<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
FORM 10-Q
[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 2, 1994
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 of incorporation) (I.R.S. Employer
Identification No.)
77 WEST 66th STREET, NEW YORK, NEW YORK 10023
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including
area code (212) 456-7777
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
----- -----
The number of shares outstanding of the issuer's common stock as of
October 31, 1994: 154,036,879 shares, excluding 29,898,081 treasury
shares.
<PAGE>
PART 1 FINANCIAL INFORMATION
----------------------------
CAPITAL CITIES/ABC, INC.
------------------------
CONSOLIDATED STATEMENT OF INCOME (Unaudited)
--------------------------------------------
(Thousands of Dollars)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
Oct. 2, Sept. 26, Oct. 2, Sept. 26,
------- --------- ------- ---------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net revenues $1,461,932 $1,301,371 $4,404,973 $3,918,534
---------- ---------- ---------- ----------
Costs and expenses
Direct operating expenses 858,370 834,123 2,580,180 2,442,619
Selling, general and
administrative 316,837 280,047 896,873 799,214
Depreciation 27,792 23,783 81,285 71,023
Amortization of intangible
assets 15,830 15,386 47,444 46,024
---------- ---------- ---------- ----------
1,218,829 1,153,339 3,605,782 3,358,880
---------- ---------- ---------- ----------
Operating income 243,103 148,032 799,191 559,654
Other income (expense)
Interest expense (14,129) (11,777) (40,566) (46,769)
Interest income 8,346 9,569 15,711 28,558
Miscellaneous, net (1,345) (3,253) 2,408 (8,001)
---------- ---------- ---------- ----------
(7,128) (5,461) (22,447) (26,212)
---------- ---------- ---------- ----------
Income before income taxes 235,975 142,571 776,744 533,442
Income taxes 102,300 64,300 337,500 232,800
---------- ---------- ---------- ----------
Income before extraordinary
charge 133,675 78,271 439,244 300,642
Extraordinary charge - - - (12,122)
---------- ---------- ---------- ----------
Net income $ 133,675 $ 78,271 $ 439,244 $ 288,520
========== ========== ========== ==========
Income per share
before extraordinary charge $ 0.87 $ 0.47 $ 2.86 $ 1.82
Extraordinary charge - - - (0.07)
---------- ---------- ---------- ----------
Net income $ 0.87 $ 0.47 $ 2.86 $ 1.75
========== ========== ========== ==========
Dividends per common share $ 0.05 $ 0.005 $ 0.105 $ 0.015
========== ========== ========== ==========
Average shares outstanding 154,035 164,850 153,840 164,700
(000's) ========== ========== ========== ==========
</TABLE>
2
<PAGE>
CAPITAL CITIES/ABC, INC.
------------------------
CONSOLIDATED BALANCE SHEET
--------------------------
(Thousands of Dollars)
<TABLE>
<CAPTION>
October 2, December 31,
1994 1993
------------ ------------
(Unaudited) (Audited)
Assets
- ------
<S> <C> <C>
Current assets
Cash and short-term cash investments $ 539,236 $ 264,283
Short-term investments 202,368 173,823
Accounts and notes receivable, net 889,297 881,955
Program licenses and rights 407,206 495,125
Other current assets 208,925 176,966
--------- ---------
Total current assets 2,247,032 1,992,152
--------- ---------
Property, plant and equipment, at cost 2,115,850 2,070,013
Less accumulated depreciation (824,349) (751,286)
--------- ---------
Property, plant and equipment, net 1,291,501 1,318,727
--------- ---------
Intangible assets, net 2,013,007 2,034,680
Program licenses and rights, noncurrent 191,167 190,925
Other assets 558,052 256,134
---------- ----------
$6,300,759 $5,792,618
========== ==========
Liabilities and Stockholders' Equity
- ------------------------------------
Current liabilities
Accounts payable $ 148,730 $ 144,249
Accrued compensation 98,808 102,992
Accrued expenses and other current
liabilities 253,673 210,626
Program licenses and rights 214,736 264,935
Taxes on income 85,233 142,640
Long-term debt due within one year 4,127 5,299
--------- -----------
Total current liabilities 805,307 870,741
Deferred compensation 173,182 109,649
Deferred income taxes 264,989 240,935
Program licenses and rights, noncurrent 39,159 42,233
Other liabilities 246,722 243,859
Long-term debt due after one year 612,859 616,661
--------- ---------
Total liabilities 2,142,218 2,124,078
--------- ---------
Minority interest 106,524 96,424
--------- ---------
Stockholders' equity
Preferred stock, no par value - -
Common stock, $0.10 par value
(300,000,000 shares authorized) 18,394 18,394
Additional paid-in capital 1,035,724 1,030,634
Unrealized gains/(losses) on investments 54,372 -
Retained earnings 4,515,757 4,092,683
--------- ---------
5,624,247 5,141,711
Less common stock in treasury, at cost (1,572,230) (1,569,595)
--------- ---------
Total stockholders' equity 4,052,017 3,572,116
--------- ---------
$6,300,759 $5,792,618
========= =========
</TABLE>
3
<PAGE>
CAPITAL CITIES/ABC, INC.
