<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 July 3, 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
July 29, 1994: 154,036,590 shares, excluding 29,898,370 treasury shares.
<PAGE>
PART 1 FINANCIAL INFORMATION
----------------------------
CAPITAL CITIES/ABC, INC.
------------------------
CONSOLIDATED STATEMENT OF INCOME (Unaudited)
--------------------------------------------
(Thousands of Dollars)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
July 3, June 27, July 3, June 27,
------- -------- ------- --------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net revenues $1,538,092 $1,438,826 $2,943,041 $2,617,163
---------- ---------- ---------- ----------
Costs and expenses
Direct operating expenses 857,361 871,488 1,721,810 1,608,496
Selling, general and
administrative 295,047 257,874 580,036 519,167
Depreciation 27,558 23,588 53,493 47,240
Amortization of intangible
assets 15,800 15,190 31,614 30,638
---------- ---------- ---------- ----------
1,195,766 1,168,140 2,386,953 2,205,541
---------- ---------- ---------- ----------
Operating income 342,326 270,686 556,088 411,622
Other income (expense)
Interest expense (13,406) (13,972) (26,437) (34,992)
Interest income 3,406 8,194 7,365 18,989
Miscellaneous, net 2,962 2,269 3,753 (4,748)
---------- ---------- ---------- ----------
(7,038) (3,509) (15,319) (20,751)
---------- ---------- ---------- ----------
Income before income taxes 335,288 267,177 540,769 390,871
Income taxes 145,800 115,300 235,200 168,500
---------- ---------- ---------- ----------
Income before extraordinary
charge 189,488 151,877 305,569 222,371
Extraordinary charge - - - (12,122)
---------- ---------- ---------- ----------
Net income $ 189,488 $ 151,877 $ 305,569 $ 210,249
========== ========== ========== ==========
Income per share
Before extraordinary charge $ 1.23 $ 0.92 $ 1.99 $ 1.35
Extraordinary charge
- - - (0.07)
Net income ---------- ---------- ---------- ----------
$ 1.23 $ 0.92 $ 1.99 $ 1.28
========== ========== ========== ==========
Dividends per common share $ 0.05 $ 0.005 $ 0.055 $ 0.01
========== ========== ========== ==========
Average shares outstanding 154,030 164,850 153,745 164,600
========== ========== ========== ==========
(000's)
</TABLE>
2
<PAGE>
CAPITAL CITIES/ABC, INC.
------------------------
CONSOLIDATED BALANCE SHEET
--------------------------
(Thousands of Dollars)
<TABLE>
<CAPTION>
July 3, December 31,
1994 1993
------------ ------------
(Unaudited) (Audited)
Assets
- - ------
<S> <C> <C>
Current assets
Cash and short-term cash investments $ 355,258 $ 264,283
Short-term investments 236,589 173,823
Accounts and notes receivable, net 849,890 881,955
Program licenses and rights 377,803 495,125
Other current assets 192,071 176,966
--------- ---------
Total current assets 2,011,611 1,992,152
--------- ---------
Property, plant and equipment, at cost 2,086,620 2,070,013
Less accumulated depreciation (798,821) (751,286)
--------- ---------
Property, plant and equipment, net 1,287,799 1,318,727
--------- ---------
Intangible assets, net 2,026,195 2,034,680
Program licenses and rights, noncurrent 198,412 190,925
Other assets 548,636 256,134
--------- ---------
$6,072,653 $5,792,618
========= =========
Liabilities and Stockholders' Equity
- - ------------------------------------
Current liabilities
Accounts payable $ 125,484 $ 144,249
Accrued compensation 91,634 102,992
Accrued expenses and other current
liabilities 238,096 210,626
Program licenses and rights 162,232 264,935
Taxes on income 161,748 142,640
Long-term debt due within one year 3,694 5,299
--------- --------
Total current liabilities 782,888 870,741
Deferred compensation 123,951 109,649
Deferred income taxes 264,592 240,935
Program licenses and rights, noncurrent 45,435 42,233
Other liabilities 224,456 243,859
Long-term debt due after one year 612,742 616,661
--------- ---------
Total liabilities 2,054,064 2,124,078
--------- ---------
Minority interest 99,323 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 1,035,831 1,030,634
Unrealized gains/(losses) on investments 47,699 -
Retained earnings 4,389,783 4,092,683
--------- ---------
5,491,707 5,141,711
Less common stock in treasury, at cost (1,572,441) (1,569,595)
--------- ---------
Total stockholders' equity 3,919,266 3,572,116
--------- ---------
$6,072,653 $5,792,618
========= =========
</TABLE>
3
<PAGE>
CAPITAL CITIES/ABC, INC.
