UNITED STATES 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 March 31, 1995
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 0-9008
ANDREWS GROUP INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware 95-2683875
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3200 Windy Hill Road, Suite 1100-West, Atlanta, Georgia 30339
(Address of principal executive offices) (Zip Code)
404-955-0045
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No__
Indicate the number of shares outstanding of each of the
issuer's classes of common stock as of
the latest practicable date.
Class Outstanding at May 12, 1995
Common Stock, $1.00 par 1,000
As of May 12, 1995, all of the Registrant's outstanding common
stock was indirectly held by Mafco Holdings Inc.
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<TABLE>
ANDREWS GROUP INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
(Unaudited)
<CAPTION>
March 31, December 31,
1995 1994
<S> ----------- -----------
ASSETS <C> <C>
Cash $105.9 $175.7
Restricted cash 77.3 --
Trade receivables, net 365.0 302.8
Inventories 67.8 50.2
Television program contract rights 22.6 23.9
Film costs, net 66.5 62.4
Prepaid expenses and other 64.3 62.9
----------- -----------
Total current assets 769.4 677.9
Property, plant and equipment, net 270.9 232.0
Television program contract rights 4.1 12.7
Film costs, net 36.9 44.8
Intangible assets and excess reorganization value, net 2,222.8 1,648.4
Loans to affiliate 221.3 224.6
Other assets 208.6 388.8
--------- -----------
$3,734.0 $3,229.2
========= ===========
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current liabilities:
Current portion of long-term debt and notes payable $161.4 $100.8
Accounts payable and accrued expenses 283.9 286.9
Television program contracts payable 21.0 26.8
Deferred income 29.5 28.2
Participations and residuals payable 29.6 23.9
--------- -----------
Total current liabilities 525.4 466.6
Long-term debt 2,551.8 2,148.9
Indebtedness to affiliates 175.3 154.2
Other liabilities 147.9 142.1
Minority interest 466.2 414.7
Redeemable preferred stock of subsidiaries 247.0 246.9
Stockholder's deficit:
Common stock, $1.00 par value; 1,000 shares
authorized, issued and outstanding
Additional paid-in-capital 32.9 32.6
Accumulated deficit (412.3) (375.6)
Cumulative translation adjustment (0.2) (1.2)
--------- -----------
Total stockholder's deficit (379.6) (344.2)
--------- -----------
$3,734.0 $3,229.2
========= ===========
<FN>
See notes to consolidated financial statements
</TABLE>
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<TABLE>
ANDREWS GROUP INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in millions)
(Unaudited)
<CAPTION>
Three Months Ended
March 31
-------------------------
1995 1994
--------- --------
<S> <C> <C>
Net revenues $274.4 $180.0
Operating expenses:
Direct costs 172.0 95.3
Selling general and administrative expenses 80.3 48.3
Amortization of goodwill and intangibles 12.6 10.9
--------- --------
Operating income 9.5 25.5
--------- --------
Other (expenses) income:
Interest expense (65.3) (44.0)
Interest and net investment income 9.9 1.5
Gain on sale of interest in businesses 54.9 31.0
Amortization of debt issuance costs and other (4.4) (2.1)
--------- --------
(4.9) (13.6)
--------- --------
Income before income taxes, minority interest and
equity in net income of investees 4.6 11.9
Provisions for income taxes (43.3) (0.6)
Minority interest in loss of subsidiaries 1.9 1.0
Equity in net income of investees 0.1 0.9
--------- --------
Net (loss) income ($36.7) $13.2
========= ========
<FN>
See notes to consolidated financial statements
</TABLE>
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<TABLE>
ANDREWS GROUP INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions)
(Unaudited)
<CAPTION>
Three Months Ended
March 31
-------------------------
1995 1994
--------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income ($36.7) $13.2
--------- --------
Adjustments to reconcile net income (loss) to net cash flows from
operating activities:
Depreciation and amortization 23.7 16.6
Noncash interest expense 23.9 14.0
Undistributed earnings of investees (0.1) (0.9)
Minority interest in loss of subsidiaries (1.9) (1.0)
Gain on sale of interest in businesses (54.9) (31.0)
Excess of television program contract rights amortization
over payments 2.1 1.8
Film cost amortization over (under) additions 3.8 (9.3)
Changes in assets and liabilities, net of effects
of acquisitions and dispositions of businesses:
Increase in assets (19.7) (2.0)
Decrease in liabilities (1.8) (18.6)
--------- --------
(24.9) (30.4)
--------- --------
Net cash flows from operating activities (61.6) (17.2)
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Broadcast station acquisitions, net of cash acquired (360.1) --
Sale of business interests 253.0 --
Other acquisitions, investments and advances (6.7) 0.6
Loans to affiliates, net 3.3 --
Capital expenditures (11.5) (10.6)
--------- --------
Net cash flows from investing activities (122.0) (10.0)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long term debt 214.7 125.0
Repayment and repurchases of debt (51.7) (65.4)
Issuance of preferred and common stock by subsidiaries 0.5 208.1
Loans from affiliates, net 21.1 (26.2)
Increase in restricted cash (77.3) --