------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
------------------------------------------------
(Thousands of Dollars)
<TABLE>
<CAPTION>
Nine Months Ended
-----------------
Oct. 2, Sept. 26,
------- ---------
1994 1993
---- ----
<S> <C> <C>
Cash flows from operating activities
Net income $ 439,244 $ 288,520
Adjustments to reconcile net income to net cash
Noncash and nonoperating items
Depreciation 81,285 71,023
Amortization of intangible assets 47,444 46,024
Increase (decrease) in deferred liabilities 49,959 (20,799)
Extraordinary charge, early debt redemption - 12,122
Other noncash and nonoperating items, net 1,127 9,881
Changes in operating assets and liabilities,
net of effects of acquisitions and dispositions
Decrease in program assets and liabilities, net 34,125 34,171
(Increase) in accounts receivable (2,765) (49,758)
(Decrease) increase in accounts payable, accrued
expenses and other current liabilities (14,351) 29,080
(Increase) decrease in other operating
assets, net (31,260) 9,686
--------- ---------
Net cash provided by operating activities 604,808 429,950
--------- --------
Cash flows from investing activities
Capital expenditures (87,630) (65,873)
Acquisition of operating companies and
equity investments (213,486) (91,725)
(Increase) in short-term investments (29,699) (31,690)
Proceeds from dispositions of real estate 22,000 -
Proceeds from dispositions of operating companies - 12,300
Other investing activities, net (1,664) 29,631
--------- ---------
Net cash used in investing activities (310,479) (147,357)
--------- ---------
Cash flows from financing activities
Reduction of long-term debt (5,661) (502,046)
Common stock purchased for treasury (27,444) (24,502)
Common stock issued under Employee Stock Plans 29,899 27,605
Dividends (16,170) (2,469)
Premium on early redemption of debt - (15,915)
--------- --------
Net cash used in financing activities (19,376) (517,327)
--------- --------
Net increase (decrease) in cash and short-term
cash investments 274,953 (234,734)
Cash and short-term cash investments
Beginning of period 264,283 686,928
--------- ---------
End of period $ 539,236 $ 452,194
========= =========
</TABLE>
* * * * * *
Cash and short-term cash investments at October 2, 1994 and September 26, 1993
excludes $202,368,000 and $542,535,000, respectively, of highly liquid U.S.
Government instruments with original maturities in excess of three months, to
conform to the definition of a cash investment prescribed by the Financial
Accounting Standards Board.
4
<PAGE>
CAPITAL CITIES/ABC, INC.
------------------------
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (Unaudited)
----------------------------------------------------------
Nine Months Ended October 2, 1994
(Thousands of Dollars)
<TABLE>
<CAPTION>
Unrealized
Additional gains/
Common paid-in (losses) on Retained Treasury
stock capital investments earnings stock Total
------ ---------- ----------- --------- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance at December
31, 1993 $18,394 $1,030,634 $ - $4,092,683 $(1,569,595) $3,572,116
Adjustment to
beginning balance
for change in
accounting method,
net of income
taxes of $32,174 - - 46,491 - - 46,491
Change in unrealized
gains/(losses),
net of income
taxes of $5,455 - - 7,881 - - 7,881
Net income for
nine months - - - 439,244 - 439,244
64,848 shares
issued under
Employee Stock
Purchase Plan - 5,277 - - 24,475 29,752
5,610 shares issued
from exercise of
employee stock
options - (187) - - 334 147
446,000 shares
purchased for
treasury - - - - (27,444) (27,444)
Dividends - - - (16,170) - (16,170)
------ --------- ------ --------- ----------- ---------
Balance at
October 2, 1994 $18,394 $1,035,724 $54,372 $4,515,757 $(1,572,230) $4,052,017
====== ========= ====== ========= =========== =========
</TABLE>
5
<PAGE>
CAPITAL CITIES/ABC, INC.
------------------------
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(1) The results presented in the financial statements are unaudited, but
in the opinion of management contain all adjustments (consisting
only of normal recurring adjustments) necessary for a fair
presentation of the results of operations.
(2) Earnings per share and average shares outstanding for 1993,
dividends per share and the number of shares issued under employee
stock plans and for treasury purchases have been restated to reflect
the Company's ten-for-one stock split which became effective June 3,
1994.
6
<PAGE>
CAPITAL CITIES/ABC, INC.