------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
------------------------------------------------
(Thousands of Dollars)
<TABLE>
<CAPTION>
Six Months Ended
----------------------
July 3, June 27,
---------- ----------
1994 1993
---------- ----------
<S> <C> <C>
Cash flows from operating activities
Net income $ 305,569 $ 210,249
Adjustments to reconcile net income to net cash
Noncash and nonoperating items
Depreciation 53,493 47,240
Amortization of intangible assets 31,614 30,638
Increase (decrease) in deferred liabilities 4,949 (22,128)
Extraordinary charge, early debt redemption - 12,122
Other noncash and nonoperating items, net (747) 7,042
Changes in operating assets and liabilities,
net of effects of acquisitions and dispositions
Decrease in program assets and liabilities, net 10,334 12,889
Decrease (increase) in accounts receivable 35,360 (1,126)
Increase in accounts payable, accrued
expenses and other current liabilities 17,027 28,657
(Increase) decrease in other operating
assets, net (14,456) 17,961
--------- ---------
Net cash provided by operating activities 443,143 343,544
--------- ---------
Cash flows from investing activities
Capital expenditures (60,380) (43,955)
Acquisition of operating companies and
equity investments (208,490) (19,619)
(Increase) in short-term investments (64,003) (5,027)
Proceeds from dispositions of real estate 22,000 -
Proceeds from dispositions of operating companies - 12,300
Other investing activities, net (29,628) 20,534
--------- ---------
Net cash used in investing activities (340,501) (35,767)
--------- ---------
Cash flows from financing activities
Reduction of long-term debt (5,549) (501,713)
Common stock purchased for treasury (27,444) (15,772)
Common stock issued under Employee Stock Plans 29,795 27,581
Dividends (8,469) (1,645)
Premium on early redemption of debt - (15,915)
--------- ---------
Net cash used in financing activities (11,667) (507,464)
--------- ---------
Net increase (decrease) in cash and short-term
cash investments 90,975 (199,687)
Cash and short-term cash investments
Beginning of period 264,283 686,928
--------- ---------
End of period $ 355,258 $ 487,241
========= =========
</TABLE>
* * * * * *
Cash and short-term cash investments at July 3, 1994 and June 27, 1993 excludes
$236,589,000 and $515,872,000, 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)
----------------------------------------------------------
Six Months Ended July 3, 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 $836 - - 1,208 - - 1,208
Net income for
six months - - - 305,569 - 305,569
648,480 shares
issued under
Employee Stock
Purchase Plan - 5,277 - - 24,475 29,752
3,250 shares issued
from exercise of
employee stock
options - (80) - - 123 43
446,000 shares
purchased for
treasury - - - - (27,444) (27,444)
Dividends - - - (8,469) - (8,469)
------ --------- ------ --------- ---------- ---------
Balance at
July 3, 1994 $18,394 $1,035,831 $47,699 $4,389,783 $(1,572,441) $3,919,266
====== ========= ====== ========= ========== =========
</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 second
quarter and six month periods is as follows (in thousands of dollars):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
July 3, June 27, July 3, June 27,
------- -------- ------- --------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Broadcasting
- - ------------
Net revenues $1,257,116 $1,182,974 $2,402,065 $2,129,920
--------- --------- --------- ---------
Direct operating costs 938,045 926,846 1,873,991 1,734,221
Amortization of
intangible assets 11,776 11,642 23,524 23,529
--------- --------- --------- ---------
Costs and expenses 949,821 938,488 1,897,515 1,757,750
--------- --------- --------- ---------
Income from operations $ 307,295 $ 244,486 $ 504,550 $ 372,170
========= ========= ========= =========
Publishing
- - ----------
Net revenues $ 280,976 $ 255,852 $ 540,976 $ 487,243
--------- --------- --------- ---------
Direct operating costs 233,546 216,012 461,812 420,974
Amortization of
intangible assets 4,024 3,548 8,090 7,109
--------- --------- --------- ---------
Costs and expenses 237,570 219,560 469,902 428,083
--------- --------- --------- ---------
Income from operations $ 43,406 $ 36,292 $ 71,074 $ 59,160
========= ========= ========= =========
Consolidated
- - ------------
Net revenues $1,538,092 $1,438,826 $2,943,041 $2,617,163
========= ========= ========= =========
Income from operations $ 350,701 $ 280,778 $ 575,624 $ 431,330
General corporate
expense 8,375 10,092 19,536 19,708
--------- --------- --------- ---------
Operating income $ 342,326 $ 270,686 $ 556,088 $ 411,622
========= ========= ========= =========
</TABLE>
Second Quarter 1994 Compared with Second Quarter 1993
- - -----------------------------------------------------
Results of Operations
- - ---------------------
Consolidated net revenues for the second quarter of 1994 were
$1,538,092,000, up 7% from the $1,438,826,000 reported in 1993. Broadcasting
net revenues for the second quarter of 1994 were $1,257,116,000, compared with
$1,182,974,000 in 1993, a 6% increase. Net revenues for the ABC Television
7
<PAGE>
Network increased moderately, while the television stations reported a slight
decline in revenue. Results at both groups reflected the absence of the
Academy Awards which was broadcast in the second quarter of 1993 versus the
first quarter of 1994. ESPN continues to report substantial revenue increases,
while radio operations also reported significant growth. Publishing Group
revenues increased 10%, with newspapers and specialized publications both
reporting increases.