Other, net (1.0) (6.2)
--------- --------
Net cash flows from financing activities 106.3 235.3
--------- --------
Cash balance from previously unconsolidated subsidiary 7.5 --
--------- --------
Net (decrease) increase in cash (69.8) 208.1
Cash at beginning of the period 175.7 40.1
--------- --------
Cash at end of the period $105.9 $248.2
========= ========
<FN>
See notes to consolidated financial statements
</TABLE>
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<TABLE>
ANDREWS GROUP INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions)
(Unaudited)
Three Months Ended
March 31
-------------------------
1995 1994
--------- --------
<S> <C> <C>
Supplemental disclosures of cash flow information:
Interest paid during the period $46.3 $33.8
Taxes paid (refunded) during the period 5.6 (1.6)
Supplemental schedule of non-cash investing and financing activities:
Purchase of television program contract rights $1.9 $1.2
Argyle stations purchase:
Fair value of assets acquired $766.1
Purchase option applied to purchase price (100.0)
Cash paid, net of cash received (360.1)
---------
Liabilities assumed $306.0
=========
<FN>
See notes to consolidated financial statements
</TABLE>
<PAGE>
ANDREWS GROUP INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in millions, except per share data)
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements include
the accounts of Andrews Group Incorporated ("Andrews" or the
"Company") and its majority-owned subsidiaries after elimination
of all material intercompany accounts and transactions. The
Company is a wholly owned subsidiary of MacAndrews & Forbes
Holdings Inc. ("MacAndrews Holdings") which is a wholly owned
subsidiary of Mafco Holdings Inc. ("Mafco Holdings"). The
unaudited consolidated financial statements should be read in
conjunction with the consolidated financial statements and related
notes contained in the Company's 1994 Form 10-K. In the opinion
of management, all adjustments (which include only normal
recurring accruals) necessary for a fair statement of the results
of operations have been made.
Certain reclassifications have been made to conform to the
current period's presentation.
2. ACQUISITIONS AND DISPOSITIONS
Genesis
On March 17, 1994, NWCG purchased the remaining 50% interest
not previously owned by NWCG of Genesis and a note issued by a
subsidiary of NWCG in exchange for 2,035,486 shares of Class B
Common Stock of NWCG and certain other consideration. The
acquisition was accounted for using the purchase method of
accounting. NWCG amortizes the excess of the purchase price over
the historical book value over a 40-year period.
Moving Target
Concurrently with hiring a chairman of NW Entertainment in
June 1994, NWCG acquired Moving Target Productions, Inc. ("Moving
Target"). The consideration for such acquisition consisted of
652,174 shares of Class A Common Stock of NWCG and a warrant to
purchase one million shares of Class A Common Stock of NWCG at a
price of $11.50 per share.
CitiCasters' Stations
On September 9, 1994, NWCG consummated the acquisition of
three broadcast television stations, KSAZ-TV (Phoenix), WDAF-TV
(Kansas City) and WGHP-TV (Greensboro-High Point), from
CitiCasters for consideration of $262.3 in cash and a warrant to
purchase 5,000,000 shares of NWCG's Class A Common Stock for an
initial exercise price of $15.00 per share. Further, on October
12, 1994, NWCG completed the acquisition of a fourth broadcast
television station, WBRC-TV (Birmingham), from CitiCasters for
cash consideration of approximately $94.1. In connection with
these acquisitions, NWCG assumed certain liabilities. The
financial statements reflect a preliminary allocation of the
purchase price for these broadcast stations which is subject to
adjustment. On March 31, 1995, NWCG granted to Fox Television
Stations, Inc. ("Fox") an option to acquire both WGHP-TV and WBRC-
TV in consideration of a non-refundable payment by Fox of $100.0,
subject to certain adjustments. The $100.0 may be credited
against the purchase price of $135.0. NWCG contributed the stock
of the subsidiaries which own and operate WGHP-TV and WBRC-TV to a
trust of which NWCG is the beneficiary (the "Trust"). NWCG will
have no role in the management or operation of the stations
contributed to the Trust. Further, NWCG borrowed approximately
$40.4 from Fox, secured by the beneficial interest in the Trust
and non-recourse to any other assets of NWCG. Assets held for
sale included in other assets in the accompanying balance sheet
reflect the estimated sales proceeds of WGHP-TV and WBRC-TV;
therefore, NWCG's future operations will not be affected by these
stations' results except to the extent of income remitted by the
Trust to service the Fox debt.
WSBK-TV
In March 1995 NWCG sold its investment in WSBK-TV (the
"Boston Station") for gross proceeds of $107.5. NWCG recorded an
estimated gain on the sale of approximately $40.9 in the first
quarter. NWCG repaid $19.5 of the Bank Credit Agreement Loans in
March 1995 and $77.3 of the Step-Up Notes in April 1995 from the
estimated net proceeds of the WSBK sale. At March 31, 1995, $77.3
used to repay the Step-Up Notes, which was held by a collateral
trustee, is included in restricted cash and in the current portion
of long-term debt.