------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
-----------------------------------------------------------
AND RESULTS OF OPERATIONS
-------------------------
A summary of the Company's operations by business segment for the third
quarter and nine month periods is as follows (in thousands of dollars):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
Oct. 2, Sept. 26, Oct. 2, Sept. 26,
------- --------- ------- ---------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Broadcasting
- ------------
Net revenues $1,184,537 $1,051,424 $3,586,602 $3,181,344
---------- ---------- ---------- ----------
Direct operating costs 959,795 912,424 2,833,786 2,646,645
Amortization of
intangible assets 11,878 11,688 35,402 35,217
---------- ---------- ---------- ----------
Costs and expenses 971,673 924,112 2,869,188 2,681,862
---------- ---------- ---------- ----------
Income from operations $ 212,864 $ 127,312 $ 717,414 $ 499,482
========== ========== ========== ==========
Publishing
- ----------
Net revenues $ 277,395 $ 249,947 $ 818,371 $ 737,190
---------- ---------- ---------- ----------
Direct operating costs 231,659 215,749 693,471 636,723
Amortization of
intangible assets 3,952 3,698 12,042 10,807
---------- ---------- ---------- ----------
Costs and expenses 235,611 219,447 705,513 647,530
---------- ---------- ---------- ----------
Income from operations $ 41,784 $ 30,500 $ 112,858 $ 89,660
========== ========== ========== ==========
Consolidated
- ------------
Net revenues $1,461,932 $1,301,371 $4,404,973 $3,918,534
========== ========== ========== ==========
Income from operations $ 254,648 $ 157,812 $ 830,272 $ 589,142
General corporate
expense 11,545 9,780 31,081 29,488
---------- ---------- ---------- ----------
Operating income $ 243,103 $ 148,032 $ 799,191 $ 559,654
========== ========== ========== ==========
</TABLE>
Third Quarter 1994 Compared with Third Quarter 1993
- ---------------------------------------------------
Results of Operations
- ---------------------
Consolidated net revenues for the third quarter of 1994 were $1,461,932,000,
up 12% from the $1,301,371,000 reported in 1993, reflecting strong advertiser
demand throughout the Company's operations. Broadcasting net revenues for the
third quarter of 1994 were $1,184,537,000, compared with $1,051,424,000 in 1993,
a 13% increase. The ABC Television Network and the television stations
7
<PAGE>
reported significant net revenue increases. ESPN continued to report substantial
revenue increases while the radio operations reported moderate revenue growth.
Publishing Group revenues increased 11%. The newspaper operations reported
modest increases, and the specialized publications reported significant gains.
Total costs and expenses for the third quarter of 1994 were $1,218,829,000
compared with $1,153,339,000 in 1993, a 6% increase. Broadcasting costs in the
third quarter of 1994 increased 5% from 1993. Costs and expenses for the ABC
Television Network increased moderately, primarily due to higher programming,
production and administrative expenses. Television station expenses increased
slightly due to higher general and administrative costs and programming expense.
ESPN expenses decreased moderately reflecting the effects of a substantially
reduced commitment for the broadcast of Major League Baseball. This reduction
was partially offset by other programming expense increases and the start-up of
ESPN2. Costs at the other Cable and International operations rose due to the
inclusion of two recent acquisitions. Costs at the Company's radio operations
were virtually flat with the prior year. Publishing Group costs increased 7%
from 1993 due to higher advertising and general and administrative expenses and
the effect of acquisitions and start-ups.
Operating income for the third quarter of 1994 was $243,103,000 compared
with $148,032,000 reported in 1993, an increase of 64%. The ABC Television
Network reported a significant increase in operating income as it continues to
enjoy strong advertising demand and improved ratings. The television stations
also reported substantial earnings gains reflecting increases in advertiser
demand and effective cost controls. Cable and International operations and the
radio operations reported very significant earnings increases. Publishing
earnings increased 37%, with significant gains reported at both the newspapers
and specialized publications.
Net financial expense (interest expense less interest income) for the third
quarter of 1994 increased $3,575,000 from 1993. Interest expense increased
$2,352,000, primarily as a result of a reduction of capitalized interest.
Interest income was $1,223,000 lower in the third quarter of 1994 due to a lower
level of invested cash, somewhat offset by higher interest rates in 1994.
Interest of $680,000 and $2,643,000 was capitalized in the third quarter of 1994
and 1993, respectively.
Consolidated net income for the third quarter of 1994 was $133,675,000
compared with $78,271,000 reported for the same period of 1993. Earnings per
share for the third quarter of 1994 were $0.87, an increase of 85% from the
$0.47 reported in last year's comparable quarter. Average shares outstanding for
the third quarter of 1994 were 154,035,000 compared with 164,850,000 in 1993,
the decrease resulting from repurchases of the Company's common stock during
1993 and 1994. Earnings per share and average shares outstanding for 1993 have
been restated to reflect the Company's ten-for-one stock split effective June 3,
1994.
8
<PAGE>
First Nine Months of 1994 Compared With First Nine Months of 1993
- -----------------------------------------------------------------
Results of Operations
- ---------------------
As a consequence of the Company's fiscal calendar, the first nine months of
1994 had six more days than the first nine months of 1993 (the fourth quarter of
1994 will have six fewer days) resulting in a slight increase in net revenues,
expenses and operating income.
Consolidated net revenues for the first nine months of 1994 were
$4,404,973,000, an increase of 12% from the $3,918,534,000 reported in 1993. All
of the Company's operating groups benefitted from stronger advertising demand in
the 1994 period. Broadcasting net revenues for the first nine months of 1994
were $3,586,602,000, compared with $3,181,344,000 in 1993, a 13% increase. Net
revenues for the ABC Television Network increased significantly due to greater
advertising demand from an improved marketplace. Television station revenues
increased moderately, while radio operations reported significant revenue gains.
ESPN reported very significant revenue increases. Publishing Group revenues
increased 11%. The newspaper operations reported significant increases, and the
specialized publications, excluding acquisitions, dispositions and start-ups,
reported moderate gains.