Total costs and expenses for the second quarter of 1994 were $1,195,766,000
compared with $1,168,140,000 in 1993, a 2% increase. Broadcasting costs in the
second quarter of 1994 increased 1% from 1993. Costs and expenses for the ABC
Television Network increased only slightly, partially due to the absence of the
Academy Awards, which was telecast in the first quarter of 1994 versus the
second quarter of 1993. Television station expenses decreased moderately,
mainly due to the resolution of a long-standing music license fee dispute. ESPN
expenses decreased slightly primarily reflecting the effects of a substantially
reduced commitment for the broadcast of Major League Baseball. This reduction
was partially offset by other programming increases and the start-up of ESPN2.
Costs at the Company's radio operations increased significantly, mainly due to
higher programming expense as well as the acquisition of second FM stations in
Atlanta and Minneapolis. Publishing Group costs increased 8% from 1993, due to
higher general and administrative expenses and the effect of acquisitions and
start-ups.
Operating income for the second quarter of 1994 was $342,326,000 compared
with $270,686,000 reported in 1993, an increase of 26%. The ABC Television
Network reported a significant gain in operating income due to increased
advertiser demand combined with favorable cost comparisons, while the television
stations' earnings increased slightly. ESPN and the radio operations reported
very significant earnings increases. Publishing earnings increased 20%, with
significant gains reported at both the newspapers and specialized publications.
Net financial expense (interest expense less interest income) for the
second quarter of 1994 increased $4,222,000 from 1993. Interest expense
decreased $566,000, primarily as a result of a reduction of outstanding long-
term debt. Interest income was $4,788,000 lower in the second quarter of 1994
due to the use of cash for long-term debt redemptions and repurchases of common
stock as well as lower interest rates in 1994. Interest of $730,000 and
$2,593,000 was capitalized in the second quarter of 1994 and 1993, respectively.
Consolidated net income for the second quarter of 1994 was $189,488,000
compared with $151,877,000 reported for the same period of 1993. Earnings per
share for the second quarter of 1994 were $1.23, an increase of 34% from the
$0.92 reported in last year's comparable quarter. Average shares outstanding
for the second quarter of 1994 were 154,030,000 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 which
became effective June 3, 1994.
8
<PAGE>
First Half of 1994 Compared with First Half of 1993
- - ---------------------------------------------------
Results of Operations
- - ---------------------
As a consequence of the Company's fiscal calendar, the first half of 1994
had six more days than the first half 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 half of 1994 were $2,943,041,000,
an increase of 12% from the $2,617,163,000 reported in 1993. Broadcasting net
revenues for the first half of 1994 were $2,402,065,000, compared with
$2,129,920,000 in 1993, a 13% increase. Net revenues for the ABC Television
Network increased significantly due to greater advertising demand. 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 half of 1994 were $2,386,953,000, compared
with $2,205,541,000 in 1993, an 8% increase, with broadcasting costs also
increasing 8%. Costs and expenses for the ABC Television Network increased
moderately in 1994. Television station expenses decreased slightly due to the
favorable music license fee settlement, partially offset by increased
programming and news coverage costs. Costs for ESPN increased substantially due
to higher programming and production costs as well as costs associated with the
launch of ESPN2. Reduced rights cost for the telecast of Major League Baseball
at ESPN were favorable in the first six months of 1994. Costs at the Company's
radio operations increased significantly, primarily due to higher programming
expense and the effect of two recent FM station acquisitions. Publishing Group
costs increased 10% from 1993. Newspaper operations reported moderate cost
increases as a result of higher circulation, advertising and general and
administrative costs, while the specialized publications also reported moderate
increases.
Operating income for the first half of 1994 was $556,088,000 compared with
$411,622,000 reported in 1993, an increase of 35%. 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 20%, with the
newspaper and specialized publications both reporting increases.
Net financial expense (interest expense less interest income) for the first
half of 1994 increased $3,069,000 from 1993. Interest expense decreased
$8,555,000 primarily as a result of a reduction of outstanding long-term debt.
Interest income was $11,624,000 lower in the first half of 1994 due to the use
of cash for long-term debt redemptions and repurchases of common stock as well
as lower interest rates in 1994. Interest of $2,603,000 and $5,288,000 was
capitalized in the first half of 1994 and 1993, respectively.
9
<PAGE>
The Company's income tax provision for the first half 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 six months of 1994 was $305,569,000,
compared with $222,371,000 reported in 1993 (before an extraordinary charge).
Earnings per share for 1994 were $1.99, an increase of 47% from the $1.35
reported in 1993 (before an extraordinary charge). Average shares outstanding
for 1994 were 153,745,000 compared with 164,600,000 in 1993, the decline
resulting from repurchases of the Company's common stock during 1993 and the
first half of 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 half 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 half of 1994, net cash provided by operating activities was
$443,143,000, an increase of $99,599,000 from the $343,544,000 reported in 1993.
The increase was primarily attributable to higher 1994 net income.
Net Cash Used In Investing Activities
- - -------------------------------------
For the first half of 1994, net cash used in investing activities was
$340,501,000, an increase of $304,734,000 from the $35,767,000 used in the prior
year. A higher level of capital spending, an increase in acquisition activity
and an increase in short-term investments accounted for most of the increased
use of cash.