Argyle Stations
NWCG purchased certain debt and equity securities of Argyle
Television Holding Inc. ("Argyle") for total consideration of
approximately $750.4, including the $100.0 in cash paid for an
option in 1994 and assumption of debt of approximately $283.6.
Argyle controlled four VHF television stations, KDFW-TV (Dallas,
Texas), KTBC-TV (Austin, Texas), KTVI-TV (St. Louis, Missouri) and
WVTM-TV (Birmingham, Alabama). For financial reporting purposes,
the acquisition occurred on March 31, 1995. FCC approval for
change in control of the television stations occurred on April 14,
1995. The acquisition has been accounted for as a purchase; the
purchase price allocation is preliminary.
Pro Forma Financial Information
The following condensed pro forma financial information gives
effect, as of the beginning of the respective periods, to the
purchase of the four CitiCasters' stations, the purchase of the
four Argyle stations, the disposal of WGHP-TV and WBRC-TV, the
exchange of shares of NWCG for 100% of the stock of NW
Entertainment, Four Star and Genesis, the sale of WSBK-TV,
borrowings necessary to fund the acquisitions, repayment of a
portion of NWTV's debt, issuance of the NWCG Holdings Notes and
the issuance of preferred stock. The pro forma financial
information does not necessarily reflect the future results or the
results that would have occurred had these transactions actually
occurred as of the beginning of the respective periods.
Pro Forma
---------------------------
Three Months Three Months
Ended Ended
March 31, March 31,
1995 1994
------------ ------------
Net revenues $299.4 $216.2
============ ============
Net loss $(38.9) $(25.1)
============ ============
3. TOY BIZ IPO
On March 2, 1995, Toy Biz completed an initial public
offering (the "Toy Biz IPO") in which it issued and sold 2,750,000
shares of class A common stock at $18 per share. Avi Arad, a
principal stockholder of Toy Biz also sold in the Toy Biz IPO
700,000 shares of class A common stock owned by him. The net
proceeds to Toy Biz, after deducting commissions and estimated
offering expenses, of approximately $44.1 were used to pay
outstanding amounts due under subordinated notes held by Marvel
and the sole stockholder of the predecessor to Toy Biz and for
working capital and general corporate purposes. The Company
recorded a gain of approximately $14.0 in connection with the Toy
Biz IPO in recognition of the net increase in value of Marvel's
investment in Toy Biz. In conjunction with the Toy Biz IPO,
Marvel's equity ownership was reduced to approximately 36.6% and
its voting control increased to approximately 85.3%. The
consolidated financial statement of the Company include the
results of operations, financial position and cash flow of Toy Biz
on a consolidated basis since the Toy Biz IPO as a result of
Marvel's increased voting control. For periods prior to the Toy
Biz IPO, Toy Biz was accounted for under the equity method.
In connection with the Toy Biz IPO, Toy Biz entered into a
three year $30.0 revolving line of credit with a syndicate of
banks for which Chemical Bank serves as administrative agent.
Substantially all of the assets of Toy Biz have been pledged to
secure borrowings under the Toy Biz credit facility. Borrowings
under the credit facility bear interest at either Chemical Bank's
alternate base rate or at the Eurodollar rate plus the applicable
margin. The applicable margin is 1% unless Toy Biz meets specific
financial operating levels, in which case the applicable margin
decreases to 3/4 of 1%. The credit facility requires Toy Biz to
pay a commitment fee of 3/8 of 1% per annum on the average daily
unused portion of the credit facility.
The Toy Biz credit facility contains various financial
covenants, as well as restrictions, on the incurrence of
new indebtedness, prepaying or amending subordinated debt,
acquisitions and similar investments, the sale or transfer of assets,
capital expenditures, limitations on restricted payments, dividends,
issuing guarantees and creating liens. The credit facility also
requires that (a) Marvel continue to control a majority of the voting
control of Toy Biz and have the power to elect a majority of Toy Biz's
Board of Directors and (b) the exclusive royalty free perpetual
worldwide license agreement between Toy Biz and Marvel remain in
effect. The Toy Biz credit facility is not guaranteed by Marvel.
4. INVENTORIES
March 31, December 31,
1995 1994
--------- ------------
Raw materials $17.3 $17.4
Work-in-process 12.7 11.9
Finished goods 37.8 20.9
--------- ------------
$67.8 $50.2
========= ============
5. LONG-TERM DEBT
In March 1995, NWCG entered into a $100.0 credit agreement
secured by the capital stock of NW Entertainment and various
subsidiaries ("Entertainment Line of Credit"). The availability
of credit is determined based on the amount of eligible accounts
receivable of NW Entertainment and various other factors. The
Entertainment Line of Credit bears interest at a Eurodollar rate
plus 1 1/2% or a prime rate plus 1/2%. On March 31, 1995, the
Entertainment Line of Credit had an outstanding balance of $57.0.
With the net proceeds from the sale of the Boston Station,
NWCG repaid $19.5 of Bank Credit Agreement in March 1995.