Total expenses for the first nine months of 1994 were $3,605,782,000,
compared with $3,358,880,000 in 1993, a 7 % increase, with broadcasting costs
also increasing 7%. Costs and expenses for the ABC Television Network increased
moderately in 1994 as a result of higher programming, production and
administrative expense. Television station expenses rose slightly due to
increased programming and news coverage costs, partially offset by a favorable
music license fee settlement. Costs for ESPN increased slightly due to higher
selling, general and administrative costs as well as expenses associated with
the launch of ESPN2. Overall costs at ESPN were favorably affected by
substantially reduced rights cost for the telecast of Major League Baseball.
Costs at the Company's radio operations increased moderately, primarily due to
higher programming, and general and administrative expenses as well as the
effect of two recent FM station acquisitions. Publishing Group costs increased
9% from 1993. Newspaper operations reported moderate cost increases as a result
of higher circulation, advertising and general and administrative costs, while
the specialized publications, excluding the effect of acquisitions and start-
ups, also reported moderate increases.
Operating income for the first nine months of 1994 was $799,191,000
compared with $559,654,000 reported in 1993, an increase of 43%, while
broadcasting operating earnings increased 44%. Operating income for the ABC
Television Network, ESPN and the radio operations each increased very
significantly over 1993. Television station operating earnings were up
substantially. Publishing Group operating income increased 26%, with the
newspaper and specialized publications both reporting very significant
increases.
9
<PAGE>
Net financial expense (interest expense less interest income) for the first
nine months of 1994 increased $6,644,000 from 1993. Interest expense decreased
$6,203,000 primarily as a result of a reduction of outstanding long-term debt
somewhat offset by lower capitalized interest. Interest income was $12,847,000
lower in the first nine months of 1994 due to the use of cash for long-term debt
redemptions during 1993, and repurchases of common stock, somewhat offset by
higher interest rates in 1994. Interest of $3,283,000 and $7,931,000 was
capitalized in the first nine months of 1994 and 1993, respectively.
The Company's income tax provision for the first nine months of 1994 has
been computed by applying the estimated 1994 annual effective income tax rate of
43.5% to income before taxes. For the full year 1993, the effective tax rate was
43.6%.
Consolidated net income for the first nine months of 1994 was $439,244,000,
compared with $300,642,000 reported in 1993 (before an extraordinary charge).
Earnings per share for the first nine months of 1994 were $2.86, an increase of
57% from the $1.82 reported in the comparable period of 1993 (before the
extraordinary charge). Average shares outstanding for 1994 were 153,840,000
compared with 164,700,000 in 1993, the decline resulting from repurchases of the
Company's common stock during 1993 and 1994. The 1993 earnings per share and
average shares outstanding have been restated to reflect the June 1994 ten-for-
one stock split.
In the first nine months of 1993, an extraordinary charge (after-tax) of
$12,122,000, or $0.07 per share, was recorded relating to early debt
redemptions.
Liquidity and Capital Resources
- -------------------------------
Net Cash Provided By Operating Activities
- -----------------------------------------
For the first nine months of 1994, net cash provided by operating
activities was $604,808,000, an increase of $174,858,000 from the $429,950,000
reported in 1993. The increase was primarily attributable to higher 1994 net
income and an increase in deferred liabilities partially offset by changes in
other working capital accounts.
Net Cash Used In Investing Activities
- -------------------------------------
For the first nine months of 1994, net cash used in investing activities
was $310,479,000, an increase of $163,122,000 from the $147,357,000 used in the
prior year. A higher level of capital spending and an increase in acquisition
activity accounted for most of the increase.
Net Cash Used in Financing Activities
- -------------------------------------
For the first nine months of 1994, net cash used in financing activities
was $19,376,000, a decrease of $497,951,000 from the $517,327,000 used in 1993.
The decrease was primarily attributable to a significant reduction in long-term
debt payments slightly offset by an increase in dividends paid.
10
<PAGE>
At October 2, 1994, cash and short-term cash investments were $539,236,000,
an increase of $274,953,000 from December 31, 1993. However, after the inclusion
of short-term investments, the balance at October 2, 1994 aggregated
$741,604,000, an increase of $303,498,000 from $438,106,000 at December 31,
1993. The Company's policy is very conservative with respect to investment of
its cash. At October 2, 1994, substantially all of the Company's cash was
invested in highly liquid United States Government securities with a weighted
average life to maturity of 66 days. The Financial Accounting Standards Board
requirements arbitrarily define cash equivalents as those investments with
original maturities at the date of purchase of three months or less. At October
2, 1994, $202,368,000 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.
Interest paid during the first nine months of 1994 and 1993 was $43,633,000
and $67,647,000, respectively. Income taxes paid, net of refunds received,
during the first nine months of 1994 and 1993 was $426,826,000 and $288,486,000,
respectively.
