,644 576 1,075 484 46,135 43,619
120,812 193,542 153,413 116,309 153,082 75,384 53,866 47,595
2,475 1,556 3,458 124,904 367,528 7,872 16,030 32,766
3,417 3,538 3,427 3,231 3,219 2,595 2,570 2,656
========== ========== ========== ========== ========== ========== ========== ==========
$1,919,944 $1,735,617 $1,504,954 $ 640,574 $ 416,230 $ 830,986 $ 240,985 $ 265,847
6,696,187 6,359,507 6,088,871 5,378,372 5,191,416 1,884,931 1,208,172 1,052,912
1,947,390 1,695,071 1,693,543 1,696,901 1,821,805 714,298 222,995 220,960
3,367,897 3,291,860 3,025,505 2,224,921 1,948,627 889,260 734,455 625,255
16,759 17,534 17,999 16,193 16,126 12,998 12,867 13,103
$459 1/8 $564 1/8 $362 1/4 $345 $267 1/2 $224 1/2 $164 5/8 $144
633 568 369 3/4 450 279 3/4 229 174 1/2 157 1/2
380 353 297 267 1/4 208 1/4 152 1/4 123 1/2 114 3/4
========== ========== ========== ========== ========== ========== ========== ==========
</TABLE>
27
<PAGE>
Capital Cities/ABC
- --------------------------------------------------------------------------------
Consolidated Statement of Income
<TABLE>
<CAPTION>
Years ended December 31, 1993, 1992
and 1991
(Dollars in thousands except per share
amounts) 1993 1992 1991
- ---------------------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
Net revenues............................ $5,673,653 $5,344,127 $5,381,989
---------- ---------- ----------
Costs and expenses
Direct operating expenses............. 3,557,301 3,421,054 3,463,628
Selling, general and administrative... 1,097,826 1,043,595 998,760
Depreciation.......................... 95,032 95,664 96,037
Amortization of intangible assets..... 61,345 62,009 62,331
---------- ---------- ----------
4,811,504 4,622,322 4,620,756
---------- ---------- ----------
Operating income........................ 862,149 721,805 761,233
---------- ---------- ----------
Other income (expense)
Interest expense...................... (59,772) (104,009) (179,347)
Interest income....................... 36,650 51,958 98,784
Miscellaneous, net.................... (10,648) 16,174 (18,474)
---------- ---------- ----------
(33,770) (35,877) (99,037)
---------- ---------- ----------
Income before income taxes.............. 828,379 685,928 662,196
---------- ---------- ----------
Income taxes
Federal............................... 300,100 245,500 233,600
State and local....................... 60,900 51,100 53,900
---------- ---------- ----------
361,000 296,600 287,500
---------- ---------- ----------
Income before extraordinary charge and
cumulative effect of accounting changes 467,379 389,328 374,696
Extraordinary charge, net of income
taxes.................................. (12,122) -- (31,203)
Cumulative effect of accounting changes,
net of income taxes.................... -- (143,235) --
---------- ---------- ----------
Net income.............................. $ 455,257 $ 246,093 $ 343,493
========== ========== ==========
Income per share before extraordinary
charge and cumulative effect of
accounting changes..................... $28.53 $23.45 $22.33
Extraordinary charge per share.......... (.74) -- (1.86)
Cumulative effect of accounting changes
per share.............................. -- (8.63) --
---------- ---------- ----------
Net income per share.................... $27.79 $14.82 $20.47
========== ========== ==========
Average shares outstanding (000's
omitted)............................... 16,380 16,600 16,780
========== ========== ==========
</TABLE>
See accompanying notes
28
<PAGE>
- --------------------------------------------------------------------------------
Consolidated Statement of Cash Flows
<TABLE>
<CAPTION>
Years ended December 31, 1993, 1992
and 1991
(Dollars in thousands) 1993 1992 1991
- ---------------------------------------- ----------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities
Net income............................ $ 455,257 $ 246,093 $ 343,493
Adjustments to reconcile net income
to net cash
Noncash and nonoperating items
Depreciation...................... 95,032 95,664 96,037
Amortization of intangible assets. 61,345 62,009 62,331
Extraordinary charge, early debt
redemption....................... 12,122 -- 31,203
Cumulative effect of accounting
changes.......................... -- 143,235 --
Increase (decrease) in deferred
liabilities ..................... 7,995 (26,458) (39,897)
Other noncash and nonoperating
items............................ 11,748 (17,661) 19,715
----------- --------- ---------
Cash from operations before changes
in operating assets and liabilities 643,499 502,882 512,882
Decrease (increase) in program
assets and liabilities, net........ 29,722 (129,064) 171,371
(Increase) in accounts receivable... (57,895) (2,842) (13,151)
Increase (decrease) in accounts
payable, accrued expenses and
other current liabilities.......... 5,741 47,125 (83,156)
Decrease (increase) in other
operating assets, net.............. 20,190 (10,357) (398)
----------- --------- ---------
Net cash provided by operating
activities............................. 641,257 407,744 587,548
----------- --------- ---------
Cash flows from investing activities
Capital expenditures.................. (97,788) (114,736) (120,998)
Acquisition of operating companies
and equity investments............... (133,294) (2,432) (48,733)
Decrease in short-term investments.... 337,022 99,413 187,143
Proceeds from dispositions of
operating companies and equity
investments.......................... 12,500 150,168 1,228
Proceeds from disposition of real
estate............................... -- 53,149 --
Other investing activities, net....... 27,329 (50,912) (4,171)
----------- --------- ---------
Net cash provided by investing
activities............................. 145,769 134,650 14,469
----------- --------- ---------
Cash flows from financing activities
Common stock purchased for treasury... (715,010) (118,410) (83,714)
Common stock issued under employee
stock plans.......................... 29,365 26,547 30,503
Dividends............................. (3,238) (3,321) (3,346)
Payments of long-term debt............ (504,873) (486,327) (599,302)
Premium on early redemption of debt... (15,915) -- (37,074)
Proceeds from issuance of long-term
debt................................. -- -- 253,922
----------- --------- ---------
Net cash (used in) financing activities. (1,209,671) (581,511) (439,011)
----------- --------- ---------
Net (decrease) increase in cash and
short-term cash investments............ (422,645) (39,117) 163,006
Cash and short-term cash investments
Beginning of period................... 686,928 726,045 563,039
----------- --------- ---------
End of period......................... $ 264,283 $ 686,928 $ 726,045
=========== ========= =========
</TABLE>
See accompanying notes
29
<PAGE>
Capital Cities/ABC
- --------------------------------------------------------------------------------
Consolidated Balance Sheet
<TABLE>
<CAPTION>
December 31, 1993 and 1992
(Dollars in thousands)
- ---------------------------------------------
Assets 1993 1992
- ------ ---------- ----------
<S> <C> <C>
Current assets
Cash and short-term cash investments....... $ 264,283 $ 686,928
Short-term investments..................... 173,823 510,845
Accounts and notes receivable (net of
allowance for doubtful accounts of $44,650
in 1993 and $35,114 in 1992).............. 881,955 820,115
Program licenses and rights................ 495,125 524,453
Other current assets....................... 176,966 190,294
---------- ----------
Total current assets..................... 1,992,152 2,732,635
---------- ----------
Property, plant and equipment, at cost
Land....................................... 334,719 333,816
Buildings and improvements................. 707,902 692,772
Broadcasting and publishing equipment...... 788,528 755,308
Other, including construction-in-progress.. 238,864 226,338
---------- ----------
2,070,013 2,008,234
Less accumulated depreciation.............. 751,286 692,250
---------- ----------
Property, plant and equipment, net....... 1,318,727 1,315,984
---------- ----------
Intangible assets (net of accumulated
amortization of $529,338 in 1993 and
$469,602 in 1992)........................... 2,034,680 2,047,191
Program licenses and rights, noncurrent...... 190,925 187,889
Other assets................................. 256,134 238,460
---------- ----------
$5,792,618 $6,522,159
========== ==========
</TABLE>
See accompanying notes
30
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Liabilities and Stockholders' Equity 1993 1992
- -------------------------------------------- ---------- ----------
<S> <C> <C>
Current liabilities
Accounts payable.......................... $ 144,249 $ 141,045
Accrued compensation...................... 102,992 77,077
Accrued interest.......................... 9,574 22,521
Accrued expenses and other current
liabilities.............................. 201,052 218,452
Program licenses and rights............... 264,935 296,506
Taxes on income........................... 142,640 135,398
Long-term debt due within one year........ 5,299 203,873
---------- ----------
Total current liabilities............... 870,741 1,094,872
Deferred compensation....................... 109,649 93,435
Deferred income taxes....................... 240,935 249,154
Program licenses and rights, noncurrent..... 42,233 40,953
Other liabilities........................... 243,859 241,274
Long-term debt due after one year........... 616,661 912,110
---------- ----------
Total liabilities....................... 2,124,078 2,631,798
---------- ----------
Minority interest........................... 96,424 84,619
---------- ----------
Stockholders' equity
Preferred stock, no par value (4,000,000
shares authorized)....................... -- --
Common stock, $1 par value (80,000,000
shares authorized)....................... 18,394 18,394
Additional paid-in capital................ 1,030,634 1,031,607
Retained earnings......................... 4,092,683 3,640,664
---------- ----------
5,141,711 4,690,665
Less common stock in treasury, at cost
(3,010,910 shares in 1993 and 1,949,733
shares in 1992)............................ 1,569,595 884,923
---------- ----------
Total stockholders' equity............... 3,572,116 3,805,742
---------- ----------
$5,792,618 $6,522,159
========== ==========
</TABLE>
31
<PAGE>
Capital Cities/ABC
- --------------------------------------------------------------------------------
Consolidated Statement of Stockholders' Equity
<TABLE>
<CAPTION>
Years ended December 31, 1993, 1992 Additional
and 1991 Common paid-in Retained Treasury
(Dollars in thousands) stock capital earnings stock Total
- ---------------------------------------- ------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Balance January 1, 1991................. $18,394 $ 998,570 $3,057,745 $ (706,812) $3,367,897
Net income for 1991................... -- -- 343,493 -- 343,493
67,298 shares issued under Employee
Stock Purchase Plan.................. -- 17,475 -- 8,970 26,445
21,683 shares issued on exercise of
employee stock options............... -- 1,150 -- 2,908 4,058
209,445 shares purchased for treasury. -- -- -- (83,714) (83,714)
Cash dividends........................ -- -- (3,346) -- (3,346)
------- ---------- ---------- ---------- ----------
Balance December 31, 1991............... 18,394 1,017,195 3,397,892 (778,648) 3,654,833
Net income for 1992................... -- -- 246,093 -- 246,093
64,937 shares issued under Employee
Stock Purchase Plan.................. -- 14,870 -- 9,064 23,934
13,078 shares issued on exercise of
employee stock options............... -- (458) -- 3,071 2,613
272,923 shares purchased for treasury. -- -- -- (118,410) (118,410)
Cash dividends........................ -- -- (3,321) -- (3,321)
------- ---------- ---------- ---------- ----------
Balance December 31, 1992............... 18,394 1,031,607 3,640,664 (884,923) 3,805,742
Net income for 1993................... -- -- 455,257 -- 455,257
72,585 shares issued under Employee
Stock Purchase Plan.................. -- 1,023 -- 26,437 27,460
10,455 shares issued on exercise of
employee stock options............... -- (1,996) -- 3,901 1,905
1,144,217 shares purchased for
treasury............................. -- -- -- (715,010) (715,010)
Cash dividends........................ -- -- (3,238) -- (3,238)
------- ---------- ---------- ---------- ----------
Balance December 31, 1993............... $18,394 $1,030,634 $4,092,683 $(1,569,595) $3,572,116
======= ========== ========== ========== ==========
</TABLE>
See accompanying notes
32
<PAGE>
- -------------------------------------------------------------------------------
Notes to Consolidated Financial Statements
1. Accounting Policies
Principles of Consolidation--The consolidated financial statements include the
accounts of all significant subsidiaries. Investments in other companies which
are at least 20% owned are reported on the equity method. All significant
intercompany accounts and transactions have been eliminated.
Property, Plant and Equipment - Depreciation--Depreciation is computed on the
straight-line method for financial accounting purposes and on accelerated
methods for tax purposes. Estimated useful lives for major asset categories are
10-55 years for buildings and improvements, 4-20 years for broadcasting
equipment and 5-20 years for publishing machinery and equipment. Leasehold
improvements are amortized over the terms of the leases.