Restricted cash of $77.3 was used in April to repay a portion of
the Step-Up Notes.
In connection with the purchase of Argyle, NWCG assumed debt
with a March 31, 1995 balance of approximately $283.6. NWCG
intends to extinguish this debt with borrowings under the
Acquisition Credit Agreement.
As discussed above, NWCG has non-recourse debt to Fox of
approximately $40.4; interest, which accrues at a rate of 18% per
year, will be paid with monies remitted by the Trust.
6. INCOME TAXES
Income tax expense in 1995 reflects the recognition of income
taxes on the sale of the Boston Station by NWCG due to the lower
historical tax basis of the station's net assets. The liability
associated with these taxes will be offset by utilization of pre-
Plan Effective Date net operating losses of NWCG. The utilization
has been reflected as a reduction of excess reorganization value.
Income tax expense in 1995 also reflects an increase in foreign
source pre-tax income of Marvel compared to the 1994 period which
is taxed at higher rates. In addition, the Company has not
recorded a benefit in 1995 for its separate company loss since
Andrews Group's ownership of Marvel was reduced below 80% during
the second quarter of 1994 resulting in a deconsolidation for tax
purposes.
7. RELATED PARTY TRANSACTIONS
At March 31, 1995 and December 31, 1994, the Company and its
subsidiaries had advances from Mafco Holdings and its affiliates
of $175.3 and $154.2, respectively. These advances bear interest
primarily at 2% over the prime rate.
At March 31, 1995 and December 31, 1994, Holdings III had
advances of $4.9 and $8.2, respectively, to Mafco Holdings
represented by a non-interest bearing demand note of Mafco
Holdings. In addition, at March 31, 1995 and December 31, 1994, a
subsidiary of the Company had advances of $216.4 to Mafco Holdings
representing the net proceeds from the borrowings under the Marvel
IV Credit Agreement.
At May 2, 1995, an aggregate of 78.4 million shares of common
stock of Marvel owned by the Company were pledged to secure the
indebtedness and letters of credit of Marvel Holdings, Parent
Holdings, Holdings III and Four Star Holdings and 2.4 million
shares of common stock of Marvel are subject to a negative pledge
under the terms of the Marvel Holdings Notes. At May 2, 1995, an
aggregate of 34.5 million shares of NWCG owned by the Company were
pledged to secure the NWCG Holdings Notes.
8. SUBSEQUENT EVENTS
On April 26, 1995, pursuant to an Agreement and Plan of Merger
dated as of March 8, 1995 (the "SkyBox Merger Agreement"), among SkyBox
International Inc., a Delaware corporation ("SkyBox"), Marvel and
a wholly owned subsidiary of Marvel, Marvel acquired all of the issued
and outstanding shares of SkyBox common stock for $16 per share or
approximately $146.4. The transaction was accomplished through a tender
offer (the "Tender Offer') and subsequent merger (the "Merger" and
collectively with the Offer, the "SkyBox Acquisition"). Upon consummation
of the transaction, the Company repaid approximately $6.0 of indebtedness
of SkyBox, approximately $4.0 of which was borrowed by SkyBox to redeem its
outstanding preferred stock prior to the expiration of the Tender Offer.
The purchase price also includes an obligation to former SkyBox
stockholders who did not tender their shares.
In April 1995, Marvel entered into a $350.0 term loan
agreement with a syndicate of banks, the Co-Agents and Chemical
Bank, as administrative agent (the "U.S. Term Loan Agreement").
Marvel borrowed $350.0 under the U.S. Term Loan Agreement to
finance the SkyBox Acquisition, refinance the term loan portion of
its existing Amended and Restated Credit Agreement and for general
corporate purposes. Borrowings under the U.S. Term Loan
Agreement are repayable in six semi-annual installments beginning
August 31, 1999.
As a result of the refinancing of the term loan portion of the
Amended and Restated Credit Agreement, the Company anticipates an
extraordinary charge to earnings representing the write-off of related
deferred financing costs during the second quarter of 1995.
Loans under the U.S. Term Loan Agreement bear interest at a
rate per annum equal to the Eurodollar Rate (as defined in the
U.S. Term Loan Agreement), plus the Applicable Margin (as defined
in this paragraph), or the Alternate Base Rate (as defined in the
U.S. Term Loan Agreement). Eurodollar Rate loans will, at the
option of Fleer, have interest periods of one, two, three or six
months. Applicable Margin means (a) with respect to Eurodollar
Rate loans, 2% through the first Anniversary Date (as defined in
the U.S. Term Loan Agreement) and 1 1/8% to 2 1/2% thereafter, to
be determined based on the Company's financial performance and (b)
with respect to Alternate Base Rate loans, 1% through the first
Anniversary Date and 1/8 of 1% to 1 1/2% thereafter, to be
determined based on Marvel's financial performance.
The U.S. Term Loan Agreement includes various restrictive
covenants incorporated by reference to the existing Amended and
Restated Credit Agreement prohibiting Marvel from, among other
things, incurring additional indebtedness, with certain limited
exceptions, and making dividend, redemption and certain other
payments on its capital stock. The U.S. Term Loan Agreement also
contains certain customary financial convenants and events of
default for a financing of this type.