Net Cash Used In Financing Activities
- - -------------------------------------
For the first half of 1994, net cash used in financing activities was
$11,667,000, a decrease of $495,797,000 from the $507,464,000 used in 1993. The
decrease was primarily attributable to a substantial reduction in long-term debt
payments partially offset by an increase of common stock repurchases and
dividends paid.
At July 3, 1994, cash and short-term cash investments were $355,258,000, an
increase of $90,975,000 from December 31, 1993. However, after the inclusion of
short-term investments, the balance at July 3, 1994 aggregated $591,847,000, an
increase of $153,741,000 from $438,106,000 at December 31, 1993. The Company's
policy is very conservative with respect to investment of its cash. At July 3,
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
168 days. The Financial Accounting Standards Board requirements arbitrarily
define cash equivalents as those investments
10
<PAGE>
with original maturities at the date of purchase of three months or less. At
July 3, 1994, $236,589,000 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 six months of 1994 and 1993 was $28,942,000
and $53,445,000, respectively. Income taxes paid, net of refunds received,
during the first six months of 1994 and 1993 was $230,987,000 and $155,910,000,
respectively.
Interest-bearing debt at July 3, 1994 and December 31, 1993 was as follows
(000's omitted):
<TABLE>
<CAPTION>
July 3, 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 16,436 21,960
-------- --------
$616,436 $621,960
======== ========
</TABLE>
A subsidiary of the Company has issued commercial paper, $100,000,000 of
which is outstanding at July 3, 1994, at a weighted average interest rate of
4.45%. The commercial paper is supported by a $1,000,000,000 bank revolving
credit agreement terminating on June 30, 1995, unless otherwise extended. The
amount of commercial paper outstanding at July 3, 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.
At July 3, 1994 and at December 31, 1993, interest-bearing debt represented
13% and 14%, respectively, of the Company's total capitalization.
Capital expenditures in the first six months of 1994 were $60,380,000. The
Company anticipates 1994 capital expenditures for property, plant and equipment
will be approximately $160,000,000.
11
<PAGE>
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 $3,996,000,000 at July 3, 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
---------------------------------------------------
(a) The Annual Meeting of Shareholders of the
Company was held on May 19, 1994. Proxies
were solicited in connection with such
meeting pursuant to Regulation 14A under the
Securities Exchange Act of 1934.
(b) Not applicable.
(c) At the meeting the following matters were
voted upon by the shareholders:
(1) Election of directors:
The following persons were nominated and
received the votes as indicated:
<TABLE>
<CAPTION>
Name For Withheld
- - ---- ----------- --------
<S> <C> <C>
Robert P. Bauman 13,113,186 319,064
Nicholas F. Brady 13,102,298 329,952
Warren E. Buffett 13,103,690 328,560
Daniel B. Burke 13,112,473 319,777
Frank T. Cary 13,112,528 319,722
John B. Fairchild 13,103,096 329,154
Leonard H. Goldenson 13,112,629 319,621
Frank S. Jones 13,112,868 319,382
Ann Dibble Jordan 13,113,514 318,736
John H. Muller, Jr. 13,113,628 318,622
Thomas S. Murphy 13,112,742 319,508
Wyndham Robertson 13,113,599 318,651
M. Cabell Woodward, Jr. 13,113,507 318,743
</TABLE>
13
<PAGE>
(2) Proposal to ratify the appointment of
Ernst & Young as the Company's
independent auditors for 1994:
<TABLE>
<CAPTION>
For Against Abstain
---- ------- -------
<S> <C> <C>
13,408,731 10,171 13,348
</TABLE>
(3) Proposal to amend the Certificate of
Incorporation to increase the authorized
shares, and reduce the par value, of the
Common Stock:
<TABLE>
<CAPTION>
For Against Abstain
---- ------- -------
<S> <C> <C>
13,242,221 109,867 80,162
</TABLE>
(4) Proposal to approve the Employee Stock
Purchase Plan, as amended:
<TABLE>
<CAPTION>
For Against Abstain
---- ------- -------
<S> <C> <C>
12,771,875 570,798 89,577
</TABLE>
(5) Shareholder proposal to require all directors
to own a minimum of 100 shares of Company
stock:
<TABLE>
<CAPTION>
For Against Abstain
---- ------- -------
<S> <C> <C>
1,000,230 11,457,174 974,846
(d) Not applicable
</TABLE>
ITEM 5. Other Information
-----------------
At the Annual Meeting of Shareholders held on
May 19, 1994, shareholders approved an amendment
of the Company's Certificate of Incorporation to
increase to 300,000,000 the number of shares of
Common Stock which the Company is authorized to
issue, and reduce the par value of all shares of
Common Stock from $1 per share to $0.10 per share.
The Board of Directors, at its meeting held on
May 19, 1994 following the Annual Meeting of
Shareholders, declared a ten-for-one stock split
of the Common Stock, effective on June 3, 1994.
Certificates for the additional shares were mailed
on June 17, 1994 to shareholders of record on
June 3, 1994.
14
<PAGE>
ITEM 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
(3)(a) Restated Certificate of Incorporation
incorporating all amendments through May 19,
1994.