Intangible Assets--Intangible assets consist of amounts by which the cost of
acquisitions exceeded the values assigned to net tangible assets. The
broadcasting and publishing intangible assets, all of which may be characterized
as scarce assets with very long and productive lives, have historically
increased in value with the passage of time. In accordance with Accounting
Principles Board Opinion No. 17, substantially all of these intangible assets
are being amortized over periods of up to 40 years, even though in the opinion
of management there has been no diminution of value of the underlying assets.
Program Licenses and Rights--Program licenses and rights and related
liabilities are recorded when the license period begins and the program is
available for use. Television network and station rights for theatrical movies
and other long-form programming are charged to expense primarily on accelerated
bases related to the usage of the program. Television network series costs and
multi-year sports rights are charged to expense based on the flow of
anticipated revenue.
Short-Term Investments--Short-term investments consist of highly liquid U.S.
Government instruments with original maturities in excess of three months and
are carried at cost, which approximates market. Short-term investments which
have a maturity of three months or less at the time of purchase are considered
cash equivalents. The carrying amount of the short-term investments and cash
equivalents approximates market value due to their short maturity.
Other--In November 1992, the Financial Accounting Standards Board issued
Statement No. 112, "Employers' Accounting for Postemployment Benefits" and in
May 1993 issued Statement No. 115, "Accounting for Certain Investments in Debt
and Equity Securities." The Company will adopt both standards in 1994. The
impact on the financial statements of such adoption is estimated not to be
material.
33
<PAGE>
Capital Cities/ABC
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements--(Continued)
2. Long-term Debt
Long-term debt at December 31, 1993 and 1992 is as follows (000's omitted):
<TABLE>
<CAPTION>
1993 1992
-------- ----------
<S> <C> <C>
Commercial paper supported by
bank revolving credit
agreement..................... $100,000 $ 100,000
8 3/4% debentures due 2021..... 250,000 250,000
8 7/8% notes due 2000.......... 250,000 250,000
8 3/4% sinking fund debentures
due 2016...................... -- 300,000
8 1/4% notes due 1996.......... -- 200,000
Other long-term debt........... 21,960 15,983
-------- ----------
$621,960 $1,115,983
======== ==========
</TABLE>
The aggregate payments of long-term debt outstanding at December 31, 1993, for
the next five years, excluding commercial paper, are summarized as follows: 1994
- - $5,299,000; 1995 - $3,602,000; 1996 - $3,638,000; 1997 - $2,891,000;
1998 - $6,153,000.
Interest paid on long-term debt during 1993, 1992 and 1991 amounted to
$83,002,000, $139,674,000 and $203,170,000, respectively.
A subsidiary of the Company has issued commercial paper, $100,000,000 of which
was outstanding at December 31, 1993, at a weighted average interest rate of
3.4%. The commercial paper is supported by a $1,000,000,000 bank revolving
credit agreement terminating on June 30, 1995, unless otherwise extended.
Under terms of the bank revolving credit agreement, the Company and its
consolidated subsidiaries are required to maintain a consolidated net worth of
$2,581,211,000 at December 31, 1993, increasing annually by 33 percent of the
consolidated net income of the previous year. The commercial paper outstanding
at December 31, 1993, is classified as long-term since the Company intends to
renew or replace with long-term borrowings all, or substantially all, of the
commercial paper. However, the amount of commercial paper outstanding in 1994 is
expected to fluctuate and may be reduced from time to time. The Company has
unconditionally guaranteed the commercial paper, and any borrowings which may be
made by a subsidiary under the bank revolving credit agreement.
The 8 7/8% notes and the 8 3/4% debentures are not redeemable prior to maturity
and are not subject to any sinking fund. During 1991, the Securities and
Exchange Commission declared effective a shelf registration statement of the
Company which allows for the issuance of up to $500,000,000 in additional debt
securities.
During 1993, the Company redeemed $200,000,000 of 8 1/4% notes due 1996 and
$300,000,000 of 8 3/4% sinking fund debentures due 2016. An extraordinary
charge of $12,122,000 (net of income taxes of $7,706,000), or $0.74 per share,
was recorded related to these redemptions. In 1991, the Company recorded an
extraordinary charge of $31,203,000 (net of income taxes of $19,015,000), or
$1.86 per share, upon the early redemption of certain other long-term debt,
then outstanding.
The fair value of the Company's long-term debt, estimated based on the quoted
market prices for similar issues or on the current rates offered to the Company
for debt of similar remaining maturities, was approximately $702,000,000 and
$1,175,000,000 at December 31, 1993 and 1992, respectively.
34
<PAGE>
- -------------------------------------------------------------------------------
3. Employee Benefit Plans
The Company has defined benefit pension plans covering substantially all of its
employees not covered by union plans. The Company's policy is to fund amounts
as are necessary on an actuarial basis to provide for pension benefits in
accordance with the requirements of ERISA. Benefits are generally based on
years of service and compensation. The weighted average discount rate used in
determining the actuarial present value of the projected benefit obligation was
8% at December 31, 1993 and 9% at December 31, 1992. The rate of increase in
future compensation levels and the expected long-term rate of return on assets
were 5% and 8%, respectively, in 1993 and 1992.
The components of net pension cost for 1993, 1992 and 1991 are as follows (000's
omitted):
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Service cost of current period $ 15,494 $ 15,077 $ 14,419
Interest cost on projected
benefit obligation........... 42,499 39,548 36,512
Actual return on plan assets.. (39,731) (42,650) (72,147)
Net amortization and deferral. 2,561 5,864 36,664
-------- -------- --------
Net pension cost.............. $ 20,823 $ 17,839 $ 15,448
======== ======== ========
</TABLE>
The following table sets forth the pension plans' funded status and amounts
recognized in the balance sheet at December 31, 1993 and 1992 (000's omitted):
<TABLE>
<CAPTION>
1993 1992
--------- ---------
<S> <C> <C>
Actuarial present value of accumulated plan benefits
(including vested benefits of $479,332 in 1993 and
$377,548 in 1992).................................. $ 495,304 $ 393,132
========= =========
Plan assets at fair value, primarily publicly traded
securities and short-term cash investments......... $ 522,096 $ 510,207
Projected benefit obligation for service rendered to
date............................................... (585,710) (468,641)
--------- ---------
Plan assets (less than) in excess of projected
benefit obligation................................. (63,614) 41,566
Prior service cost not yet recognized in net
periodic pension cost.............................. 39,493 29,918
Unrecognized net loss (gain) from past experience
different from that assumed........................ 6,095 (66,664)
Unrecognized net asset (transition amount) being
recognized principally over 15 years............... (14,547) (17,428)
--------- ---------
(Accrued) pension cost included in balance sheet.... $ (32,573) $ (12,608)
========= =========
</TABLE>
For certain employees not covered by pension plans, the Company contributes to
profit sharing plans. The profit sharing plans provide for contributions by the
Company in such amount as the Board of Directors may annually determine.
Contributions to the profit sharing plans of $6,045,000, $6,192,000 and
$6,432,000 were charged to expense in 1993, 1992 and 1991, respectively.
The Company also has a Savings & Investment Plan which allows eligible employees
to allocate up to 10% of salary, through payroll deduction, among a Company
stock fund, a diversified equity fund and a fixed interest fund. The Company
matches 50% of the employee's contribution, up to 5% of salary. In
1993, 1992 and 1991, the cost of this plan (net of forfeitures) was $11,204,000,
$10,982,000 and $10,138,000, respectively.
In addition to the Company's defined benefit pension plans and qualified profit
sharing plans, the Company provides certain postretirement medical and life
insurance benefits to eligible retirees and dependents. Covered individuals
include retired and active employees who have met certain age and service
requirements at various dates during 1989. No other employees become eligible
for postretirement benefits after these dates. The benefits are subject to
deductibles, co-payment provisions and other limitations. The Company reserves
the right to amend, modify or discontinue these plans in the future.
35
<PAGE>
Capital Cities/ABC
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements--(Continued)
3. Employee Benefit Plans--(Continued)
In 1992, the Company adopted Financial Accounting Standard No. 106 "Employers'
Accounting for Postretirement Benefits Other Than Pensions." In applying this
statement, the Company recognized the full amount of the accumulated
postretirement benefit obligation as of January 1, 1992 as a cumulative effect
of an accounting change. The noncash charge to 1992 earnings was $54,817,000
(net of income taxes of $36,544,000), or $3.30 per share.
The accumulated postretirement benefit obligation was determined using an
assumed discount rate of 8% at December 31, 1993 and 9% at December 31, 1992.
The assumed health care cost trend rate used in measuring the accumulated
postretirement benefit obligation was 13%; the rate was assumed to decrease
gradually to 5 1/2% by the year 2001 and remain at that level thereafter. An
increase in the assumed health care cost trend rate by one percentage point in
each year would increase the accumulated postretirement benefit obligation as of
December 31, 1993 by approximately $10,370,000 and the aggregate of the service
and interest cost components of net periodic postretirement benefit cost for the
year then ended by approximately $1,120,000.
The following table sets forth the plans' amounts recognized in the consolidated
balance sheet at December 31, 1993 and 1992 for the Company's defined
postretirement benefit plans (other than pensions) (000's omitted):
<TABLE>
<CAPTION>
1993 1992
-------- --------
<S> <C> <C>
Accumulated postretirement benefit
obligation:
Retirees............................ $ 58,165 $ 53,854
Fully eligible active participants.. 21,430 21,644
Other active participants........... 22,126 18,710
-------- --------
Total accumulated postretirement
benefit obligation................... 101,721 94,208
Unrecognized net loss................. (4,415) --
-------- --------
Accrued postretirement benefit cost... $ 97,306 $ 94,208
======== ========
</TABLE>
Net periodic postretirement benefit cost (other than pensions) for 1993 and 1992
consisted of the following components (000's omitted):
<TABLE>
<CAPTION>
1993 1992
------ ------
<S> <C> <C>
Service cost-benefits attributed to
service during the period................ $1,232 $1,031
Interest cost on accumulated post-
retirement benefit obligation............ 8,141 7,961
------ ------
Net periodic postretirement benefit cost.. $9,373 $8,992
====== ======
</TABLE>
4. Commitments
At December 31, 1993, the Company is committed to the purchase of broadcast
rights for various feature films, sports and other programming aggregating
approximately $3,702,000,000. The aggregate payments related to these
commitments during the next five years are summarized as follows:
1994 -- $ 1,303,369,000; 1995 -- $ 751,210,000;
1996 -- $ 624,585,000; 1997 -- $ 549,276,000;
1998 -- $ 260,287,000.
The Company anticipates 1994 capital expenditures for property, plant and
equipment will approximate $145,000,000.
Rental expense under operating leases amounted to $86,312,000, $92,820,000 and
$93,089,000 for 1993, 1992 and 1991, respectively. Future minimum annual rental
payments under non-cancelable leases are as follows (000's omitted):
<TABLE>
<CAPTION>
Capital Operating
leases leases
--------- ---------
<S> <C> <C>
1994.................................. $ 7,684 $ 57,770
1995.................................. 7,401 45,617
1996.................................. 7,017 40,490
1997.................................. 6,107 37,203
1998.................................. 5,652 34,335
1999 and thereafter................... 126,273 120,362
--------- --------
Minimum lease payments................ 160,134 $335,777
========
Imputed interest...................... (114,684)
---------
Present value of minimum lease
payments............................. $ 45,450
=========
</TABLE>
Total minimum payments for operating leases have not been reduced for future
minimum sublease rentals aggregating $8,566,000.