In connection with the U.S. Term Loan Agreement, Marvel also entered
into an amendment to the existing Amended and Restated Credit Agreement
which, among other things, permitted Marvel to incur the indebtedness
under the U.S. Term Loan Agreement. Pursuant to this amendment, the
Applicable Margin under the existing Amended and Restated Credit Agreement
for the Alternative Base Rate loans will range from 0% to 1% and for
Eurodollar Rate loans will range from 0.625% to 2%, in each case depending
on Marvel's financial performance.
<PAGE>
ANDREWS GROUP INCORPORATED AND SUBSIDIARIES
MANAGAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(dollars in millions, except per share data)
Results of Operations
General
- -------
The Company operates in the youth entertainment segment
through its approximately 79% ownership in Marvel. Marvel is a
leading creator, publisher and distributor of youth entertainment
products for domestic and international markets based on action
adventure characters owned by Marvel and on professional athletes,
sports teams and leagues and popular entertainment characters and
properties owned by others. Marvel also licenses its characters
and properties for consumer products, television and film and
advertising promotions. Marvel's operations include Marvel and
Malibu comics, Marvel Family Publishing children's magazines,
Fleer and SkyBox sports and entertainment picture cards, Panini
children's activity stickers and adhesives, Toy Biz toys and Fleer
confectionery products.
On April 26, 1995, pursuant to an Agreement and Plan of Merger
dated as of March 8, 1995 (the "SkyBox Merger Agreement"), among SkyBox
International Inc., a Delaware corporation ("SkyBox"), Marvel and
a wholly owned subsidiary of Marvel, Marvel acquired all of the issued
and outstanding shares of SkyBox common stock for $16 per share or
approximately $146.4. The transaction was accomplished through a tender
offer (the "Tender Offer') and subsequent merger (the "Merger" and
collectively with the Offer, the "SkyBox Acquisition"). Upon consummation
of the transaction, the Company repaid approximately $6.0 of indebtedness
of SkyBox, approximately $4.0 of which was borrowed by SkyBox to redeem its
outstanding preferred stock prior to the expiration of the Tender Offer.
The purchase price also includes an obligation to former SkyBox
stockholders who did not tender their shares.
Over the past five years, Marvel has diversified into a
broadly based youth entertainment company. As a result, an
increasing portion of Marvel's net revenues and net income has
been derived from businesses other than comic book publishing.
For example, in 1990, net revenues from comic book publishing
were approximately 87% of Marvel's total net revenues as compared
to approximately 25% in 1994. Marvel's business has been
augmented by the manufacture, marketing and distribution of sports
and entertainment picture cards and children's activity stickers
and the licensing of Marvel's characters for consumer products,
television and film, advertising promotions, and toys.
Marvel believes that, in 1993, Marvel and the overall comic
book direct market (i.e., comic book specialty stores) experienced
an unusual increase in revenues due in large part to speculative
purchases of comic books. Lower speculative purchases resulted in
a decline in overall direct market comic book publishing revenues,
including those of Marvel, for 1994 as compared to 1993 and may
result in a further decline in 1995. As a result of the changes
in the direct market, Marvel has recently undertaken several
strategic actions to bolster its comic book publishing business,
including the acquisition in late 1994 of Heroes World, the third
largest direct market distributor, and a planned reduction in the
number of comic book titles published each month.
In 1994, Marvel's sales to the direct market, which
represented approximately 63% of Marvel's net publishing revenues
and 16% of Marvel's consolidated net revenues, were derived from
sales to 10 unaffiliated distributors. Marvel plans to expand
Heroes World's distribution operations nationwide. Effective
July 1, 1995, Marvel will discontinue sales through the 9 unaffiliated
distributors and begin to distribute Marvel's publications
directly to approximately 4,500 comic book specialty stores on an
exclusive basis. Marvel believes that controlling distribution to
comic book specialty stores and focusing its distributor's efforts
exclusively on Marvel products will improve future operating results
of Marvel's publishing business. However, Marvel may experience some
disruption in sales and collections as Marvel expands Heroes
World's distribution capabilities nationwide.
Marvel implemented a plan to reduce by the summer of 1995 the number
of comic book titles published to approximately 75 per month by the
summer of 1995 from more than 100 per month in 1994. Marvel
believes that the reduction in titles is consistent with changing
levels of consumer demand, and will result in improved overall
quality of Marvel's publications by allowing the most talented
artists and writers to focus their efforts on Marvel's remaining titles.
Marvel expects that the reduction in revenues resulting from a lower
number of titles will not materially affect profitability as the
reduction in revenues will be offset by lower personnel and
production costs. Although Marvel expects that exclusive
distribution through Heroes World and the reduction in titles will
ultimately have a positive impact upon future publishing results,
net revenues and net income from publishing were adversely
affected in the first quarter of 1995 as compared to 1994 and
Marvel expects this to continue throughout the first half of 1995
as compared to 1994 as these actions are fully implemented.