(b) Reports on Form 8-K
None filed during Second Quarter 1994.
15
<PAGE>
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CAPITAL CITIES/ABC, INC.
----------------------------------
(Registrant)
Date: August 8, 1994 /S/ Ronald J. Doerfler
----------------------------------
Ronald J. Doerfler
Senior Vice President and
Chief Financial Officer
16
<PAGE>
EXHIBIT 3(a)
RESTATED CERTIFICATE OF INCORPORATION
OF
CAPITAL CITIES/ABC, INC.
UNDER SECTION 807 OF THE BUSINESS CORPORATION LAW
WE, THE UNDERSIGNED, Ronald J. Doerfler and Philip
R. Farnsworth, being, respectively, Senior Vice President and Chief Financial
Officer and Secretary of Capital Cities/ABC, Inc., hereby certify:
FIRST: The name of the Corporation is Capital Cities/
ABC, Inc. The name under which the Corporation was incorporated is Hudson
Valley Broadcasting Company, Inc.
SECOND: The Certificate of Incorporation was filed by the Department
of State under the name Hudson Valley Broadcasting Company, Inc. on April 5,
1946.
THIRD: The text of the Certificate of Incorporation, as heretofore
amended, is hereby restated, without any amendment or change, to read as herein
set forth in full:
1. The name of the Corporation is Capital Cities/ABC,
Inc.
2. The purpose for which the Corporation is formed is to engage
in any lawful act or activity for which corporations may be organized under
the Business Corporation Law; provided, however, that the Corporation is
not formed to engage in any act or activity requiring the consent or
approval of any state official, department, board, agency, or other body
without first obtaining the consent of such body.
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3.A. Authorized Shares. The aggregate number of shares which
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the Corporation shall have authority to issue is 304,000,000 of which
4,000,000 shares shall be without par value and shall be designated
Preferred Stock, and 300,000,000 shares shall be with a par value of $.10
per share and shall be designated Common Stock.
B. Preferred Stock. Shares of Preferred Stock may
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be issued from time to time in one or more series as may be determined from
time to time by the Board of Directors. Except in respect of the
particulars to be fixed by the Board of Directors as provided below, all
shares of Preferred Stock shall be of equal rank. All shares in any one
series of Preferred Stock shall be alike in every particular except that
shares of any one series issued at different times may differ as to the
dates from which dividends thereon shall be cumulative. The voting rights,
if any, of each such series and the preferences and relative,
participating, optional and other special rights of each series and the
qualifications, limitations and restrictions thereof, if any, may differ
from those of any and all other series. The Board of Directors shall have
the authority to fix by resolutions, duly adopted prior to the issuance of
any shares of a particular series of Preferred Stock designated by the
Board of Directors, the voting rights, if any, of the holders of shares of
such series and the designations, preferences and relative, participating,
optional and other special rights of each series and the qualifications,
limitations and restrictions thereof.
Without limiting the generality of the foregoing authority of the
Board of Directors, the Board of Directors from time to time may:
(a) establish and designate a series of Preferred Stock, which
may be distinguished by number, letter or title from other Preferred Stock
of the Corporation or any series thereof;
(b) fix and thereafter increase or decrease (but not below the
number of shares thereof then outstanding) the number of shares that shall
constitute such series;
(c) provide for dividends on shares of such series and, if
provision is made for dividends, determine the dividend rate and the dates
on which dividends, if declared,
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shall be payable, whether the dividends shall be cumulative and, if
cumulative, for what date or dates dividends shall accrue, and the other
conditions, if any, including rights of priority, if any, upon which the
dividends shall be paid;
(d) provide as to whether the shares of such series shall be
redeemable, and if redeemable, the terms, limitations and restrictions
with respect to such redemption, including without limitation, the manner
of selecting shares for redemption if less than all shares are to be
redeemed, the time or times and the price or prices at which the shares of
such series shall be subject to redemption, in whole or in part, and the
amount, if any, in addition to any accrued dividends thereon which the
holders of shares of any series shall be entitled to receive upon the
redemption thereof, which amount may vary at different redemption dates
and may be different with respect to shares redeemed through the operation
of any purchase, retirement or sinking fund and with respect to shares
otherwise redeemed;
(e) fix the amount, in addition to any accrued dividends
thereon, which the holders of shares of such series shall be entitled to
receive upon the voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, which amount may vary at different dates and
may vary depending on whether such liquidation, dissolution or winding up
is voluntary or involuntary, and to determine any other rights, if any, to
which holders of the shares of such series shall be entitled in the event
of any liquidation, dissolution or winding up of the Corporation;
(f) establish whether the shares of such series shall be subject
to the operation of a purchase, retirement or sinking fund and, if so, the
terms, limitations and restrictions with respect thereto, including without
limitation, whether such purchase, retirement or sinking fund shall be
cumulative or noncumulative, the extent to and the manner in which such
funds shall be applied to the purchase, retirement or redemption of the
shares of such series for retirement or to other corporate purposes and the
terms and provisions relative to the operation thereof;
(g) determine the extent of the voting rights, if any, of the
shares of such series and determine whether the shares of such series
having voting rights shall have multiple votes per share;
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(h) provide whether or not the shares of such series shall be
convertible into or exchangeable for shares of any other class or classes
of capital stock of the Corporation, including Common Stock, Preferred
Stock or of any series thereof, and, if convertible or exchangeable,
establish the conversion or exchange price or rate, the adjustment thereof,
and the other terms and conditions, if any, on which such shares shall be
convertible or exchangeable; and
(i) provide for any other preferences, any relative
participating, optional or other special rights, any qualifications,
limitations or restrictions thereof, or any other term or provision of
shares of such series as the Board of Directors may deem appropriate or
desirable.