36
<PAGE>
- --------------------------------------------------------------------------------
5. Segment Data
The Company's business operations are classified into two segments:
Broadcasting and Publishing. Broadcasting operations include the ABC Television
Network and eight television stations, the ABC Radio Networks, radio stations,
cable television programming and multimedia business activities. The Publishing
segment includes newspapers, shopping guides, various specialized business
periodicals and books, research services and data base publishing. There are no
material product transfers between segments of the Company, and virtually all of
the Company's business is conducted within the United States. The segment data
is as follows (000's omitted):
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Broadcasting
Net revenues............................ $4,663,215 $4,265,561 $4,329,743 $4,283,633 $3,899,989
---------- ---------- ---------- ---------- ----------
Direct operating costs................ 3,762,988 3,523,143 3,537,676 3,331,316 2,943,321
Depreciation.......................... 75,424 76,406 75,883 75,088 74,333
Amortization of intangible assets..... 46,726 46,695 46,476 46,772 46,186
---------- ---------- ---------- ---------- ----------
Total operating costs................... 3,885,138 3,646,244 3,660,035 3,453,176 3,063,840
---------- ---------- ---------- ---------- ----------
Income from operations.................. $ 778,077 $ 619,317 $ 669,708 $ 830,457 $ 836,149
========== ========== ========== ========== ==========
Assets at year-end...................... $4,389,700 $4,357,152 $4,249,089 $4,250,540 $4,177,132
Capital expenditures.................... 78,526 94,255 106,254 105,475 173,078
Publishing
Net revenues............................ $1,010,438 $1,078,566 $1,052,246 $1,101,969 $1,057,405
---------- ---------- ---------- ---------- ----------
Direct operating costs................ 851,787 908,791 895,402 934,022 891,542
Depreciation.......................... 18,385 18,072 18,084 18,363 17,971
Amortization of intangible assets..... 14,619 15,314 15,855 17,213 17,448
---------- ---------- ---------- ---------- ----------
Total operating costs................... 884,791 942,177 929,341 969,598 926,961
---------- ---------- ---------- ---------- ----------
Income from operations.................. $ 125,647 $ 136,389 $ 122,905 $ 132,371 $ 130,444
========== ========== ========== ========== ==========
Assets at year-end...................... $ 824,369 $ 777,512 $ 886,482 $ 916,346 $ 899,499
Capital expenditures.................... 18,657 20,276 13,878 14,450 13,015
Consolidated
Net revenues............................ $5,673,653 $5,344,127 $5,381,989 $5,385,602 $4,957,394
========== ========== ========== ========== ==========
Income from operations.................. $ 903,724 $ 755,706 $ 792,613 $ 962,828 $ 966,593
General corporate expense............. (41,575) (33,901) (31,380) (39,613) (44,081)
---------- ---------- ---------- ---------- ----------
Operating income........................ 862,149 721,805 761,233 923,215 922,512
Interest expense...................... (59,772) (104,009) (179,347) (168,859) (174,417)
Interest and miscellaneous, net....... 26,002 68,132 80,310 83,424 103,032
---------- ---------- ---------- ---------- ----------
Income before income taxes.............. $ 828,379 $ 685,928 $ 662,196 $ 837,780 $ 851,127
========== ========== ========== ========== ==========
Assets employed by segments............. $5,214,069 $5,134,664 $5,135,571 $5,166,886 $5,076,631
Cash investments and other corporate
assets................................. 578,549 1,387,495 1,560,141 1,529,301 1,282,876
---------- ---------- ---------- ---------- ----------
Total assets at year-end................ $5,792,618 $6,522,159 $6,695,712 $6,696,187 $6,359,507
========== ========== ========== ========== ==========
</TABLE>
37
<PAGE>
Capital Cities/ABC
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements--(Continued)
6. Income Taxes
The Company adopted Financial Accounting Standard No. 109 (FAS 109) effective
January 1, 1992. As a result of adopting FAS 109, net deferred taxes increased
by $127,198,000 of which $88,418,000 was recorded as the cumulative effect of
adopting the Statement.
The provision for taxes on income before the extraordinary charges for 1993 and
1991, and the cumulative effect of accounting changes for 1992 differs from the
amount of tax determined by applying the federal statutory rate for the
following reasons (000's omitted):
<TABLE>
<CAPTION>
1993 1992 1991
-------------- -------------- --------------
Amount % Amount % Amount %
-------- ---- -------- ---- -------- ----
<S> <C> <C> <C> <C> <C> <C>
Income before income taxes........... $828,379 $685,928 $662,196
======== ======== ========
Income tax expense at statutory
federal rate........................ $289,933 35.0 $233,216 34.0 $225,147 34.0
State and local income taxes, net
of federal benefit.................. 40,321 4.9 34,547 5.0 33,432 5.0
Amortization of intangibles.......... 17,950 2.2 17,541 2.6 21,020 3.2
Other, net........................... 12,796 1.5 11,296 1.6 7,901 1.2
-------- ---- -------- ---- -------- ----
Total................................ $361,000 43.6 $296,600 43.2 $287,500 43.4
======== ==== ======== ==== ======== ====
</TABLE>
Income tax expense is comprised of the following (000's omitted):
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Federal
Current...... $312,800 $274,900 $216,400
Deferred..... (12,700) (29,400) 17,200
-------- -------- --------
300,100 245,500 233,600
-------- -------- --------
State and local
Current...... 65,500 57,400 50,500
Deferred..... (4,600) (6,300) 3,400
-------- -------- --------
60,900 51,100 53,900
-------- -------- --------
Total.......... $361,000 $296,600 $287,500
======== ======== ========
</TABLE>
Income taxes paid, net of refunds received, during 1993, 1992 and 1991 amounted
to $341,587,000, $292,329,000 and $310,737,000, respectively.
Deferred income taxes represent the tax effect of temporary differences between
the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes.
Significant components of the Company's deferred tax asset (recorded in other
current assets on the balance sheet) and liability as of December 31, 1993 and
1992, are as follows (000's omitted):
<TABLE>
<CAPTION>
1993 1992
--------- ---------
<S> <C> <C>
Current
Programming........................ $ 33,140 $ 41,475
Other, net......................... 70,023 52,570
--------- ---------
Net current deferred tax asset....... $ 103,163 $ 94,045
========= =========
Noncurrent
Deferred compensation.............. $ 40,665 $ 35,262
Postretirement benefits other than
pensions.......................... 40,431 37,744
Basis differences on prior
business combinations............. (258,511) (257,190)
Accelerated depreciation........... (120,303) (111,922)
Other, net......................... 56,783 46,952
--------- ---------
Net noncurrent deferred tax liability $(240,935) $(249,154)
========= =========
</TABLE>
38
<PAGE>
- --------------------------------------------------------------------------------
7. Common Stock Plans
The Company has stock option plans under which certain key personnel have been
granted the right to purchase shares of common stock over a 6-, 10- or 11-year
period from the date of grant at prices equal to market value on the grant date.
Each option is cumulatively exercisable as to 25% of the total shares
represented thereby for each of the first four years after grant, provided that
the individual remains in the employ of the Company. During 1991, the
stockholders approved a plan authorizing the issuance of 500,000 shares, and at
the same time canceled all previously authorized but unissued options. The
following information pertains to the Company's stock option plans:
<TABLE>
<CAPTION>
1993 1992 1991
------------------ ------------------ ------------------
<S> <C> <C> <C>
Outstanding options, beginning of year 35,746 39,124 61,107
Granted............................... 19,100 10,000 --
Canceled or expired................... (125) (300) (300)
Exercised............................. (10,455) (13,078) (21,683)
------- ------- -------
Outstanding options, end of year...... 44,266 35,746 39,124
======= ======= =======
Average price of options exercised
during the year...................... $159.19 $175.71 $125.81
Exercise price of outstanding.........
options, end of year................. $131.13 to $634.75 $131.13 to $492.00 $131.13 to $383.38
Options exercisable, end of year...... 17,666 24,396 36,274
Options available for future grant.... 470,900 490,000 500,000
</TABLE>
The Company has an Employee Stock Purchase Plan which allows eligible employees,
through contributions of up to 15% of their compensation, to purchase shares at
85% of the lower of fair market value at the Grant Date or at the Purchase Date
(normally one year subsequent). Employees purchased 72,585, 64,937 and 67,298
shares under the Plan in 1993, 1992 and 1991, respectively. As of December 31,
1993, 264,127 shares remain available to be purchased through the period ending
April 1995.
The Company has an incentive compensation plan for certain of its employees
under which amounts payable are based upon appreciation in the market price of
the Company's common stock. Payments are made in either cash, common stock or a
combination thereof, at the discretion of the Company.
8. Shareholder Rights Plan
In 1989, the Company adopted a Shareholder Rights Plan. The Plan becomes
operative upon the occurrence of certain events involving the acquisition of 20%
or more of the Company's common stock by any person or group in transactions not
approved by the Company's Board of Directors. In the case of Berkshire Hathaway
Inc., pursuant to an existing agreement, the threshold for activation of the
Rights Plan is the acquisition of more than 30% of the Company's common stock.
Upon the occurrence of such an event, each Right, unless redeemed by the Board,
entitles its holder to purchase at the Right's exercise price of $2,000 a number
of common shares of the Company, or in certain circumstances the acquiring
company's common shares, having a market value of twice that price. The Rights
expire in 1999.
39
<PAGE>
Capital Cities/ABC
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements--(Continued)
9. Quarterly Financial Data (Unaudited)
The following summarizes the Company's results of operations for each quarter of
1993 and 1992 (000's omitted, except per share amounts). The net income per
share computation for each quarter and the year are separate calculations.
Accordingly, the sum of the quarterly net income per share amounts may not equal
the net income per share for the year.
<TABLE>
<CAPTION>
First Second Third Fourth
quarter quarter quarter quarter Year
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
1993
Net revenues................................ $1,178,337 $1,438,826 $1,301,371 $1,755,119 $5,673,653
Costs and expenses........................ 1,037,401 1,168,140 1,153,339 1,452,624 4,811,504
---------- ---------- ---------- ---------- ----------
Operating income............................ 140,936 270,686 148,032 302,495 862,149
Interest expense.......................... (21,020) (13,972) (11,777) (13,003) (59,772)
Interest and miscellaneous, net........... 3,778 10,463 6,316 5,445 26,002
---------- ---------- ---------- ---------- ----------
Income before income taxes.................. 123,694 267,177 142,571 294,937 828,379
Income taxes.............................. 53,200 115,300 64,300 128,200 361,000
---------- ---------- ---------- ---------- ----------
Income before extraordinary charge.......... 70,494 151,877 78,271 166,737 467,379
Extraordinary charge...................... (12,122) -- -- -- (12,122)
---------- ---------- ---------- ---------- ----------
Net income.................................. $ 58,372 $ 151,877 $ 78,271 $ 166,737 $ 455,257
========== ========== ========== ========== ==========
Income per share
Before extraordinary charge............... $4.29 $ 9.21 $4.75 $10.35 $ 28.53
Extraordinary charge...................... (.74) -- -- -- (.74)
---------- ---------- ---------- ---------- ----------
Net income per share........................ $3.55 $9.21 $4.75 $10.35 $ 27.79
========== ========== ========== ========== ==========
1992
Net revenues................................ $1,095,421 $1,391,321 $1,215,289 $1,642,096 $5,344,127
Costs and expenses........................ 997,501 1,122,592 1,098,806 1,403,423 4,622,322
---------- ---------- ---------- ---------- ----------
Operating income............................ 97,920 268,729 116,483 238,673 721,805
Interest expense.......................... (27,146) (27,309) (26,241) (23,313) (104,009)
Interest and miscellaneous, net........... 4,472 30,495 21,018 12,147 68,132
---------- ---------- ---------- ---------- ----------
Income before income taxes.................. 75,246 271,915 111,260 227,507 685,928
Income taxes.............................. 33,500 124,400 49,100 89,600 296,600
---------- ---------- ---------- ---------- ----------
Income before cumulative effect of
accounting changes......................... 41,746 147,515 62,160 137,907 389,328
Cumulative effect of accounting changes... (143,235) -- -- -- (143,235)
---------- ---------- ---------- ---------- ----------
Net income.................................. $ (101,489) $ 147,515 $ 62,160 $ 137,907 $ 246,093
========== ========== ========== ========== ==========
Income per share
Before cumulative effect of accounting
changes.................................. $2.51 $8.84 $3.74 $8.38 $23.45
Cumulative effect of accounting
changes................................. (8.63) -- -- -- (8.63)
---------- ---------- ---------- ---------- ----------
Net income per share........................ $(6.12) $8.84 $3.74 $8.38 $14.82
========== ========== ========== ========== ==========
</TABLE>
40
<PAGE>
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements--(Continued)
10. Common Stock and
Stockholder Information (Unaudited)
As of February 28, 1994, the approximate number of holders of common stock was
8,610. Dividends of $.05 per share have been paid for each quarter of 1993 and
1992. The common stock is traded on the New York and Pacific Stock Exchanges.
The high, low and closing prices of the Company's common stock for each quarter
of 1993 and 1992 are as follows:
<TABLE>
<CAPTION>
1993 1992
-------------------------- ----------------------------
High Low Close High Low Close
------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
1st quarter........... 531 3/4 476 530 $475 $410 1/8 $425
2nd quarter........... 551 500 503 1/8 487 413 450 7/8
3rd quarter........... 577 489 3/4 571 467 7/8 428 1/4 453 1/4
4th quarter........... 643 3/4 567 619 1/2 521 418 3/4 507 3/4
</TABLE>
Report of Independent Auditors
The Board of Directors and Shareholders
Capital Cities/ABC, Inc.