Moreover, there can be no assurance that any or all of these changes
described above will succeed in accomplishing all of the results
anticipated.
The continuation of the baseball strike through March 1995,
had an adverse effect on baseball picture card sales and returns
in the first quarter of 1995. Although Major League Baseball has
resumed, Marvel anticipates that the effects of the recently ended
strike will continue to adversely impact baseball picture card net
revenues during 1995. Currently, there is no collective bargaining
agreement in effect between the owners and players. Any further
disruption of the 1995 season would have an adverse affect on baseball
picture card sales and could have an adverse effect on other sports
picture card sales and sports picture card returns in 1995. Additionally,
after the current season, the NBA Players Association and the NBA team
owners will continue labor negotiations on a contract which previously
expired. While Marvel has no reason to believe that these negotiations
will be unsuccessful, Marvel's net revenues from basketball picture cards
could be adversely impacted in 1995 in the event of a strike or
"lockout" causing a disruption of the 1995-1996 NBA season.
As stated previously, Marvel purchased SkyBox, a picture card
company which markets entertainment picture cards as well as
basketball, football and NASCAR picture cards. Marvel anticipates
that the acquisition of SkyBox will have a positive impact on
future picture card results, particularly in Marvel's
entertainment picture card business.
In the absence of any further disruption in baseball and a
disruption in basketball, Marvel anticipates that net revenues and
profitability for its picture card business for 1995 as a whole will
compare favorably to 1994.
Marvel expects that there will continue to be year to year
fluctuations in the net revenues and profitability of its
individual businesses. However, Marvel believes that its
continued diversification into a broad based youth entertainment
company will mitigate, if not offset, any effects of such
fluctuations on overall net revenues and profitability, including
those resulting from the developments described above.
The Company operates in the broadcasting and production and
distribution segments through its approximately 42% ownership
interest (81% voting interest) in NWCG, assuming conversion of
NWCG Series B Preferred Stock. NWCG currently operates eight
broadcast television stations, a television production company,
and a filmed entertainment distribution business. Prior to the
Merger, the Company owned approximately 54.15% of NWTV which was
acquired on May 25, 1993. NWCG also owns a 37.5% interest in
Guthy-Renker, which is engaged in marketing various products
through long-form television advertisements.
Three Months Ended March 31, 1995 Compared With Three Months Ended
- ------------------------------------------------------------------
March 31, 1994
- --------------
The Company's net revenues in 1995 were $274.4 compared with
$180.0 in 1994. Revenues in 1995 include $159.5 from the
Company's youth entertainment segment and $114.9 from the
Company's broadcasting and production and distribution segment.
Revenues in 1994 include $98.2 from the Company's youth
entertainment segment and $81.8 from the Company's broadcasting
and production and distribution segment.
The increase in revenues from the youth entertainment segment
reflects a $27.0 increase in picture card and sticker revenues, a
$7.9 increase in net publishing revenues, an increase of $1.0 in
licensing revenues, an increase of $12.2 in other product revenues
and $13.2 in toy revenues as a result of the consolidation of Toy
Biz's results since the Toy Biz IPO. The increase in picture card
and sticker net revenues was attributable to the addition of
sports and entertainment children's activity sticker collections
commencing with the Panini Acquisition on September 1, 1994, which
more than offset a significant decrease in picture card net
revenues principally as a result of the baseball strike. The
increase in publishing revenues principally reflects the addition
of Heroes World and, to a lesser extent, the addition of Malibu
and Marvel Family Publishing in the fourth quarter of 1994. Until
July 1, 1995, the targeted exclusive distribution date, Heroes
World will continue to generate sales from the distribution of comic
books of other publishers.
The increase in revenues from the television entertainment
segment reflects an increase in broadcasting revenues for the two
stations acquired in September 1994 from CitiCasters partially
offset by a decrease in revenues for the six original stations
owned for both periods and a decrease in revenues reflecting the
sale of the Boston Station in March 1995. The Company had
expected the conversion to Fox to result in an initial decline in
revenues. The decrease in revenue for the six original stations
reflects a temporary reduction of revenue due to the conversion
and higher revenues in 1994 when the majority of these stations
broadcast the 1994 Winter Olympics. Production and distribution
revenue increased primarily due to increases in domestic
syndication revenues.
Direct costs for 1995 and 1994 relates to the youth
entertainment segment ($96.9 and $49.0, respectively) and to the
broadcasting and production and distribution segment ($75.1 and
$46.3, respectively). The youth entertainment segment's direct
costs as a percentage of sales was 61% in 1995 and 50% in 1994
period, reflecting higher direct costs as a percentage of net
revenues for publishing and picture cards, partially offset by
lower direct costs as a percentage of net revenue from toys and
children's activity sticker collections.