Interest-bearing debt at October 2, 1994 and December 31, 1993 was as
follows (000's omitted):
<TABLE>
<CAPTION>
October 2, December 31,
---------- ------------
1994 1993
---- ----
<S> <C> <C>
Commercial paper supported by
bank revolving credit agreement $100,000 $100,000
8 7/8% notes due 2000 250,000 250,000
8 3/4% debentures due 2021 250,000 250,000
Other long-term debt 16,986 21,960
-------- --------
$616,986 $621,960
======== ========
</TABLE>
A subsidiary of the Company has issued commercial paper, $100,000,000 of
which is outstanding at October 2, 1994, at a weighted average interest rate of
4.72%. The commercial paper is supported by a $1,000,000,000 bank revolving
credit agreement terminating on June 30, 1999, unless otherwise extended. The
amount of commercial paper outstanding at October 2, 1994 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.
During 1991, the Securities and Exchange Commission declared effective a
shelf registration statement of the Company which allows for issuance of up to
$500,000,000 in additional debt securities.
11
<PAGE>
At October 2, 1994 and at December 31, 1993, interest-bearing debt
represented 12% and 14%, respectively, of the Company's total capitalization.
Capital expenditures in the first nine months of 1994 were $87,630,000. The
Company anticipates 1994 capital expenditures for property, plant and equipment
will be approximately $160,000,000.
As the operator of the ABC Television Network, the ESPN cable services and
eight television stations, the Company will continue to enter into commitments
to purchase the broadcast rights to various sports events, feature films and
other programming. Total commitments to purchase broadcast programming
approximated $4,000,000,000 at October 2, 1994. This amount is substantially
payable over the next five years. The Company plans to fund its operations and
commitments from internally generated funds and, if needed, from the various
external sources of funds which are available.
12
<PAGE>
PART II
-------
OTHER INFORMATION
-----------------
ITEM 1. Legal Proceedings
-----------------
Not applicable.
ITEM 2. Changes in Securities
---------------------
Not applicable.
ITEM 3. Defaults Upon Senior Securities
-------------------------------
Not applicable.
ITEM 4. Submission of Matters to a Vote of Security-Holders
---------------------------------------------------
Not applicable.
ITEM 5. Other Information
-----------------
Not applicable.
ITEM 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
(4) Fourth Amendment, dated as of July 29, 1994, to the
previously filed Revolving Credit Agreement among the Company,
Chemical Bank and certain other banks.
(27) - Financial Data Schedule.
(b) Reports on Form 8-K
None filed during Third Quarter 1994.
13
<PAGE>
Exhibit 4
---------
FOURTH AMENDMENT dated as of July 29, 1994 (the "Fourth
Amendment"), to the Credit Agreement (as hereinafter defined)
among CAPITAL CITIES/ABC, INC., a New York corporation (the
"Company"), the Borrowing Subsidiaries (as defined in the Credit
Agreement and together with the Company, the "Borrowers"), the
banks listed on Schedule I hereto under the captions "Departing
Banks" (the "Departing Banks"), "Continuing Banks" (the
"Continuing Banks") and "Additional Banks" (the "Additional
Banks" and, together with the Departing Banks and Continuing
Banks, the "Banks"), and CHEMICAL BANK, a New York banking
corporation, as agent for the banks under the Credit Agreement
(in such capacity, the "Agent").
A. The Company, the Borrowing Subsidiaries, the Departing Banks, the
Continuing Banks and the Agent are parties to a Revolving Credit Agreement dated
as of January 3, 1986, as amended and restated through June 30, 1987, as amended
as of June 30, 1989, and as amended and restated through April 30, 1992 (the
"Credit Agreement").
B. The Company has requested, and the Banks and the Agent have
agreed, upon the terms and subject to the conditions set forth or referred to
herein, that the Credit Agreement be amended to extend to June 30, 1999, the
Commitments of the Banks as set forth in the Section 2.01 of the Credit
Agreement and to give effect to certain other changes.
C. Capitalized terms used and not defined herein shall have the
meanings assigned to such terms in the Credit Agreement.
Accordingly, in consideration of the mutual agreements herein
contained and other good and valuable consideration, the sufficiency and receipt
of which are
<PAGE>
2
hereby acknowledged, the parties hereto hereby agree as follows:
SECTION 1. Amendment to Article I of the Credit Agreement. Article I
-----------------------------------------------
of the Credit Agreement is hereby amended:
(a) by deleting the schedule appearing after the third line of the
definition of "Applicable Facility Fee Percentage" and substituting
therefor the schedule set forth in Exhibit A hereto;
(b) by deleting the schedule appearing after the fifth line of the
definition of "Applicable Margin" and substituting therefor the schedule
set forth in Exhibit B hereto;
(c) by deleting the language "June 30, 1995" appearing on the second
line of the definition of "Maturity Date" and substituting therefore "June
30, 1999"; and
(d) by inserting the following definition in the appropriate
alphabetical order:
"'Utilization Fee' shall mean the fee of 0.0625% payable on the
outstanding amount of Loans at all times when the Loans outstanding
under the Credit Agreement exceed 50% of the aggregate Commitments".
SECTION 2. Amendment to Section 2.01. Section 2.01 of the Credit
--------------------------
Agreement is hereby amended by deleting the schedule appearing after the
introductory paragraph thereto and substituting therefor the schedule set forth
in Exhibit C hereto.