We have audited the accompanying consolidated balance sheets of Capital
Cities/ABC, Inc. as of December 31, 1993 and 1992, and the related
consolidated statements of income, stockholders' equity, and cash flows
for each of the three years in the period ended December 31, 1993. These
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Capital Cities/ABC, Inc. at December 31, 1993 and 1992, and the
consolidated results of its operations and its cash flows for each of
the three years in the period ended December 31, 1993, in conformity
with generally accepted accounting principles.
As discussed in Notes 3 and 6 to the consolidated financial statements,
in 1992, the Company changed its method of accounting for other
postretirement benefits and income taxes.
New York, New York
February 28, 1994
41
<PAGE>
Capital Cities/ABC
- --------------------------------------------------------------------------------
Report of Management
The management of Capital Cities/ABC, Inc. is responsible for the preparation of
and the information included in the consolidated financial statements. These
statements, including the accompanying notes, have been prepared in accordance
with generally accepted accounting principles and include amounts which are
based upon management's best estimates and judgments.
In recognition of its responsibility for the integrity and reliability of the
data contained in the financial statements, management maintains a system of
internal controls. Internal controls are designed to provide reasonable, but
not absolute, assurance at an appropriate cost, that assets are safeguarded from
loss or unauthorized use, and that the financial records are reliable for the
preparation of financial statements.
The Audit Committee of the Board of Directors, which is composed of six outside
directors, meets periodically with management, the independent auditors and the
Company's internal auditors to ensure that each is carrying out its
responsibilities. The Audit Committee reports its conclusions and
recommendations to the Board of Directors. Both the independent and internal
auditors have free and direct access to the Audit Committee.
The financial statements have been audited by the Company's independent auditors
in accordance with generally accepted auditing standards. In that connection,
the independent auditors develop and maintain an understanding of the Company's
accounting controls and conduct such tests and related procedures as they deem
necessary to render their opinion as to the fairness of the presentation in all
material respects of the financial statements in conformity with generally
accepted accounting principles.
Thomas S. Murphy
Chairman of the
Board and Chief
Executive Officer
Ronald J. Doerfler
Senior Vice President and
Chief Financial Officer
42
<PAGE>
- --------------------------------------------------------------------------------
Capital Cities/ABC
Corporate
Thomas S. Murphy, Chairman of the Board and
Chief Executive Officer
John B. Fairchild, Executive Vice President; Chairman,
Fairchild Publications Group
Robert A. Iger, Executive Vice President;
President, ABC Television Network Group
Ronald J. Doerfler, Senior Vice President and
Chief Financial Officer
Herbert A. Granath, Senior Vice President; President,
Cable and International Broadcast Group
Michael P. Mallardi, Senior Vice President;
President, Broadcast Group
Phillip J. Meek, Senior Vice President;
President, Publishing Group
Stephen A. Weiswasser, Senior Vice President and
General Counsel; President, Multimedia Group
David Westin, Senior Vice President; President of
Production, ABC Television Network Group
Alan N. Braverman, Vice President and Deputy
General Counsel
Allan J. Edelson, Vice President and Controller
David J. Vondrak, Vice President and Treasurer
Joseph M. Fitzgerald, Vice President, Investor Relations
James M. Goldberg, Vice President, Taxes
Robert T. Goldman, Vice President, Administration
Christine Hikawa, Vice President, Broadcast Standards
and Practices
Andrew E. Jackson, Vice President, Corporate Affairs
Charles Keller, Vice President, Corporate Initiatives
Patricia J. Matson, Vice President, Corporate Communications
Jeffrey Ruthizer, Vice President, Labor Relations
William J. Wilkinson, Vice President and Executive
Assistant to the Chairman
Philip R. Farnsworth, Secretary
Allen S. Bomes, Assistant Treasurer
* * * * * *
ABC Television Network Group
Robert A. Iger, President
Peter Chrisanthopoulos, Executive Vice President
John J. Wolters, Senior Vice President
ABC Entertainment
Edward W. Harbert, President
Stuart J. Bloomberg, Executive Vice President
Ronald B. Sunderland, Executive Vice President
Judd L. Parkin, Senior Vice President
Mark A. Pedowitz, Senior Vice President
Donna L. Rosenstein, Senior Vice President
Alan B. Sternfeld, Senior Vice President
P. Thomas Van Schaick, Senior Vice President
Mark C. Zakarin, Senior Vice President
ABC Daytime
Patricia K. Fili-Krushel, President
Mary Alice Dwyer-Dobbin, Senior Vice President
William D. Herlihy, Senior Vice President
ABC Early Morning and Late Night
Philip R. Beuth, President
ABC Children's Programming
Jeanette B. Trias, President
ABC Television Network
Mark A. Mandala, President
Marvin F. Goldsmith, President, Sales & Marketing
Robert J. Cagliero, Executive Vice President
Lawrence S. Fried, Executive Vice President
George H. Newi, Executive Vice President
ABC News
Roone Arledge, President
Paul Friedman, Executive Vice President
Robert J. Murphy, Senior Vice President
William N. Temple, Senior Vice President
Richard C. Wald, Senior Vice President
Alan H. Wurtzel, Senior Vice President
ABC Sports
Dennis D. Swanson, President
Dennis Lewin, Senior Vice President
Robert H. Apter, Senior Vice President
Broadcast Operations & Engineering
Preston A. Davis, President
Michael C. Lang, Senior Vice President
Production
David Westin, President
ABC PRODUCTIONS
Brandon Stoddard, President
GREENGRASS PRODUCTIONS
ABC/KANE PRODUCTIONS
Dennis B. Kane, President
<PAGE>
- --------------------------------------------------------------------------------
Capital Cities/ABC
Broadcast Group
Michael P. Mallardi, President
Television Stations
Lawrence J. Pollock, President
Robert O. Niles, Vice President
WABC-TV (New York, NY)
Walter C. Liss, Jr., President, General Manager
KABC-TV (Los Angeles, CA)
G. Alan Nesbitt, President, General Manager
WLS-TV (Chicago, IL)
Joseph J. Ahern, President, General Manager
WPVI-TV (Philadelphia, PA)
Thomas P. Kane, President, General Manager
KGO-TV (San Francisco, CA)
James G. Topping, President, General Manager
KTRK-TV (Houston, TX)
James E. Masucci, President, General Manager
WTVD (Durham-Raleigh, NC)
Timothy J. Bennett, President, General Manager
KFSN-TV (Fresno, CA)
Marc Edwards, President, General Manager
NATIONAL TELEVISION SALES
John B. Watkins, President
Radio
James P. Arcara, President
ABC Radio Networks
Robert F. Callahan, Jr., President
Bart W. Catalane, Executive Vice President
David M. Kantor, Executive Vice President
Radio Stations--Group I
Don P. Bouloukos, President
WABC-AM (New York, NY)
Don P. Bouloukos, President, General Manager
WPLJ-FM (New York, NY)
J. Mitchell Dolan, President, General Manager
KABC-AM (Los Angeles, CA)
George Green, President, General Manager
KLOS-FM (Los Angeles, CA)
Bill Sommers, President, General Manager
KGO-AM (San Francisco, CA)
Michael Luckoff, President, General Manager
WJR-AM (Detroit, MI)
James E. Long, President, General Manager
WHYT-FM (Detroit, MI)
John E. Cravens, President, General Manager
KQRS-AM/FM (Minneapolis, MN)
Mark S. Steinmetz, President, General Manager
Radio Stations--Group II
Norman S. Schrutt, President
WLS-AM/FM (Chicago, IL)
Thomas R. Tradup, President, General Manager
WMAL-AM (Washington, DC)
Thomas J. Bresnahan, President, General Manager
WRQX-FM (Washington, DC)
James M. Robinson, President, General Manager
WBAP-AM (Fort Worth-Dallas, TX)
William J. Hare, President, General Manager
KSCS-FM (Fort Worth-Dallas, TX)
Victor J. Sansone, President, General Manager
WKHX-AM/FM (Atlanta, GA)
WYAY-FM (Atlanta, GA)
Norman S. Schrutt, President, General Manager
* * * * * *
Cable and International Broadcast Group
Herbert A. Granath, President
John T. Healy, Executive Vice President
ESPN (Bristol, CT)
Steven M. Bornstein, President
ABC INTERNATIONAL OPERATIONS (New York, NY)
John T. Healy, President
Richard F. Spinner, President and Managing
Director, European Operations
ABC DISTRIBUTION (New York, NY)
Joseph Y. Abrams, President
DIC ENTERTAINMENT (Los Angeles, CA)
Andrew Heyward, President
ARTS & ENTERTAINMENT (New York, NY)
LIFETIME (New York, NY)
<PAGE>
- --------------------------------------------------------------------------------
Capital Cities/ABC
Capital Cities/ABC Multimedia Group
Stephen A. Weiswasser, President
Bruce Maggin, Executive Vice President
CAPITAL CITIES/ABC VIDEO PUBLISHING (Stamford, CT)
Jon R. Peisinger, President
* * * * * *
Publishing Group
Phillip J. Meek, President
Newspapers
THE KANSAS CITY STAR (Kansas City, MO)
Robert C. Woodworth, President, Publisher
FORT WORTH STAR-TELEGRAM (Fort Worth, TX)
Richard L. Connor, President, Publisher
THE OAKLAND PRESS GROUP (Pontiac, MI)
Bruce H. McIntyre, President, Publisher
BELLEVILLE NEWS-DEMOCRAT GROUP (Belleville, IL)
Gary L. Berkley, President, Publisher
THE TIMES LEADER GROUP (Wilkes-Barre, PA)
Dale A. Duncan, President, Publisher
OREGON NEWSPAPER GROUP (Albany, OR)
Richard F. Anderson, President
NEW ENGLAND NEWSPAPER GROUP (Canton, Guilford,
Milford, North Haven and West Hartford, CT; Marshfield
and Cape Cod, MA; and Kingston, RI)
John E. Coots, Group Executive
SHOPPING GUIDES
Wesley R. Turner, Group Executive
PENNYSAVERS (Orange and San Diego
Counties, Sacramento and Stockton, CA)
William E. Carman, President
PENNYPOWER SHOPPING NEWS (Wichita, KS and
Springfield, MO)
Michael T. Blasi, President
NORTHWEST NICKELS (Seattle-Tacoma and
Spokane, WA; Portland, OR; Las Vegas, NV)
Specialized Publications
DIVERSIFIED PUBLISHING GROUP
Ann Maynard Gray, President
AGRICULTURAL PUBLISHING GROUP (Carol Stream, IL)
Allan R. Johnson, President
CHILTON ENTERPRISES (Radnor, PA)
David S. Loewith, President
CHILTON PUBLICATIONS (Radnor, PA)
Leon C. Hufnagel, President
LOS ANGELES MAGAZINE (Los Angeles, CA)
Geoff Miller, Publisher
NILS PUBLISHING COMPANY (Chatsworth, CA)
William H. Bang, President
FAIRCHILD PUBLICATIONS GROUP (New York, NY)
John B. Fairchild, Chairman and Editorial Director
Michael F. Coady, President
FINANCIAL SERVICES AND MEDICAL GROUP
Peter A. Derow, President
INSTITUTIONAL INVESTOR (New York, NY)
Peter A. Derow, President
INTERNATIONAL MEDICAL NEWS GROUP (Short Hills, NJ)
Thomas Fowler, President
CAPITAL CITIES CAPITAL
George M. Cain, President
<PAGE>
- --------------------------------------------------------------------------------
Executive Officers
Thomas S. Murphy
Chairman of the Board and
Chief Executive Officer
John B. Fairchild
Executive Vice President;
Chairman, Fairchild
Publications Group
Robert A. Iger
Executive Vice President;
President, ABC Television
Network Group
Ronald J. Doerfler
Senior Vice President and
Chief Financial Officer
Herbert A. Granath
Senior Vice President;
President, Cable and
International Broadcast
Group
Michael P. Mallardi
Senior Vice President;
President, Broadcast
Group
Phillip J. Meek
Senior Vice President;
President, Publishing Group
Stephen A. Weiswasser
Senior Vice President and
General Counsel; President,
Multimedia Group
David Westin
Senior Vice President;
President of Production,
ABC Television Network
Group
<PAGE>
- --------------------------------------------------------------------------------
Board of Directors
THOMAS S. MURPHY 1,4
Chairman of the Board and Chief Executive Offer
ROBERT P. BAUMAN 3*
Chief Executive, SmithKline Beecham, p.l.c.