Broadcasting direct costs increased due to the acquisition of
the CitiCasters stations and increased direct costs for the
original six stations due to higher staffing levels to support the
increase in locally produced programming partially offset by a
decrease in direct costs reflecting the sale of the Boston Station
in March 1995. Production and distribution direct costs increased
due to substantially greater production activity in the latter
half of 1994 and 1995 and higher overhead to support the
production activity. Both of NWCG's business segments incurred
direct costs associated with NWCG's conversion of certain
broadcast stations to the Fox Network, which allows the broadcast
stations to provide more locally-produced programming.
Selling, general and administrative ("SG&A") expenses in 1995
increased by $32.0 to $80.3. The youth entertainment segment's
SG&A expenses increased from $24.6 to $45.3. The increase of
$20.7 was mainly attributable to the addition of sports and
entertainment children's activity sticker collections and
adhesives, the consolidation of Toy Biz's results, increased
corporate overhead to support the expansion of Marvel and the
effect of the strategic actions taken in the publishing business
described above. As a percentage of net revenues, the youth
entertainment segment's SG&A expenses were approximately 28% in
1995 and 25% in 1994. The television entertainment segment's SG&A
expenses were $30.1 and $20.2 in 1995 and 1994, respectively.
Broadcasting SG&A expenses increased due to the acquisition of the
CitiCasters stations and increased expenses for the original six
stations due to higher staffing levels to support the increase in
locally produced programming and the increased promotional and
advertising activities partially offset by a decrease in expenses
reflecting the sale of the Boston Station in March 1995.
Production and distribution SG&A expenses increased due to
substantially greater production activity in the latter half of
1994 and 1995, the start-up of the sales and marketing firm in May
of 1994 and higher overhead to support the production activity.
Both of NWCG's business segments incurred SG&A expenses associated
with NWCG's conversion of certain broadcast stations to the Fox
Network, which allows the broadcast stations to provide more
locally-produced programming. Also included in SG&A expenses are
$4.9 and $3.5 of corporate overhead expenses in 1995 and 1994,
respectively.
Amortization of goodwill and intangibles increased to $12.6
in 1995 from $10.9 in 1994 primarily due to the inclusion of NW
Acquisition and Panini since September 1994 and the consolidation
of Toy Biz.
The Company recorded a gain of $54.9 in 1995 in connection
with the sale of the Boston Station and the Toy Biz IPO. The
Company recorded a gain of $31.0 in 1994 in connection with the
sale by NWCG of 16,318,811 shares of common stock in a rights
offering.
Interest expense increased to $65.3 in 1995 from $44.0 in
1994 primarily due to interest expense on the long-term
indebtedness issued in 1994 by Holdings III and NWCG Holdings,
borrowings under the bank credit agreement of Marvel IV Holdings
and the increased borrowing associated with the Panini Acquisition
partially offset by a reduction in loans from affiliates.
The provision for income taxes was $43.3 and $0.6 in 1995 and
1994, respectively. The increase in income tax expense results
primarily from the recognition of income taxes on the sale of WSBK
by NWCG and an increase in foreign source pre-tax income of Marvel
which is taxed at higher rates. The tax liability associated with
the sale of WSBK will be offset by the utilization of NWCG pre-
bankruptcy plan effective date net operating losses. The
utilization has been reflected as a reduction of excess
reorganization value. In addition, the Company has not recorded a
benefit in 1995 for its separate company loss since Andrews
Group's ownership of Marvel was reduced below 80% during the
second quarter of 1994 resulting in a deconsolidation for tax
purposes.
Equity in net income of investees represents Marvel's equity
interest in Toy Biz prior to the Toy Biz IPO, NWCG's 37.5%
interest in Guthy-Renker and NWCG's portion of Genesis' net loss
prior to the acquisition of the remaining 50% of Genesis.
Inflation
In general, costs to operate in the Company's business
segments are affected by inflation, and the effects of inflation
may be experienced by the Company in future periods. Management
believes, however, that such effect has not been material to the
Company in 1995 or 1994.
Financial Condition, Liquidity and Capital Resources
(a) Marvel
------
The decrease in cash provided by operations for Marvel was
mainly attributable to the use of cash by Toy Biz in its operations
commencing with the Toy Biz IPO, a reduction in net income and a
decrease in accrued expenses and other liabilities due to the
partial liquidation of the reserve for picture card returns and the
timing of income tax payments.
Capital expenditures were $6.1 and $1.0 for the three months
ended March 31, 1995 and 1994, respectively. The significant
increase in the 1995 period as compared to the 1994 period is
primarily attributable to the expansion of Panini's adhesives
paper facility and, to a lesser extent, the consolidation of Toy
Biz.
In April, 1995, Marvel entered into a $350.0 term loan
agreement with a syndicate of banks, the Co-Agents and Chemical
Bank, as administrative agent (the "U.S. Term Loan Agreement").
Marvel borrowed $350.0 under the U.S. Term Loan Agreement to
finance the SkyBox Acquisition, refinance the term loan portion of
the existing Amended and Restated Credit Agreement and for general
corporate purposes. Borrowings under the U.S. Term Loan
Agreement are repayable in six semi-annual installments beginning
August 31, 1999.