SECTION 3. Amendment to Section 2.07. Section 2.07 of the Credit
--------------------------
Agreement is hereby amended by adding the following language after paragraph (b)
thereof:
(c) The Company agrees, to pay to the Agent for distribution to the
Banks ratably in accordance with the amounts of the Loans made by them and
outstanding from time to time, in immediately available funds, a
Utilization Fee equal to 0.0625% per annum on the aggregate principal
amount of the outstanding Loans on each day on which such aggregate
principal amount
<PAGE>
3
exceeds 50% of the aggregate Commitments. The Utilization Fee shall be
payable on March 31, June 30, September 30 and December 31, in each year.
SECTION 4. Amendment to Section 6.04. Section 6.04 is hereby amended
--------------------------
by deleting the language "December 31, 1992, $2,500,000,000" appearing on the
third line thereof and substituting therefor "December 31, 1994,
$2,700,000,000".
SECTION 5. Conditions to Effectiveness. This Fourth Amendment shall
----------------------------
become effective when:
(a) the Agent shall have received counterparts of this Fourth
Amendment which, when taken together, bear the signatures of the Company,
the Banks and the Agent, as well as new Notes reflecting the Commitments of
the Banks after giving effect to this Amendment, duly executed by the
Company;
(b) the Agent shall have received a signed copy of a favorable written
opinion of Hall, Dickler, Lawler, Kent & Friedman, counsel for the Company,
addressed to the Banks, dated as of the date hereof and satisfactory in
form and substance to Cravath, Swaine & Moore, counsel to the Agent; and
(c) the Agent shall have received (i) a copy of the Company's
Certificate of Incorporation and By-laws, including all amendments, if any,
each certified by the Secretary or Assistant Secretary of the Company, and
(ii) a certificate dated as of the date hereof and signed by the Secretary
or Assistant Secretary of the Company, certifying (A) that neither the
Certificate of Incorporation nor the By-laws of the Company have been
amended as of the date hereof except as disclosed pursuant to clause (i)
hereof, (B) that attached thereto are true and complete copies of all
resolutions adopted by the Executive Committee of the Board of Directors of
the Company authorizing the execution and delivery of this Fourth Amendment
and the new Notes and (C) as to the incumbency and specimen signature of
each officer of the Company executing this Fourth Amendment and the new
Notes and any certificates or instruments furnished pursuant hereto, such
certificate to contain a certification by another officer of the Company as
to the incumbency and signature of the officer signing such certificate.
<PAGE>
4
SECTION 6. Representations and Warranties. To induce the Banks and
-------------------------------
the Agent to enter into this Fourth Amendment, the Company and each Borrowing
Subsidiary represent and warrant to each Bank and the Agent that (a) the
representations and warranties set forth in Article III of the Credit Agreement
are true and correct in all material respects on and as of the date hereof with
the same effect as though made on and as of the date hereof, except to the
extent such representations and warranties expressly relate to any earlier date,
(b) no Event of Default or event which with notice or lapse of time or both
would constitute an Event of Default has occurred and is continuing and (c) as
of the date hereof there are no outstanding Loans.
SECTION 7. Effect of Amendment. Except as expressly set forth
--------------------
herein, this Fourth Amendment shall not by implication or otherwise limit,
impair, constitute a waiver of, or otherwise affect the rights and remedies of
the Banks or the Agent under the Credit Agreement, and shall not alter, modify,
amend or in any way affect any of the terms, conditions, obligations, covenants
or agreements contained in the Credit Agreement, all of which are ratified and
affirmed in all respects and shall continue in full force and effect. Nothing
herein shall be deemed to entitle the Company to a consent to, or a waiver,
amendment, modification or other change of, any of the terms, conditions,
obligations, covenants or agreements contained in the Credit Agreement in
similar or different circumstances. This Fourth Amendment shall apply and be
effective only with respect to the provisions of the Credit Agreement
specifically referred to herein. Any default under this Fourth Amendment shall
constitute an Event of Default under the Credit Agreement.
SECTION 8. Expenses. The Company agrees to pay all out-of-pocket
---------
fees and expenses of the Agent in connection with the preparation of this Fourth
Amendment and the transactions contemplated hereby, including the reasonable
fees, disbursements and other charges of Cravath, Swaine & Moore, counsel to the
Agent.
SECTION 9. Counterparts. This Fourth Amendment may be executed in
-------------
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts together shall constitute but one and the
same instrument. Delivery of an executed counterpart of a signature page of
this Fourth Amendment by facsimile transmission shall be as effective as
delivery of a manually executed counterpart thereof.
<PAGE>
5
SECTION 10. Applicable Law. THIS FOURTH AMENDMENT SHALL BE GOVERNED
---------------
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 11. Headings. The headings of this Fourth Amendment are for
---------
purposes of reference only and shall not limit or otherwise affect the meaning
hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Fourth
Amendment to be duly executed by their duly authorized officers, all as of the
date and year first above written.