Shares of Preferred Stock may be issued by the Corpo-
ration for such consideration as is determined by the Board of Directors.
Series A Preferred Stock:
Section 1. Designation and Amount. The shares
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of such series shall be designated as "Series A Preferred Stock" (the
"Series A Preferred Stock") and the number of shares constituting the
Series A Preferred Stock shall be 250,000. Such number of shares may be
increased or decreased by resolution of the Board of Directors; provided,
that no decrease shall reduce the number of shares of Series A Preferred
Stock to a number less than the number of shares then outstanding plus the
number of shares reserved for issuance upon the exercise of outstanding
options, rights or warrants or upon the conversion of any outstanding
securities issued by the Corporation convertible into Series A Preferred
Stock.
Section 2. Dividends and Distributions.
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(A) Subject to the rights of the holders of any shares of
any series of Preferred Stock (or any similar stock) ranking on a
parity with the Series A Preferred Stock with respect to dividends,
the holders of shares of Series A Preferred Stock, in preference to
the holders of Common Stock, par value $.10 per share (the "Common
Stock"), of the Corporation, and of any other junior stock, shall be
entitled to receive, when, as and if declared by the Board of
Directors out of funds legally
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available for the purpose, quarterly dividends payable in cash on the
first day of March, June, September and December in each year (each
such date being referred to herein as a "Quarterly Dividend Payment
Date"), commencing on the first Quarterly Dividend Payment Date after
the first issuance of a share or fraction of a share of Series A
Preferred Stock, in an amount per share (rounded to the nearest cent)
equal to the greater of (a) $1 or (b) subject to the provision for
adjustment hereinafter set forth, 100 times the aggregate per share
amount of all cash dividends, and 100 times the aggregate per share
amount (payable in kind) of all non-cash dividends or other
distributions, other than a dividend payable in shares of Common Stock
or a subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise), declared on the Common Stock since the
immediately preceding Quarterly Dividend Payment Date or, with respect
to the first Quarterly Dividend Payment Date, since the first issuance
of any share or fraction of a share of Series A Preferred Stock. In
the event the Corporation shall at any time declare or pay any
dividend on the Common Stock payable in shares of Common Stock, or
effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise
than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each such
case the amount to which holders of shares of Series A Preferred Stock
were entitled immediately prior to such event under clause (b) of the
preceding sentence shall be adjusted by multiplying such amount by a
fraction, the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator
of which is the number of shares of Common Stock that were outstanding
immediately prior to such event.
(B) The Corporation shall declare a dividend or
distribution on the Series A Preferred Stock as provided in paragraph
(A) of this Section immediately after it declares a dividend or
distribution on the Common Stock (other than a dividend payable in
shares of Common Stock); provided that, in the event no dividend or
distribution shall have been declared on the Common Stock during the
period between any Quarterly Dividend Payment Date and the next subse-
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quent Quarterly Dividend Payment Date, a dividend of $1 per share on
the Series A Preferred Stock shall nevertheless be payable on such
subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series A Preferred Stock from the Quarterly
Dividend Payment Date next preceding the date of issue of such shares,
unless the date of issue of such shares is prior to the record date
for the first Quarterly Dividend Payment Date, in which case dividends
on such shares shall begin to accrue from the date of issue of such
shares, or unless the date of issue is a Quarterly Dividend Payment
Date or is a date after the record date for the determination of
holders of shares of Series A Preferred Stock entitled to receive a
quarterly dividend and before such Quarterly Dividend Payment Date, in
either of which events such dividends shall begin to accrue and be
cumulative from such Quarterly Dividend Payment Date. Accrued but
unpaid dividends shall not bear interest. Dividends paid on the shares
of Series A Preferred Stock in an amount less than the total amount of
such dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at
the time outstanding. The Board of Directors may fix a record date
for the determination of holders of shares of Series A Preferred Stock
entitled to receive payment of a dividend or distribution declared
thereon, which record date shall be not more than 60 days prior to the
date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series A
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Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set
forth, each share of Series A Preferred Stock shall entitle the holder
thereof to 100 votes on all matters submitted to a vote of the
shareholders of the Corporation. In the event the Corporation shall at
any time declare or pay any dividend on the Common Stock payable in
shares of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by
reclassification
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or otherwise than by payment of a dividend in shares of Common Stock)
into a greater or lesser number of shares of Common Stock, then in
each such case the number of votes per share to which holders of
shares of Series A Preferred Stock were entitled immediately prior to
such event shall be adjusted by multiplying such number by a fraction,
the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which
is the number of shares of Common Stock that were outstanding
immediately prior to such event.