NICHOLAS F. BRADY 3
Chairman and Chief Executive Officer, Darby
Overseas Investments, Ltd.; Former Secretary
of the United States Department of the Treasury
WARREN E. BUFFETT 4*
Chairman of the Board and Chief Executive Officer,
Berkshire Hathaway Inc.
DANIEL B. BURKE 1,4
Retired President and Chief Executive Officer,
Capital Cities/ABC, Inc.
FRANK T. CARY 2
Former Chairman of the Board and Chief Executive
Officer, International Business Machines Corporation
JOHN B. FAIRCHILD
Executive Vice President
Chairman, Fairchild Publications Group
LEONARD H. GOLDENSON 1*
Chairman of the Executive Committee;
Retired Chairman of the Board and Chief Executive
Officer, American Broadcasting Companies, Inc.
FRANK S. JONES 2
Ford Professor of Urban Affairs, Emeritus
Massachusetts Institute of Technology
ANN DIBBLE JORDAN 2
Former Director of Social Service Department,
University of Chicago Medical School
JOHN H. MULLER, JR. 1,2*,3
Chairman of the Executive Committee, former Chairman of the
Board and Chief Executive Officer, General Housewares Corp.
WYNDHAM ROBERTSON 2
Vice President for Communications,
University of North Carolina
M. CABELL WOODWARD, JR. 1,2
Retired Vice Chairman and Chief Financial Officer,
ITT Corporation
Director Emeritus
GERALD DICKLER
Former Senior Counsel,
Hall, Dickler, Lawler, Kent & Friedman,
Attorneys at Law
1 Member of Executive Committee
2 Member of Audit Committee
3 Member of Compensation Committee
4 Member of Finance Committee
* Committee Chairman
- ----------------------------------------
Transfer Agent and Registrar
Harris Trust Company of New York
77 Water Street
New York, New York 10005
The Company's Common Stock is listed for trading on the New York and Pacific
Stock Exchanges (Symbol: CCB)
LOGO
This report is printed entirely on recycled paper
<PAGE>
Capital Cities/ABC, Inc.
77 West 66th Street
New York, New York 10023-6298
(212) 456-7777
<PAGE>
Annual Report Exhibits (the title of each graph is self-explanatory):
On Page 1 of the Annual Report, there is a bar chart entitled "Income before
extraordinary items and cumulative effect of accounting changes." The plot
points are as follows:
<TABLE>
<CAPTION>
1986 1987 1988 1989 1990 1991 1992 1993
- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
181.9 279.1 387.1 485.7 477.8 374.7 389.3 467.4
</TABLE>
On Page 1 of the Annual Report, there is a bar chart entitled "Income per share
before extraordinary itesm and cumulative effect of accounting changes." The
plot points are as follows:
<TABLE>
<CAPTION>
1986 1987 1988 1989 1990 1991 1992 1993
- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
11.20 16.46 22.31 27.25 27.71 22.33 23.45 28.53
</TABLE>
On Page 8 of the Annual Report, there is a bar chart entitled "Broadcasting -
Net Revenues." The plot points are as follows:
<TABLE>
<CAPTION>
1986 1987 1988 1989 1990 1991 1992 1993
- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
3,153.6 3,433.7 3,749.6 3,900.0 4,283.6 4,329.7 4,265.6 4,663.2
</TABLE>
On Page 8 of the Annual Report, there is a bar chart entitled "Broadcasting -
Operating Income." The plot points are as follows:
<TABLE>
<CAPTION>
1986 1987 1988 1989 1990 1991 1992 1993
- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
474.5 632.9 722.2 836.1 830.5 669.7 619.3 778.1
</TABLE>
On Page 17 of the Annual Report, there is a bar chart entitled "Publishing - Net
Revenues." The plot points are as follows:
<TABLE>
<CAPTION>
1986 1987 1988 1989 1990 1991 1992 1993
- ----- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
970.8 1,006.6 1,023.9 1,057.4 1,102.0 1,052.2 1,078.6 1,010.4
</TABLE>
On Page 17 of the Annual Report, there is a bar chart entitled "Publishing -
Operating Income." The plot points are as follows:
<TABLE>
<CAPTION>
1986 1987 1988 1989 1990 1991 1992 1993
- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
159.0 146.7 129.7 130.4 132.4 122.9 136.4 125.6
</TABLE>
On Page 21 of the Annual Report, there is a bar chart entitled "Operating
Income." The plot points are as follows:
<TABLE>
<CAPTION>
1986 1987 1988 1989 1990 1991 1992 1993
- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
602.7 746.0 816.0 922.5 923.2 761.2 721.8 862.1
</TABLE>
On Page 24 of the Annual Report, there is a bar chart entitled "Capital
Expenditures." The plot points are as follows:
<TABLE>
<CAPTION>
1986 1987 1988 1989 1990 1991 1992 1993
- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
153.1 116.3 153.4 193.5 120.8 121.0 114.7 97.8
</TABLE>
<PAGE>
EXHIBIT (21)
As of December 31, 1993
Subsidiaries of Capital Cities/ABC, Inc.
----------------------------------------
Jurisdiction
of
Incorporation
-------------
Capital Cities/ABC, Inc. (parent) New York
ABC Holding Company Inc. Delaware
ABC Cable and International Broadcast, Inc. Delaware
(formerly Capital Cities/ABC Video
Enterprises, Inc.)
ABC Cable and International Broadcast Delaware
Worldwide Holdings, Inc.
(formerly Capital Cities/ABC Video
Enterprises Worldwide Holdings, Inc.)
Capital Cities/ABC Video, Inc. Delaware
Capital Cities/ABC Video Musical Delaware
Investments, Inc.
Capital Cities/ABC Video Productions, Inc. Delaware
COBRA Productions, Inc. California
DIC Post, Inc. California
HAC MFP Productions, Inc. California
MFP Productions, Inc. California
(Stock in these 4 companies is held
by DIC Productions, L.P., a Delaware
limited partnership, in which Capital
Cities/ABC Video Productions, Inc. is
the general partner)
HEMPRO, Inc. Delaware
TPT, Inc. California
Capital Cities/ABC Video Systems, Inc. Delaware
Discriminating Distribution Delaware
Enterprises, Inc.
French Productions, Inc. Delaware
Top Drawer Productions, Inc. Delaware
(formerly Mexican Investments, Inc.)
910353 Ontario Inc. Canada
Spanish Productions, Inc. Delaware
ABC Consumer Magazines Holding Company, Inc. Delaware
ABC Daytime Circle, Inc. Delaware
ABC Network Holding Company, Inc. Delaware
ABC Equipment Leasing, Inc. New York
ABC Motion Pictures, Inc. Delaware
ABC Records, Inc. New York
ABC Circle Music, Inc. New York
American Broadcasting Music, Inc. New York
ABC Theatre Holdings, Inc. Delaware
ABC Interstate Theatres, Inc. Delaware
ABC Southeastern Theatres, Inc. Delaware
Ambro Land Holdings, Inc. Delaware
Ambroco Development Corp. New York
Broadway Development Corp. New York
Columbus West Development Corp. New York
67th Street Development Corp. New York
66th Street Development Corp. New York
<PAGE>
-2-
Capital Cities/ABC, Inc. (parent) (continued)
ABC Holding Company Inc. (continued)
ABC Network Holding Company, Inc. (continued)
Circle Location Services, Inc. Delaware
Stage Five Productions, Inc. California
TNC Company, Inc. Delaware
ABC News Holding Company, Inc. Delaware
ABC News, Inc. Delaware
ABC News InterActive, Inc. Delaware
ABC News Intercontinental, Inc. Delaware
Worldwide Television News Corporation Delaware
Transcontinental Television, Inc. Delaware
Worldwide Television News France
France S.A.R.L.
Worldwide Television News GmbH Germany
Worldwide Television News United Kingdom
(U.K.) Limited
Starbird Satellite Services United Kingdom
Limited
ABC News Overseas Sales, Inc. Delaware
ABC Radio Network, Inc. Delaware
ABC Radio International, Inc. Delaware
ABC Radio (UK) Limited United Kingdom
ABC/Watermark, Inc. Delaware
ABC Sports Holding Company, Inc. Delaware
ABC Sports, Inc. New York
ABC Sports Intercontinental S.A.R.L. France
ABC Sports Marketing, Inc. Delaware
ABC Sports Video, Inc. Delaware
American Broadcasting Companies, Inc. Delaware
Capital Cities/ABC National Television Delaware
Sales, Inc.
Capital Cities/ABC Video Publishing, Inc. Delaware
Chilton Holding Company, Inc. Delaware
Chilton Company Delaware
Automotive Information Illinois
Properties, Inc.
Capital Cities/ABC Diversified Germany
Advertising GmbH
The Center for Curriculum Delaware
Development, Inc.
Chilton Professional Automotive, Inc. Delaware
ESPN Holding Company, Inc. Delaware
ESPN, Inc. Delaware
English Sports, Inc. Delaware
ESPN 88 United Kingdom
Transatlantic Productions, Inc. Delaware
ESPN Asia, Ltd. Delaware
ESPN Enterprises, Inc. Delaware
European Investment Company, Inc. Delaware
European Media Development Delaware
Company, Inc.
European Sports Program Network, Inc. Delaware
O.C.C. Sports, Inc. Delaware
O.P.I. Sports, Inc. Delaware
<PAGE>
-3-
Capital Cities/ABC, Inc. (parent) (continued)
ABC Holding Company Inc. (continued)
Farm Progress Holding Company, Inc. Delaware
Farm Progress Companies, Inc. Illinois
Farm Progress Insurance Services, Inc. Illinois
Indiana Prairie Farmer Insurance Indiana
Services, Inc.
New York Farm Show, Inc. New York
The Miller Publishing Company, Inc. Minnesota
Hitchcock Holding Company, Inc. Delaware
Hitchcock Publishing Company Delaware
Professional Exposition Management Delaware
Company, Inc.
KABC-AM Radio, Inc. Delaware
KGO Television, Inc. Delaware
KGO-AM Radio, Inc. Delaware
KLOS-FM Radio, Inc. Delaware
KLOS Syndications, Inc. Delaware
L.I.C. Warehouse Realty Company, Inc. Delaware
Los Angeles Magazine Holding Company, Inc. Delaware
Los Angeles Magazine, Inc. Delaware
NILS Holding Company, Inc. Delaware
NILS Publishing Company Delaware
CCB/NILS, Inc. Delaware
NILS Enterprises, Inc. Delaware
Premiere Cassettes Marketing, Inc. Delaware
36/38/40 West 66 Realty Company, Inc. Delaware
WABC-AM Radio, Inc. Delaware
WLS Television, Inc. Delaware
WLS-AM Holding Company, Inc. Delaware
WLS, Inc. Delaware
WLS-FM Radio, Inc. Delaware
WMAL Holding Company, Inc. Delaware
WMAL, Inc. Delaware
WPLJ-FM Radio, Inc. Delaware
ABC/Kane Productions International, Inc. Delaware
Capital Cities/ABC Cable Holdings, Inc. Delaware
Capital Cities Capital, Inc. Delaware
Capital Cities Entertainment Systems, Inc. Delaware
Capital Cities Media, Inc. New York
Capital Cities/ABC Publishing/Far East, Inc. Japan
Fairchild Media Services, Inc. Delaware
Fairchild Publications S.A.R.L. France
Foothills Trader, Inc. Connecticut
Guilford Publishing Company, Inc. Delaware
Imprint, Inc. Delaware
Mariner Newspapers, Inc. New York
Newside Publications, Inc. Delaware
Pennysaver of Cape Cod, Inc. Massachusetts
Practical Homeowner Holding Company, Inc. New York
Precision Marketing Services, Inc. Delaware
Quad County Publishing, Inc. Illinois
Capital Cities Vision, Inc. New York
CC Finance Holding Corporation Delaware
Capital Cities/ABC Finance Company, Inc. Delaware
<PAGE>
-4-
Capital Cities/ABC, Inc. (parent)(continued)
CC Texas Holding Co., Inc. Delaware
KTRK Television, Inc. Michigan
Southfield Realty Company, Inc. Michigan
Weehawken Corporation Delaware
CCC Properties, Inc. New York
Institutional Investor, Inc. Delaware
Institutional Investor (Europe) Limited United Kingdom
JBS Productions Holding Company, Inc. Delaware
a.k.a. Productions, Inc. Delaware
The Andrew Adelson Company California
AMBROCO Media Group, Inc. Delaware
Canaka Productions, Inc. Delaware
Class of '96 Productions, Inc. Delaware
Empty Chair Productions, Inc. Delaware
Greengrass Productions, Inc. Delaware
Interglobal Productions, Inc. Delaware
Fogash Films Limited Channel Islands
The Kansas City Star Company (also owns the Missouri
preferred stock of Capital Cities Media, Inc.)