CAPITAL CITIES/ABC, INC.,
by
David J. Vondrack
------------------------
Name: David J. Vondrack
Title: Vice President & Treasurer
CHEMICAL BANK, individually and
as agent,
by
John C. Coffin
------------------------
Name: John C. Coffin
Title: Vice President
BANK OF AMERICA NT&SA,
by
Nancy L. Sun
------------------------
Name: Nancy L. Sun
Title: Vice President
THE BANK OF NEW YORK,
by
Kalpana Raina
------------------------
Name: Kalpana Raina
Title: Vice President
<PAGE>
THE BANK OF NOVA SCOTIA,
by
James Tryforos
------------------------
Name: James Tryforos
Title: Authorized Signatory
BANKERS TRUST COMPANY,
by
Edward G. Benedict
------------------------
Name: Edward G. Benedict
Title: Vice President
THE CHASE MANHATTAN BANK, N.A.,
by
Robert T. Smith
------------------------
Name: Robert T. Smith
Title: Vice President
CITIBANK, N.A.,
by
Eric Huttner
------------------------
Name: Eric Huttner
Title: Vice President
COMMERCE BANK OF KANSAS CITY,
by
Phyllis G. Kiefer
------------------------
Name: Phyllis G. Kiefer
Title: Vice President
<PAGE>
CREDIT SUISSE,
by
Chris T. Horgan
------------------------
Name: Chris T. Horgan
Title: Associate
by
Michael C. Mast
------------------------
Name: Michael C. Mast
Title: Member of Senior Management
THE FIRST NATIONAL BANK OF BOSTON,
by
Lisa C. Gallagher
------------------------
Name: Lisa C. Gallagher
Title: Director
THE FIRST NATIONAL BANK OF
CHICAGO,
by
Elaine I. Khalil
------------------------
Name: Elaine I. Khalil
Title: Vice Presidnet
MARINE MIDLAND BANK,
by
Garret Komjathy
------------------------
Name: Garret Komjathy
Title: Vice President
MELLON BANK, N.A.,
by
Sean C. Gannon
------------------------
Name: Sean C. Gannon
Title: Assistant Vice President
<PAGE>
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK,
by
Eugenia Wilds
------------------------
Name: Eugenia Wilds
Title: Vice President
NATIONSBANK OF NORTH CAROLINA, N.A.,
by
Steven G. Schneider
------------------------
Name: Steven G. Schneider
Title: Senior Vice President
NBD BANK, N.A.,
by
Carolyn J. Parks
------------------------
Name: Carolyn J. Parks
Title: Vice President
ROYAL BANK OF CANADA,
by
Eduardo Salazar
------------------------
Name: Eduardo Salazar
Title: Senior Manager
SWISS BANK CORPORATION,
by
Jane A. Majeski
------------------------
Name: Jane A. Majeski
Title: Director Merchant Banking
by
Teresa A. Portela
------------------------
Name: Teresa A. Portela
Title: Associate Director
Merchant Banking
<PAGE>
THE TORONTO-DOMINION BANK,
by
E. E. Walker
------------------------
Name: E. E. Walker
Title: Manager Credit
Administration
UNITED MISSOURI BANK OF KANSAS
CITY, N.A.,
by
Walter Beck
------------------------
Name: Walter Beck
Title: Executive Vice President
<PAGE>
EXHIBIT A
<TABLE>
<CAPTION>
S&P's/Moody's Rating Facility Fee
-------------------- -------------
<S> <C>
Category 1
- ----------
A/A2 or higher .09%
Category 2
- ----------
A-/A3 .125%
Category 3
- ----------
BBB+, BBB or BBB-/Baa1,
Baa2 or Baa3 .15%
Category 4
- ----------
Below BBB-/Baa3 or unrated .20%
</TABLE>
<PAGE>
EXHIBIT B
Applicable Margin
-----------------
<TABLE>
<CAPTION>
S&P's/Moody's Adjusted Adjusted Alternate
Rating LIBO CD Base Rate
------------- ---------- -------- ---------
<S> <C> <C> <C>
Category 1
- ----------
A/A2 or higher .16% .285% 0%
Category 2
- ----------
A-/A3 .20% .325% 0%
Category 3
- ----------
BBB+, BBB or BBB-/Baa1,
Baa2 or Baa3 .25% .375% 0%
Category 4
- ----------
Below BBB-/Baa3 or
unrated .30% .425% 0%
</TABLE>
<PAGE>
EXHIBIT C
<TABLE>
<CAPTION>
Percent of
Commitment Commitments
---------- -----------
<S> <C> <C>
Chemical Bank $ 78,500,000 7.85%
270 Park Avenue
New York, NY 10017
Attention: Hector Guenther
Vice President
Bank of America NT&SA $ 78,500,000 7.85%
335 Madison Avenue
New York, NY 10017
Attention: Nancy L. Sun
Vice President
Entertainment/Media
Division
The Bank of New York $ 78,500,000 7.85%
One Wall Street - 16th Floor
New York, NY 10286
Attention: Kalpana Raina
Assistant Vice President
The Chase Manhattan Bank, N.A. $ 78,500,000 7.85%
One Chase Manhattan Plaza
New York, NY 10081
Attention: Robert T. Smith
Vice President
Media & Communications
Component