(B) Except as otherwise provided herein, in any other
Certificate of Amendment creating a series of Preferred Stock or any
similar stock, or by law, the holders of shares of Series A Preferred
Stock and the holders of shares of Common Stock and any other capital
stock of the Corporation having general voting rights shall vote
together as one class on all matters submitted to a vote of
shareholders of the Corporation.
(C) Except as set forth herein, or as otherwise provided by
law, holders of Series A Preferred Stock shall have no special voting
rights and their consent shall not be required (except to the extent
they are entitled to vote with holders of Common Stock as set forth
herein) for taking any corporate action.
Section 4. Certain Restrictions.
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(A) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Preferred Stock as provided in
Section 2 are in arrears, thereafter and until all accrued and unpaid
dividends and distributions, whether or not declared, on shares of
Series A Preferred Stock outstanding shall have been paid in full, the
Corporation shall not:
(i) declare or pay dividends, or make any other distributions,
on any shares of stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Series A
Preferred Stock;
(ii) declare or pay dividends, or make any other
distributions, on any shares of stock ranking on a parity (either
as to dividends or
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upon liquidation, dissolution or winding up) with the Series A
Preferred Stock, except dividends paid ratably on the Series A
Preferred Stock and all such parity stock on which dividends are
payable or in arrears in proportion to the total amounts to which
the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Series A
Preferred Stock, provided that the Corporation may at any time
redeem, purchase or otherwise acquire shares of any such junior
stock in exchange for shares of any stock of the Corporation
ranking junior (either as to dividends or upon dissolution,
liquidation or winding up) to the Series A Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for consideration
any shares of Series A Preferred Stock, or any shares of stock
ranking on a parity with the Series A Preferred Stock, except in
accordance with a purchase offer made in writing or by
publication (as determined by the Board of Directors) to all
holders of such shares upon such terms as the Board of Directors,
after consideration of the respective annual dividend rates and
other relative rights and preferences of the respective series
and classes, shall determine in good faith will result in fair
and equitable treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any
shares of stock of the Corporation unless the Corporation could, under
paragraph (A) of this Section 4, purchase or otherwise acquire such
shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series A Preferred
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Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and cancelled promptly after the acquisition
thereof. All such shares shall upon their cancellation become authorized
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but unissued shares of Preferred Stock and may be reissued as part of a new
series of Preferred Stock subject to the conditions and restrictions on
issuance set forth in the Certificate of Incorporation or in any other
Certificate of Amendment creating a series of Preferred Stock or any
similar stock or as otherwise required by law.
Section 6. Liquidation, Dissolution or Winding Up. Upon any
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liquidation, dissolution or winding up of the Corporation, no distribution
shall be made (1) to the holders of shares of stock ranking junior (either
as to dividends or upon liquidation, dissolution or winding up) to the
Series A Preferred Stock unless, prior thereto, the holders of shares of
Series A Preferred Stock shall have received $100 per share, plus an amount
equal to accrued and unpaid dividends and distributions thereon, whether or
not declared, to the date of such payment, provided that the holders of
shares of Series A Preferred Stock shall be entitled to receive an
aggregate amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 100 times the aggregate amount to be
distributed per share to holders of shares of Common Stock, or (2) to the
holders of shares of stock ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up) with the Series A Preferred
Stock, except distributions made ratably on the Series A Preferred Stock
and all such parity stock in proportion to the total amounts to which the
holders of all such shares are entitled upon such liquidation, dissolution
or winding up. In the event the Corporation shall at any time declare or
pay any dividend on the Common Stock payable in shares of Common Stock, or
effect a subdivision or combination or consolidation of the outstanding
shares of Common Stock (by reclassification or otherwise than by payment of
a dividend in shares of Common Stock) into a greater or lesser number of
shares of Common Stock, then in each such case the aggregate amount to
which holders of shares of Series A Preferred Stock were entitled
immediately prior to such event under the proviso in clause (1) of the
preceding sentence shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately
prior to such event.
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Section 7. Consolidation, Merger, etc. In case the Corporation
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shall enter into any consolidation, merger, combination or other
transaction in which the shares of Common Stock are exchanged for or
changed into other stock or securities, cash and/or any other property,
then in any such case each share of Series A Preferred Stock shall at the
same time be similarly exchanged or changed into an amount per share,
subject to the provision for adjustment hereinafter set forth, equal to 100
times the aggregate amount of stock, securities, cash and/or any other
property (payable in kind), as the case may be, into which or for which
each share of Common Stock is changed or exchanged. In the event the
Corporation shall at any time declare or pay any dividend on the Common
Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of
Common Stock) into a greater or lesser number of shares of Common Stock,
then in each such case the amount set forth in the preceding sentence with
respect to the exchange or change of shares of Series A Preferred Stock
shall be adjusted by multiplying such amount by a fraction, the numerator
of which is the number of shares of Common Stock outstanding immediately
after such event and the denominator of which is the number of shares of
Common Stock that were outstanding immediately prior to such event.