KQRS Holding Corporation Delaware
KQRS, Inc. Delaware
KRXY Holding Corporation Delaware
KRXY Radio, Inc. Delaware
Legal Com of Delaware, Inc. Delaware
Legal Communications Corporation Missouri
Mexican Business Publishing, Inc. Delaware
Mexican Publishing Company, Inc. Delaware
Promotora Vina Sala, S.A. de C.V. Mexico
(Stock is held 99.998% by Mexican Business
Publishing, Inc. and .002% by Mexican
Publishing Company, Inc.)
Sibonei, S.A. de C.V. Mexico
(Stock is held 99.998% by Mexican Publishing
Company, Inc. and .002% by Mexican Business
Publishing, Inc.)
Expansion, S.A. Mexico
(Stock is held 51% by Promotora Vina Sala,
S.A. de C.V. and 49% by Sibonei, S.A.
de C.V.)
Nordic Investments, Inc. Delaware
The Oakland Press Company Michigan
Pennypower of Kansas, Inc. Delaware
Pennypower Shopping News, Inc. Kansas
ST Partner, Inc. Delaware
Star-Telegram Newspaper, Inc. Delaware
Media Transport, Inc. Texas
(Stock is held by Star-Telegram Operating, Ltd.,
a Texas limited partnership, in which ST Partner,
Inc. is the limited partner and Star-Telegram
Newspaper, Inc. is the managing general partner)
Sutton Industries, Inc. Delaware
J V Z Enterprises California
PSP & D, Inc. Delaware
TV Connection, Inc. Delaware
WBAP-KSCS Partner, Inc. Delaware
WBAP-KSCS Radio, Inc. Delaware
Wilson Publishing Company Rhode Island
<PAGE>
EXHIBIT 99(a)
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
ANNUAL REPORT
PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1993.
or
[_] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
------------ ------------
Commission file number 1-4278
A. Full title of the plan and the address of the plan, if different from
that of the issuer named below:
CAPITAL CITIES/ABC, INC. SAVINGS & INVESTMENT PLAN
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
CAPITAL CITIES/ABC, INC.
77 West 66 Street
New York, New York 10023
<PAGE>
S I G N A T U R E S
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the Plan) have duly caused this annual
report to be signed on its behalf by the undersigned hereunto duly authorized.
Capital Cities/ABC, Inc. Savings & Investment Plan
Date: March 14, 1994 ____________________________________
David J. Vondrak, a member
of the Employee Benefits Committee
<PAGE>
CAPITAL CITIES/ABC, INC. SAVINGS & INVESTMENT PLAN
FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULES
DECEMBER 31, 1993
(WITH REPORT OF ERNST & YOUNG, INDEPENDENT AUDITORS THEREON)
<PAGE>
CAPITAL CITIES/ABC, INC. SAVINGS & INVESTMENT PLAN
Index to Financial Statements
Report of Ernst & Young, Independent Auditors
Statements of Financial Condition as of
December 31, 1993 and 1992
Statements of Income and Changes in Plan Equity
for the years ended December 31, 1993, 1992 and 1991
Notes to Financial Statements
Supplemental Schedules: Schedule
- ----------------------- --------
Investments at December 31, 1993 ..................................1
Combining Statements of Financial Condition as of
December 31, 1993 and 1992 ........................................2
Combining Statements of Income and Changes in Plan Equity
for the years ended December 31, 1993, 1992 and
1991 ..............................................................3
Single Transactions in Excess of 5% of the Current
Value of Plan Assets ..............................................4
Exhibit:
- --------
Consent of Ernst & Young
<PAGE>
REPORT OF ERNST & YOUNG INDEPENDENT AUDITORS
The Board of Directors
Capital Cities/ABC, Inc.
We have audited the accompanying statements of financial condition of the
Capital Cities/ABC, Inc. Savings & Investment Plan (the Plan) as of December 31,
1993 and 1992, and the related statements of income and changes in plan equity
for each of the three years in the period ended December 31, 1993. Our audits
also included the financial statement schedules listed in the accompanying index
to financial statements. These financial statements and schedules are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial condition of the Plan at December 31, 1993
and 1992, and the results of its operations and changes in its plan equity for
each of the three years in the period ended December 31, 1993, in conformity
with generally accepted accounting principles. Also, in our opinion, the
related financial statement schedules, when considered in relation to the basic
financial statements taken as a whole, present fairly in all material respects
the information set forth therein.
ERNST & YOUNG
New York, New York
March 14, 1994
<PAGE>
CAPITAL CITIES/ABC, INC. SAVINGS & INVESTMENT PLAN
STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1993 AND 1992
<TABLE>
<CAPTION>
ASSETS 1993 1992
- ------ ------------ ------------
<S> <C> <C>
Investments, at market (notes 1 and 3):
Equity Securities:
Capital Cities/ABC, Inc. common stock
(cost of $128,861,397 and $126,479,181
in 1993 and 1992, respectively) $279,231,572 $231,617,271
Other (cost of $37,050,924 and
$31,250,396 in 1993 and 1992,
respectively) 42,377,131 36,522,393
------------ ------------
Total equity securities 321,608,703 268,139,664
------------ ------------
Other investments:
Bankers Trust Pyramid Directed Account
Cash Fund 3,797,926 2,269,018
Funds on deposit with insurance companies 113,629,385 97,525,355
------------ ------------
Total other investments 117,427,311 99,794,373
------------ ------------
Total investments 439,036,014 367,934,037
------------ ------------
Participant loans (note 2) 9,093,543 8,354,906
Receivables from sales of investments - 152,162
Interest and dividends receivable 305,971 739,207
Due from Capital Cities/ABC, Inc. 2,260,057 2,794,763
------------ ------------
Total assets $450,695,585 $379,975,075
============ ============
LIABILITIES AND PLAN EQUITY
Due to terminated and withdrawing participants $ 4,983,927 $ 5,652,052
Payables for purchases of investments 458,865 -
Plan equity 445,252,793 374,323,023
------------ ------------
Total liabilities and plan equity $450,695,585 $379,975,075
============ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
CAPITAL CITIES/ABC, INC. SAVINGS & INVESTMENT PLAN
STATEMENTS OF INCOME AND
CHANGES IN PLAN EQUITY
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
<TABLE>
<CAPTION>
1993 1992 1991
------------ ------------ -------------
<S> <C> <C> <C>
Investment income:
Dividends $ 878,479 $ 841,884 $ 774,819
Interest 7,804,018 7,366,769 7,530,128
------------ ------------ ------------
Total investment income 8,682,497 8,208,653 8,304,947
------------ ------------ ------------
Appreciation of Capital Cities/ABC, Inc.
common stock distributed to terminated
and withdrawing participants (note l) 5,331,485 1,858,251 2,471,355
Net gain on sales of investments 9,486,275 l,470,457 2,377,834
Net increase (decrease) in unrealized
appreciation of plan assets held at
year end (note l) 45,286,295 33,943,579 (10,946,233)
------------ ------------ ------------
68,786,552 45,480,940 2,207,903
------------ ------------ ------------
Contributions:
Participants (note 2) 25,143,822 27,327,695 27,781,216
Employer (notes l and 2) 11,198,503 13,220,562 9,674,343
------------ ------------ ------------
Total contributions 36,342,325 40,548 257 37,455,559
------------ ------------ ------------
Interest on participant loans (note 2) 565,127 550,590 482,260
Cash transferred from other plan (note 2) - 3,877,175 -
------------ ------------ ------------
Total 105,694,004 90,456,962 40,145,722
------------ ------------ ------------
Distributions to terminated and
withdrawing participants (note l):
Capital Cities/ABC, Inc. common
stock, at market value 11,176,531 3,220,570 6,160,715
Cash 23,355,061 22,905,738 19,039,010
------------ ------------ ------------
Total distributions 34,531,592 26,126,308 25,199,725
------------ ------------ ------------
Administrative expenses (note 4) 232,642 176,607 139,379
------------ ------------ ------------
Change in plan equity 70,929,770 64,154,047 14,806,618
------------ ------------ ------------
Plan equity:
Beginning of year 374,323,023 310,168,976 295,362,358
------------ ------------ ------------
End of year $445,252,793 $374,323,023 $310,168,976
============ ============ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
CAPITAL CITIES/ABC, INC. SAVINGS & INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(1) Summary of Significant Accounting Policies
------------------------------------------
(a) The accompanying financial statements present plan equity and changes
therein of the Capital Cities/ABC, Inc. Savings & Investment Plan (the
Plan) on an accrual basis. The Plan consists of three funds:
Fund A - Capital Cities/ABC, Inc.
Common Stock Fund
Fund B - Diversified Equity Fund
Fund C - Fixed Interest Fund
(b) The investment in common stock of Capital Cities/ABC, Inc. (Capital
Cities/ABC) is stated at market value which is based on the year-end stock
quotation from the New York Stock Exchange.
Investments of the Diversified Equity Fund consist of equity securities and
convertible debentures of companies other than Capital Cities/ABC. The market
value of the equity investments is also based on year-end stock quotations from
the New York Stock Exchange.
Investments of the Fixed Interest Fund consist of funds on deposit with
insurance companies under contracts which provide a guaranteed annual rate of
interest. The Fixed Interest Fund is valued at the contracts' carrying amounts.
Cash may be temporarily invested in obligations of the U.S. Government or other
short-term investments.
Realized gains and losses on sales of securities are accounted for on a weighted
average cost basis. Purchases and sales are recorded on a trade date basis.
Dividend income is accrued on the ex-dividend date. Interest income is recorded
on an accrual basis as earned.
Unrealized appreciation at the beginning and end of each year and the net
increase (decrease) for each year included in the accompanying statements of
income and changes in plan equity are as follows:
<TABLE>
<CAPTION>
1993 1992 1991
------------ ------------ -------------
<S> <C> <C> <C>
Balance at beginning of year $110,410,087 $ 76,466,508 $ 87,412,741
Balance at end of year 155,696,382 110,410,087 76,466,508
------------ ------------ ------------
Net increase/(decrease) $ 45,286,295 $ 33,943,579 $(10,946,233)
============ ============ ============
</TABLE>
<PAGE>
CAPITAL CITIES/ABC, INC. SAVINGS & INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(1) Summary of Significant Accounting Policies (Continued)
------------------------------------------
(c) Distributions to terminated and withdrawing participants are based
upon the market value of units and/or shares credited to participants'
accounts as of the effective date of termination or withdrawal. The
difference between the market value on the effective date of
distribution and the cost of shares distributed is shown separately in
the accompanying combined statements of income and changes in plan
equity.
(d) Employer contributions are reported net of forfeitures of $254,154,
$174,247 and $137,869 for 1993, 1992 and 1991, respectively.
(2) Description of Plan
-------------------
The Plan is an employee savings and investment plan for participating
employees of American Broadcasting Companies, Inc. (ABC) (an indirect
wholly owned subsidiary of Capital Cities/ABC) and those other subsidiaries
and divisions of Capital Cities/ABC which were previously a part of, or
affiliates of ABC. Individuals who became employees of the corporate and
other broadcasting properties of Capital Cities/ABC subsequent to 1988 are
eligible to participate in the Plan. In addition, approximately 5,000
employees of certain properties within Capital Cities/ABC's Publishing
Group are eligible to participate in the Plan. The cash transfer of
$3,877,175 in 1992 represents the merger of the International Medical News
Group Profit Sharing Plan into the Plan.
Under the Plan, eligible employees may authorize payroll deductions of
either 2, 3, 4 or 5% of their annual compensation to be invested in one or
more of three funds. Such contributions may be in the form of regular
after-tax contributions (taxable), or tax deferred contributions. Capital
Cities/ABC will contribute an amount equal to 50% of such deductions, to be
invested in the Capital Cities/ ABC, Inc. Common Stock Fund (Fund A).
Participants can also contribute an additional unmatched 2, 3, 4 or 5% of
annual compensation, which may be designated as either taxable or tax
deferred contributions for any year. Combined employee and employer-matched
contributions are limited to $30,000 for all defined contribution plans. In
1993 and 1992, the IRS-imposed limitation on tax deferred contributions
made by employees was $8,994 and $8,728, respectively. Participants are
immediately vested with respect to their own contributions. Participants
with less than 5 years of service vest with respect to employer
contributions over a three-year period, one-third each year. Upon
completion of 5 years of service, death, permanent disability, retirement
or termination of service after age 65, a participant's account is
considered fully vested.