The First National Bank of Boston $ 62,000,000 6.20%
100 Federal Street
Mail Stop 01-04-05
Boston, MA 02106
Attention: Lisa C. Gallagher
Vice President
Media & Entertainment
Division
</TABLE>
<PAGE>
2
<TABLE>
<CAPTION>
Percent of
Commitment Commitments
---------- -----------
<S> <C> <C>
Morgan Guaranty Trust Company of $ 62,000,000 6.20%
New York
60 Wall Street
New York, NY 10260
Attention: Joseph T. Donohue
Vice President
NBD Bank, N. A. $ 62,000,000 6.20%
611 Woodward Avenue
Detroit, MI 48226
Attention: Carolyn J. Parks
Vice President
Citibank, N.A. $ 50,000,000 5.00%
399 Park Avenue
New York, NY 10043
Attention: Eric Huttner
Vice President
Credit Suisse $ 50,000,000 5.00%
Tower 49
12 East 49th Street
New York, NY 10017
Attention: Chris T. Horgan
Associate
The First National Bank of Chicago $ 50,000,000 5.00%
One First National Plaza
Mail Suite 0623
Chicago, IL 60670-0623
Attention: Richard L. Elmendorf
Vice President
Mellon Bank, N.A. $ 50,000,000 5.00%
One Mellon Bank Center
Room 151-4440
Pittsburgh, PA 15258
Attention: G. Louis Ashley
First Vice President
</TABLE>
<PAGE>
3
<TABLE>
<CAPTION>
Percent of
Commitment Commitments
---------- -----------
<S> <C> <C>
NationsBank of North Carolina, N.A. $ 50,000,000 5.00%
767 Fifth Avenue
New York, NY 10153
Attention: Steven G. Schneider
Senior Vice President
Royal Bank of Canada $ 50,000,000 5.00%
1 Financial Square
New York, NY 10005
Attention: Eduardo Salazar
Senior Manager
The Toronto-Dominion Bank $ 50,000,000 5.00%
31 West 52nd Street
New York, NY 10019-6101
Attention: Melissa S. Glass
Director
USA Division
Bankers Trust Company $ 25,000,000 2.50%
130 Liberty - 30th Floor
Mail Stop 2303
New York, NY 10006
Attention: Alexander T. Mason
Managing Director
The Bank of Nova Scotia $ 25,000,000 2.50%
One Liberty Plaza - 26th Floor
New York, NY 10006
Attention: Mark E. Vigil
Representative
Commerce Bank of Kansas City $ 25,000,000 2.50%
1000 Walnut Street
P.O. Box 419248
Kansas City, MO 64141-6248
Attention: Phyllis G. Kiefer
Vice President
</TABLE>
<PAGE>
4
<TABLE>
<CAPTION>
Percent of
Commitment Commitments
---------- -----------
<S> <C> <C>
Marine Midland Bank $ 25,000,000 2.50%
140 Broadway - 6th Floor
New York, NY 10015
Attention: Garret Komjathy
Vice President
Swiss Bank Corporation $ 25,000,000 2.50%
P.O. Box 395
Church Street Station
New York, NY 10008
Attention: Jane A. Majeski
Director
United Missouri Bank of $ 25,000,000 2.50%
Kansas City, N.A.
1010 Grand Avenue
Kansas City, MO 64105
Attention: Walter Beck
Executive Vice President
Total Commitment: $1,000,000,000 100.0%
-------------- -----
</TABLE>
<PAGE>
SCHEDULE I
Departing Banks
- ---------------
Canadian Imperial Bank of Commerce
Continental Bank N.A.
Societe Generale
Additional Banks
- ----------------
Credit Suisse
Mellon Bank, N.A.
NationsBank of North Carolina, N.A.
Continuing Banks
- ----------------
Chemical Bank
Bank of America NT&SA
The Bank of New York
The Bank of Nova Scotia
Bankers Trust Company
The Chase Manhattan Bank, N.A.
Citibank, N.A.
Commerce Bank of Kansas City
The First National Bank of Boston
The First National Bank of Chicago
Marine Midland Bank
Morgan Guaranty Trust Company of New York
NBD Bank, N.A.
Royal Bank of Canada
Swiss Bank Corporation
The Toronto-Dominion Bank
United Missouri Bank of Kansas City, N.A.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
THE CAPITAL CITIES/ABC, INC. CONSOLIDATED FINANCIAL STATEMENTS FROM FORM 10-Q
FOR THE PERIOD ENDING OCTOBER 2, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> OCT-02-1994
<CASH> 539,236
<SECURITIES> 202,368
<RECEIVABLES> 930,668
<ALLOWANCES> 41,371
<INVENTORY> 24,908
<CURRENT-ASSETS> 2,247,032
<PP&E> 2,115,850
<DEPRECIATION> 824,349
<TOTAL-ASSETS> 6,300,759
<CURRENT-LIABILITIES> 805,307
<BONDS> 612,859
<COMMON> 18,394
0
0
<OTHER-SE> 4,033,623
<TOTAL-LIABILITY-AND-EQUITY> 6,300,759
<SALES> 4,404,973
<TOTAL-REVENUES> 4,404,973
<CGS> 2,568,171
<TOTAL-COSTS> 2,568,171
<OTHER-EXPENSES> 1,025,602
<LOSS-PROVISION> 12,009
<INTEREST-EXPENSE> 40,566
<INCOME-PRETAX> 776,744
<INCOME-TAX> 337,500
<INCOME-CONTINUING> 439,244
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 439,244
<EPS-PRIMARY> 2.86
<EPS-DILUTED> 0
</TABLE>