Section 8. No Redemption. The shares of Series A Preferred
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Stock shall not be redeemable.
Section 9. Amendment. The Certificate of Incorporation of the
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Corporation shall not be amended in any manner which would materially alter
or change the powers, preferences or special rights of the Series A
Preferred Stock so as to affect them adversely without the affirmative
vote of the holders of at least two-thirds of the outstanding shares of
Series A Preferred Stock, voting together as a single class.
C. Common Stock. Subject to the preferential dividend rights
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applicable to shares of any series of Preferred Stock, the holders of
shares of Common Stock shall be entitled to receive such dividends as may
be declared by the Board of Directors. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the Corporation,
after distribution in full of the preferential
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amounts to be distributed to the holders of shares of the Preferred Stock,
the holders of shares of the Common Stock shall be entitled to receive all
of the remaining assets of the Corporation available for distribution to
its shareholders, ratably in proportion to the number of shares of the
Common Stock held by them. Except as otherwise provided in paragraph B of
this Article 3, the holders of shares of Common Stock shall be entitled to
vote on all matters at all meetings of the shareholders of the Corporation
and shall be entitled to one vote for each share of Common Stock entitled
to vote at such meeting.
Shares of Common Stock may be issued by the Board of Directors for
such consideration, having a value of not less than the par value thereof,
as is determined by the Board of Directors.
D. Restrictions Upon Voting Rights of Aliens. Any provisions herein
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to the contrary notwithstanding, except as otherwise provided by law, not
more than twenty percent of the aggregate number of shares outstanding
entitled to vote on any matter shall at any time be voted by or for the
account of aliens or their representatives, or by or for the account of a
foreign government or representative thereof, or by or for the account of
any corporation organized under the laws of a foreign country.
The Board of Directors shall make such rules and regulations as it
shall deem necessary or appropriate to enforce the provisions of this
paragraph D.
E. Transfer of Shares to Aliens. Except as otherwise provided by
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law, not more than twenty percent of the aggregate number of shares of
voting stock outstanding shall at any time be owned of record by or for the
account of aliens or their representatives or by or for the account of a
foreign government or representative thereof, or by or for the account of
any corporation organized under the laws of a foreign country.
Shares of stock shall be transferable on the books of the Corporation
to aliens and their representatives, foreign governments and
representatives thereof, and corporations organized under the laws of
foreign countries, or to any person holding for the account of aliens and
their representatives, foreign governments and representatives
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thereof, and corporations organized under the laws of foreign countries,
only, if after giving effect to such transfer, the aggregate number of
shares of stock owned by or for the account of aliens and their
representatives, foreign governments and representatives thereof, and cor-
porations organized under the laws of foreign countries, would be not more
than twenty percent of the number of shares of voting stock then
outstanding.
The Board of Directors shall make such rules and regulations as it
shall deem necessary or appropriate to enforce the foregoing provisions of
this paragraph E.
4. Neither the holders of the shares of the Common Stock nor the
holders of the shares of the Preferred Stock shall have preemptive rights
to purchase any shares of stock of any class or any other securities of the
Corporation.
5. The office of the Corporation is to be located in the City of New
York, County of New York, State of New York. The address to which the
Secretary of State shall mail a copy of process in any action or proceeding
against the Corporation which may be served on him is: 77 West 66th
Street, New York, New York 10023-6298, Attention: Secretary.
6. The Secretary of State of the State of New York is hereby
designated as the agent of the Corporation upon whom process in any action
or proceeding against it may be served.
7. The duration of the Corporation shall be perpetual.
8. The business and property of the Corporation shall be managed by a
Board of not fewer than seven nor more than 21 directors who shall be
elected by the shareholders, except as otherwise provided in the By-laws of
the Corporation. Directors need not be shareholders.
9. The Board of Directors of the Corporation shall have power by vote
of the majority of the directors and without the assent of the shareholders
to make, alter, amend and rescind the By-laws of the Corporation.
10. No director of the Corporation shall be personally liable to the
Corporation or any of its shareholders for monetary damages for breach of
duty as a director, except
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in a case where a court of competent jurisdiction finds that the acts or
omissions that are the subject of the cause of action were (1) taken in bad
faith, or (2) involved intentional misconduct or a knowing violation of
law, or (3) that the director personally obtained a financial profit or
other advantage to which the director was not legally entitled, or (4) that
the director's actions violated Section 719 of the New York Business
Corporation Law. Any repeal or modification of this Article 10 shall be
prospective only, and shall not adversely affect any right or protection of
a director of the Corporation existing at the time of such repeal or
modification with respect to acts or omissions occurring prior to such
repeal or modifications.
FOURTH: The manner in which the aforesaid restated Certificate of
Incorporation was authorized was by at least a majority vote of the Board of
Directors.
IN WITNESS WHEREOF, we have signed this certificate on the 20th day of
May, 1994 and we affirm the statements contained therein as true under penalties
of perjury.
/S/ Ronald J. Doerfler
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Ronald J. Doerfler
Senior Vice President and
Chief Financial Officer
/S/ Philip R. Farnsworth
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Philip R. Farnsworth
Secretary