The Plan permits the Employee Benefits Committee to postpone distributions
of a member's account in instances where a member's termination of services
arises out of a change in ownership of stock or all or part of the assets
of a member's employing unit and such member is reemployed by the acquiring
entity if such termination is not deemed a "separation from service" within
the meaning of the applicable income tax rulings or regulations. In such
instances the Employee Benefits Committee may postpone the distribution
until such distribution may be accomplished without adverse income tax
consequences to the member or to the Plan or may allow a transfer to
another qualified plan or allow a permissible tax-free rollover.
(Continued)
2
<PAGE>
CAPITAL CITIES/ABC, INC. SAVINGS & INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(2) Description of Plan (Continued)
-------------------
Under the Plan, members are allowed to obtain loans equal to the lesser of
the amount of such member's account attributable to taxable and tax
deferred contributions or the maximum amount allowable under Federal tax
regulations with $1,000 being the minimum. The loans bear interest at a
rate determined by the Employee Benefits Committee.
The value of a participant's account is determined based upon share value
for Fund A and unit values for Funds B and C. Upon permanent disability or
retirement, the amount credited to a participant's account is distributed
to him or his beneficiary, either in a lump sum or in installments over a
period not exceeding ten years. Upon termination of employment for reasons
other than permanent disability or retirement, the amount credited to the
participant's account is distributed in a lump sum. While employed, a
participant may, in 10% increments or a lump sum, withdraw from the Plan
the amount credited to his account which is attributable to his taxable
contributions. Upon a withdrawn participant's termination, the vested
amount credited to his account attributable to employer contributions is
distributed to him. If a participant terminates prior to vesting with
respect to employer contributions, forfeited funds are used to reduce the
contribution of Capital Cities/ABC. Distributions of Fund A are paid either
in shares of Capital Cities/ABC common stock or cash. Distributions for
Funds B and C are paid in cash.
As of December 31, 1993 there were 9,803 participants in Fund A, 4,792
participants in Fund B and 7,041 participants in Fund C.
As of December 31, 1993 there were 6,772,307 total units in Fund B and
25,862,811 total units in Fund C with unit values of $7.20 and $4.49,
respectively.
(Continued)
3
<PAGE>
CAPITAL CITIES/ABC, INC. SAVINGS & INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(3) Changes in Investment in Equity Securities
------------------------------------------
Changes in investment in equity securities, at cost, for the years ended
December 31, 1993 and 1992 were as follows:
<TABLE>
<CAPTION>
Shares Cost
---------- -------------
<S> <C> <C>
Capital Cities/ABC, Inc.
common stock:
Balance at December 31, 1991 445,845 $119,827,361
Purchases 22,163 9,864,823
Distributions to terminated and
withdrawing participants (11,844) (3,213,003)
--------- ------------
Balance at December 31, 1992 456,164 126,479,181
Purchases 16,216 8,428,702
Distributions to terminated and
withdrawing participants (21,643) (6,046,486)
--------- ------------
Balance at December 31, 1993 450,737 $128,861,397
========= ============
Other equity securities:
Balance at December 31, 1991 606,048 $ 23,076,592
Purchases 799,550 23,402,711
Sales (429,098) (15,228,907)
--------- ------------
Balance at December 31, 1992 976,500 31,250,396
Purchases 1,153,827 32,586,076
Sales (890,702) (26,785,548)
--------- ------------
Balance at December 31, 1993 1,239,625 $ 37,050,924
========= ============
</TABLE>
(Continued)
4
<PAGE>
CAPITAL CITIES/ABC, INC. SAVINGS & INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(4) Administration of the Plan
--------------------------
Under the terms of a trust agreement between Bankers Trust Company (the
Trustee) and the Plan, the Trustee manages the Plan assets on behalf of the
Plan. Substantially all of the Plan assets are held by the Trustee.
Costs incurred specifically by the Plan are paid directly from funds of the
Plan.
(5) Termination of the Plan
-----------------------
Although Capital Cities/ABC has not expressed any intent to terminate the
Plan, it may be terminated at any time by action of its Board of Directors.
In the event of termination, the amounts credited to the participants'
accounts become fully vested and the Trustee is required to distribute such
amounts to participants or continue the trust fund and pay benefits
therefrom in accordance with the provisions of the Plan.
(6) Income Tax Status
-----------------
The Internal Revenue Service has advised Capital Cities/ABC on March 24,
1989 that the Plan is qualified under Section 401(a) of the Internal
Revenue Code, and therefore, its related trust is exempt from Federal
income taxes under the provisions of Section 501(a) of the Code. The Plan
has been amended to comply with certain legislative and regulatory changes.
Participants are not subject to Federal income tax on employer
contributions made to their accounts under the Plan, or on the earnings in
their accounts, until amounts in their accounts are withdrawn or
distributed.
5
<PAGE>
SUPPLEMENTAL SCHEDULES
<PAGE>
Schedule 1
CAPITAL CITIES/ABC, INC. SAVINGS & INVESTMENT PLAN
INVESTMENTS
DECEMBER 31, 1993
<TABLE>
<CAPTION>
NUMBER MARKET
DESCRIPTION OF SHARES COST VALUE
- ----------- --------- ----------- -----------
<S> <C> <C> <C>
Equity Securities:
- -----------------
Abbott Labs Com 26,000 $ 724,558 $ 770,250
Albertsons Inc Com 15,000 408,315 401,250
Amerada Hess Corp Com 13,600 726,919 613,700
American Intl Group Inc Com 7,500 417,209 658,125
Ann Taylor Stores Corp 12,500 291,500 309,375
Armstrong World Inds Inc Com 7,500 240,407 399,375
Attwoods Plc Adr 30,000 344,394 300,000
Baker Hughes Inc Com 10,500 248,139 210,000
Banc One Corp Com 13,725 514,561 536,991
Bard C R Inc Com 13,000 326,891 328,250
Capital Cities/ABC Inc Com 450,737 128,861,397 279,231,572
Capital Holdings Corp Del Com 25,000 631,930 928,125
Carter Wallace Inc Com 22,500 713,510 480,938
Chesapeake Corp 13,500 307,383 344,250
Chicago & North Westn Holdings Corp 15,000 297,798 375,000
Chubb Corp Com 7,500 482,333 584,063
Colgate Palmolive Co Com 11,000 560,594 686,125
Coltec Inds Inc 26,000 411,060 487,500
Columbia Healthcare Corp Com 14,000 390,880 463,750
Cooper Inds Inc Com 7,500 370,380 369,375
Donnelley RR & Sons Co Com 18,500 531,560 575,813
Eastman Kodak Co Com 7,500 307,950 421,875
Equitable Cos Inc Com 33,200 681,131 896,400
Fruit of the Loom Cl A 19,000 476,457 458,375
Fuller H B Co Com 7,000 264,000 252,000
General Electric Co Com 8,000 566,475 839,000
General Re Corp Com 7,000 620,318 749,000
Glaxo Holdings Plc Sponsored Adr 43,500 985,137 908,063
Hewlett Packard Co Com 12,000 783,761 948,000
Illinois Centl Corp Com Ser A 16,500 456,973 591,938
Intel Corp Com 12,000 621,638 744,000
Johnson & Johnson Com 9,600 415,899 430,800
Kimberly Clark Corp Com 9,000 417,870 466,875
Limited Inc Com 32,000 770,698 544,000
Longview Fibre Co (Washington) Com 25,500 444,101 576,938
LTV Corp New Com 18,700 270,196 301,538
Manor Care Inc Com 23,000 464,669 560,625
Mapco Inc Com 7,600 421,634 464,550
MBNA Corp Com 13,000 327,964 433,875
McDonalds Corp Com 13,000 434,788 741,000
MCI Communications Corp Com 12,800 333,720 361,600
Mead Corp Com 14,000 524,811 630,000
Millipore Corp Com 13,000 375,399 520,000
Minnesota Mng & Mfg Co Com 2,000 183,906 217,500
Nationsbank Corp Com 6,400 294,784 313,600
</TABLE>
<PAGE>
Schedule 1
(Continued)
CAPITAL CITIES/ABC, INC. SAVINGS & INVESTMENT PLAN
INVESTMENTS
DECEMBER 31, 1993
<TABLE>
<CAPTION>
NUMBER MARKET
DESCRIPTION OF SHARES COST VALUE
- ----------- --------- ------------ ------------
<S> <C> <C> <C>
Equity Securities: (Continued)
- ------------------
Noble Affiliates Inc Com 16,000 427,554 424,000
NWNL Cos Inc 16,000 312,634 512,000
Omnicom Group Com 15,000 639,675 693,750
Oryx Energy Co Com 27,500 526,315 474,375
Owens Corning Fiberglass Corp Com New 16,000 647,343 710,000
Owens Ill Inc Com New 55,000 607,477 680,625
Pall Corp Com 17,800 315,570 327,075
Pfizer Inc Com 14,400 925,162 993,600
Price/Costco Inc Com 22,100 381,295 425,425
Primerica Corp Del 17,500 414,552 680,312
Procter & Gamble Co Com 10,100 487,433 575,700
Provident Life & Acc Ins Co Cl B 17,500 330,804 540,312
Safeco Corp Com 14,500 500,065 797,500
Schering Plough Corp Com 12,000 703,533 822,000
Schlumberger Ltd Com 8,000 530,197 473,000
Scott Paper Co Com 14,100 506,654 579,863
Scripp E W Co Cl A 21,000 567,265 577,500
Stratus Computer Inc Com 14,500 452,461 454,937
Tandy Corp Com 21,000 642,784 1,039,500
Texas Instrs Inc Com 6,800 407,818 431,800
Tidewater Inc Com 14,100 303,150 282,000
Topps Inc Com 14,000 112,500 98,000
Torchmark Corp Com 10,000 430,715 450,000
Toys R Us Inc Com 12,000 439,198 490,500
Union Tex Pete Hldgs Inc Com 22,500 416,038 458,438
Unocal Corp Com 27,900 747,918 777,713
V F Corp Com 14,500 680,823 668,812
Washington Mut Svgs Bk Seattle Com 30,000 623,620 723,750
Wells Fargo & Co Com 11,500 919,495 1,487,812
Weyerhaeuser Co Com 15,000 643,211 669,375
Whitman Corp Com 9,000 113,949 146,250
WMX Technologies Inc Com 27,200 909,116 717,400
--------- ------------ ------------
TOTAL EQUITY SECURITIES 1,690,362 165,912,321 321,608,703
Other Investments:
- -----------------
Bankers Trust Pyramid Directed
Account Cash Fund 3,797,926 3,797,926
Funds on Deposit with Insurance Companies:
(at carrying value)
Group Annuity Contracts with:
AETNA Life Insurance 74,742,927 74,742,927
Metropolitan Life Insurance 38,886,458 38,886,458
------------ ------------
TOTAL OTHER INVESTMENTS 117,427,311 117,427,311
------------ ------------
TOTAL INVESTMENTS $283,339,632 $439,036,014
============ ============
</TABLE>
<PAGE>
Schedule 2
CAPITAL CITIES/ABC, INC. SAVINGS & INVESTMENT PLAN
COMBINING STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1993
<TABLE>
<CAPTION>
Fund A -
Capital Cities/ Fund B - Fund C -
ABC, Inc. Diversified Fixed
Common Stock Equity Interest
ASSETS Total Funds Fund Fund Fund
- ------ ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
Investments, at market
Equity Securities:
Capital Cities/ABC, Inc.
common stock $279,231,572 $279,231,572 $ - $ -
Other 42,377,131 - 42,377,131 -
------------ ------------ ----------- ------------
Total equity securities 321,608,703 279,231,572 42,377,131 -
------------ ------------ ----------- ------------
Other investments:
Bankers Trust Pyramid Directed
Account Cash Fund 3,797,926 53,311 3,720,113 24,502
Funds on deposit with
insurance companies 113,629,385 - - 113,629,385
------------ ------------ ----------- ------------
Total other investments 117,427,311 53,311 3,720,113 113,653,887
------------ ------------ ----------- ------------
Total investments 439,036,014 279,284,883 46,097,244 113,653,887
Participant loans 9,093,543 5,649,738 867,763 2,576,042
Interest and dividends
receivable 305,971 26,968 74,649 204,354
Due from Capital Cities/
ABC, Inc. 2,260,057 (1,777,944) 2,382,983 1,655,018
------------ ------------ ----------- ------------
TOTAL ASSETS $450,695,585 $283,183,645 $49,422,639 $118,089,301
============ ============ =========== ============
LIABILITIES AND PLAN EQUITY
Due to terminated and withdrawing
participants $ 4,983,927 $ 2,791,315 $ 203,788 $ 1,988,824
Payables for purchases of
investments 458,865 - 458,865 -
Plan equity 445,252,793 280,392,330 48,759,986 116,100,477
------------ ------------ ----------- ------------
TOTAL LIABILITIES
AND PLAN EQUITY $450,695,585 $283,183,645 $49,422,639 $118,089,301
============ ============ =========== ============
</TABLE>
<PAGE>
Schedule 2
CAPITAL CITIES/ABC, INC. SAVINGS & INVESTMENT PLAN
COMBINING STATEMENT OF FINANCIAL CONDITION
DECEMBER 31, 1992
<TABLE>
<CAPTION>
Fund A -
Capital Cities/ Fund B - Fund C -
ABC, Inc. Diversified Fixed
Common Stock Equity Interest
ASSETS Total Funds Fund Fund Fund
- ------ ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
Investments, at market
Equity Securities:
Capital Cities/ABC, Inc.
common stock $231,617,271 $231,617,271 $ - $ -
Other 36,522,393 - 36,522,393 -
------------ ------------ ----------- ------------
Total equity securities 268,139,664 231,617,271 36,522,393 -
------------ ------------ ----------- ------------
Other investments:
Bankers Trust Pyramid Directed
Account Cash Fund 2,269,018 1,024,288 1,244,730 -
Funds on deposit with
insurance companies 97,525,355 - - 97,525,355
------------ ------------ ----------- ------------
Total other investments 99,794,373 1,024,288 1,244,730 97,525,355
------------ ------------ ----------- ------------
Total investments 367,934,037 232,641,559 37,767,123 97,525,355
Participant loans 8,354,906 5,175,427 793,900 2,385,579
Receivables from sales of
investments 152,162 - 152,162 -
Interest and dividends
receivable 739,207 24,288 75,557 639,362
Due from Capital Cities/
ABC, Inc. 2,794,763 720,646 1,262,095 812,022
------------ ------------ ----------- ------------
TOTAL ASSETS $379,975,075 $238,561,920 $40,050,837 $101,362,318
============ ============ =========== ============
LIABILITIES AND PLAN EQUITY
Due to terminated and withdrawing
participants $ 5,652,052 $ 3,191,343 $ 519,029 $ 1,941,680
Plan equity 374,323,023 235,370,577 39,531,808 99,420,638
------------ ------------ ----------- ------------
TOTAL LIABILITIES
AND PLAN EQUITY $379,975,075 $238,561,920 $40,050,837 $101,362,318
============ ============ =========== ============
</TABLE>
<PAGE>
Schedule 3
CAPITAL CITIES/ABC, INC. SAVINGS & INVESTMENT PLAN
COMBINING STATEMENTS OF INCOME AND CHANGES IN PLAN EQUITY
DECEMBER 31, 1993
<TABLE>
<CAPTION>
Fund A -
Capital Cities/ Fund B - Fund C -
ABC, Inc. Diversified Fixed
Common Stock Equity Interest
Total Funds Fund Fund Fund
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
Investment income:
Dividends $ 878,479 $ 91,462 $ 787,017 $ -
Interest 7,804,018 36,088 99,296 7,668,634
------------ ------------ ----------- ------------
Total investment income 8,682,497 127,550 886,313 7,668,634
------------ ------------ ----------- ------------
Appreciation of Capital
Cities/ABC, Inc. common
stock distributed to
terminated and withdrawing
participants 5,331,485 5,331,485 - -
Net gain on sales of
investments 9,486,275 - 2,988,256 6,498,019
Net increase in unrealized
appreciation of plan assets
held at year end 45,286,295 45,232,085 54,210 -
------------ ------------ ----------- ------------
68,786,552 50,691,120 3,928,779 14,166,653
------------ ------------ ----------- ------------
Contributions:
Participants 25,143,822 5,716,341 7,541,631 11,885,850
Employer 11,198,503 11,198,503 - -
------------ ------------ ----------- ------------
Total contributions 36,342,325 16,914,844 7,541,631 11,885,850
------------ ------------ ----------- ------------
Interest on participant loans 565,127 363,265 56,512 145,350
Participant transfers - (3,651,421) 1,588,091 2,063,330
------------ ------------ ----------- ------------
Total 105,694,004 64,317,808 13,115,013 28,261,183
------------ ------------ ----------- ------------
Distributions to terminated
and withdrawing participants:
Capital Cities/ABC, Inc.
common stock, at market
value 11,176,531 11,176,531 - -
Cash 23,355,061 8,119,524 3,654,193 11,581,344
------------ ------------ ----------- ------------
Total distributions 34,531,592 19,296,055 3,654,193 11,581,344
------------ ------------ ----------- ------------
Administrative expenses 232,642 - 232,642 -
------------ ------------ ----------- ------------
Change in plan equity 70,929,770 45,021,753 9,228,178 16,679,839
------------ ------------ ----------- ------------
Plan equity:
Beginning of year 374,323,023 235,370,577 39,531,808 99,420,638
------------ ------------ ----------- ------------
End of year $445,252,793 $280,392,330 $48,759,986 $116,100,477
============ ============ =========== ============
</TABLE>
<PAGE>
Schedule 3
CAPITAL CITIES/ABC, INC. SAVINGS & INVESTMENT PLAN
COMBINING STATEMENTS OF INCOME AND CHANGES IN PLAN EQUITY
DECEMBER 31, 1992
<TABLE>
<CAPTION>
Fund A -
Capital Cities/ Fund B - Fund C -
ABC, Inc. Diversified Fixed
Common Stock Equity Interest
Total Funds Fund Fund Fund
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Investment income:
Dividends $ 841,884 $ 90,366 $ 751,518 $ -
Interest 7,366,769 33,760 25,797 7,307,212
------------ ------------ ----------- -----------
Total investment income 8,208,653 124,126 777,315 7,307,212
------------ ------------ ----------- -----------
Appreciation of Capital
Cities/ABC, Inc. common
stock distributed to
terminated and withdrawing
participants 1,858,251 1,858,251 - -
Net gain on sales of
investments 1,470,457 - 1,470,457 -
Net increase in unrealized
appreciation of plan
assets held at year end 33,943,579 31,691,637 2,251,942 -
------------ ------------ ----------- -----------
45,480,940 33,674,014 4,499,714 7,307,212
------------ ------------ ----------- -----------
Contributions:
Participants 27,327,695 8,038,693 6,931,665 12,357,337
Employer 13,220,562 13,220,562 - -
------------ ------------ ----------- -----------
Total contributions 40,548,257 21,259,255 6 931,665 12,357 337
------------ ------------ ----------- -----------
Interest on participant loans 550,590 300,040 67,716 182,834
Participant transfers - (2,708,037) 1,740,186 967,851
Cash transfered from other plan 3,877,175 116,853 426,428 3,333,894
------------ ------------ ----------- -----------
Total 90,456,962 52,642,125 13,665,709 24,149,128
------------ ------------ ----------- -----------
Distributions to terminated
and withdrawing participants:
Capital Cities/ABC, Inc.
common stock, at market
value 3,220,570 3,220,570 - -
Cash 22,905,738 10,505,985 3,091,097 9,308,656
------------ ------------ ----------- -----------
Total distributions 26,126,308 13,726,555 3,091,097 9,308,656
------------ ------------ ----------- -----------
Administrative expenses 176,607 - 176,607 -
------------ ------------ ----------- -----------
Change in plan equity 64,154,047 38,915,570 10,398,005 14,840,472
------------ ------------ ----------- -----------
Plan equity:
Beginning of year 310,168,976 196,455,007 29,133,803 84,580,166
------------ ------------ ----------- -----------
End of year $374,323,023 $235,370,577 $39,531,808 $99,420,638
============ ============ =========== ===========
</TABLE>
<PAGE>
Schedule 3
CAPITAL CITIES/ABC, INC. SAVINGS & INVESTMENT PLAN
COMBINING STATEMENTS OF INCOME AND CHANGES IN PLAN EQUITY
DECEMBER 31, 1991
<TABLE>
<CAPTION>
Fund A -
Capital Cities/ Fund B - Fund C -
ABC, Inc. Diversified Fixed
Common Stock Equity Interest
Total Funds Fund Fund Fund
------------ -------------- ----------- -----------
<S> <C> <C> <C> <C>
Investment income:
Dividends $ 774,819 $ 88,809 $ 686,010 $ -
Interest 7,530,128 62,345 102,326 7,365,457
------------ ------------ ----------- -----------
Total investment income 8,304,947 151,154 788,336 7,365,457
------------ ------------ ----------- -----------
Appreciation of Capital
Cities/ABC, Inc. common
stock distributed to
terminated and withdrawing
participants 2,471,355 2,471,355 - -
Net gain on sales of
investments 2,377,834 - 2,377,834 -
Net (decrease) increase in
unrealized appreciation of plan
assets held at year end (10,946,233) (13,503,607) 2,557,374 -
------------ ------------ ----------- -----------
2,207,903 (10,881,098) 5,723,544 7,365,457
------------ ------------ ----------- -----------
Contributions:
Participants 27,781,216 11,085,552 4,834,966 11,860,698
Employer 9,674,343 9,674,343 - -
------------ ------------ ----------- -----------
Total contributions 37,455,559 20,759,895 4,834,966 11,860,698
------------ ------------ ----------- -----------
Interest on participant loans 482,260 433,850 11,775 36,635
Participant transfers - (1,220,137) (325,162) 1,545,299
------------ ------------ ----------- -----------
Total 40,145,722 9,092,510 10,245,123 20,808,089
------------ ------------ ----------- -----------
Distributions to terminated
and withdrawing participants:
Capital Cities/ABC, Inc.
common stock, at market
value 6,160,715 6,160,715 - -
Cash 19,039,010 7,935,993 2,584,310 8,518,707
------------ ------------ ----------- -----------
Total distributions 25,199,725 14,096,708 2,584,310 8,518,707
------------ ------------ ----------- -----------
Administrative expenses 139,379 - 139,379 -
------------ ------------ ----------- -----------
Change in plan equity 14,806,618 (5,004,198) 7,521,434 12,289,382
------------ ------------ ----------- -----------
Plan equity:
Beginning of year 295,362,358 201,459,205 21,612,369 72,290,784
------------ ------------ ----------- -----------
End of year $310,168,976 $196,455,007 $29,133,803 $84,580,166
============ ============ =========== ===========
</TABLE>
<PAGE>
CAPITAL CITIES/ABC, INC. SAVINGS & INVESTMENT PLAN
SINGLE TRANSACTIONS IN EXCESS OF 5% OF THE CURRENT VALUE OF PLAN ASSETS
YEAR ENDED DECEMBER 31, 1993
<TABLE>
<CAPTION>
Cost of Cost of
Investment Proceeds Investment Gain/
Shares Description of Investment Purchased from Sale Disposed (Loss)
- ------------ --------------------------- ---------- ----------- ----------- ------
<S> <C> <C> <C> <C> <C>
74,742,927 AETNA Life Group Annuity $ - $74,742,927 $74,742,927 $ -
Contract (9.75%)
74,742,927 AETNA Life Group Annuity 74,742,927 - - -
Contract (2.91%)
</TABLE>
<PAGE>
CONSENT OF ERNST & YOUNG
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No 33-2196) pertaining to the Capital Cities/ABC, Inc. Savings & Investment
Plan and in the related Prospectus of our report dated March 14, 1994, with
respect to the financial statements and schedules of the Capital Cities/ABC,
Inc. Savings & Investment Plan included in this Annual Report (Form 11-K) for
the year ended December 31, 1993.
ERNST & YOUNG
New York, New York
March 14, 1994
<PAGE>
EXHIBIT (99)(b)
The Registrant hereby undertakes as follows, which undertakings shall be
and hereby are incorporated by reference into Form S-8 Registration Statements
No. 2-59014, No. 2-86863, No. 33-2196, No. 33-11806, No. 33-16206, No. 33-25918,
No. 33-33761 and No. 33-52563.
UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement: (i) to include any
prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii)to
reflect in the prospectus any facts or events arising after the effective date
of the registration statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement; (iii) to include any
material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
The undersigned Registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or
cause to be delivered, to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