Loans under the U.S. Term Loan Agreement bear interest at a
rate per annum equal to the Eurodollar Rate (as defined in the
U.S. Term Loan Agreement) plus the Applicable Margin (as defined
in this paragraph), or the Alternate Base Rate (as defined in the
U.S. Term Loan Agreement). Eurodollar Rate Loans will, at the
option of Fleer, have interest periods of one, two, three or six
months. Applicable Margin means (a) with respect to Eurodollar
Rate Loans, 2% through the first Anniversary Date (as defined in
the U.S. Term Loan Agreement) and 1 1/8% to 2 1/2% thereafter, to
be determined based on Marvel's financial performance and b) with
respect to Alternate Base Rate Loans, 1% through the first
Anniversary Date and 1/8 of 1% to 1 1/2% thereafter, to be
determined based on Marvel's financial performance. The interest
rate on Eurodollar Rate Loans at May 2, 1995, was approximately 6
1/16% to 6 3/8%, depending upon the length of the relevant
interest period, and the interest rate on Alternate Base Rate
Loans, at May 2, 1995, was approximately 9% per annum. Interest
on Alternate Base Rate Loans is payable quarterly in arrears and
interest on Eurodollar Rate Loans, is payable at the end of the
applicable interest period, except that if the interest period is
six months, interest is payable ninety days after the commencement
of the interest period and at the end of the interest period.
The obligations of Fleer under the U.S. Term Loan Agreement
are not secured, but Marvel has guaranteed Fleer's obligations
thereunder.
The U.S. Term Loan Agreement includes various restrictive
covenants incorporated by reference to the existing Amended and
Restated Credit Agreement prohibiting Marvel from, among other
things, incurring additional indebtedness, with certain limited
exceptions, and making dividend, redemption and certain other
payments on its capital stock. The U.S. Term Loan Agreement, also
contains certain customary financial covenants and events of
default for a financing of this type.
In connection with the U.S. Term Loan Agreement, Marvel also entered
into an amendment to the existing Amended and Restated Credit Agreement
which, among other things, permitted Marvel to incur the indebtedness
under the U.S. Term Loan Agreement. Pursuant to this amendment, the
Applicable Margin under the existing Amended and Restated Credit Agreement
for the Alternative Base Rate loans will range from 0% to 1% and for
Eurodollar Rate loans will range from 0.625% to 2%, in each case depending
on Marvel's financial performance.
At May 2, 1995, 78.4 million shares, or 78% of Marvel's
common stock were pledged to secure indebtedness of subsidiaries
of Mafco Holdings. The indentures governing this indebtedness
contain various covenants relating to Marvel, including certain
limitations on Marvel's indebtedness.
At May 2, 1995, Marvel's outstanding bank indebtedness was
$555.9, and Marvel had $49.5 available under its revolving credit
facility.
On March 2, 1995, Toy Biz completed an initial public
offering (the "Toy Biz IPO") in which it issued and sold 2,750,000
shares of its class A common stock at $18.00 per share. Avi Arad,
a principal shareholder of Toy Biz, also sold in the Toy Biz IPO
700,000 shares of class A common stock owned by him. The net
proceeds of approximately $44.1 to Toy Biz, after deducting
commissions and offering expenses, were used to pay outstanding
amounts due under subordinated notes held by Marvel and the sole
stockholder of the predecessor to Toy Biz and for working capital
and general corporate purposes. Marvel recorded a gain of
approximately $14.0 on the Toy Biz IPO in recognition of the net
increase in value of Marvel's investment in Toy Biz. In
conjunction with the Toy Biz IPO, Marvel's equity ownership was
reduced to 36.6% and its voting control increased to approximately
85.3%.
In conjunction with the Toy Biz IPO, Toy Biz entered into a
three year $30.0 revolving line of credit with a syndicate of
banks for which Chemical Bank serves as administrative agent.
Substantially all of the assets of Toy Biz have been pledged to
secure borrowings under the Toy Biz credit facility. Borrowings
under the credit facility bear interest at either Chemical Bank's
alternate base rate or at the Eurodollar rate plus the applicable
margin. The applicable margin is 1% unless Toy Biz meets specific
financial operating levels, in which case the applicable margin
decreases to 3/4 of 1%. The credit facility requires Toy Biz to
pay a commitment fee of 3/8 of 1% per annum on the average daily
unused portion of the credit facility.
The Toy Biz credit facility contains various financial
covenants, as well as restrictions, on the incurrence of new
indebtedness, prepaying or amending subordinated debt, acquisitions
and similar investments, the sale or transfer of assets, capital
expenditures, limitations on restricted payments, dividends, issuing
guarantees and creating liens. The credit facility also requires
that (a) Marvel continue to control a majority of the voting control of
Toy Biz and have the power to elect a majority of Toy Biz's Board of
Directors and (b) the exclusive, royalty free perpetual
worldwide license agreement between Toy Biz and Marvel remain in
effect. The Toy Biz credit facility is not guaranteed by Marvel.
There was no outstanding indebtedness under the Toy Biz line
of credit at May 2, 1995.
Management anticipates that borrowings under its various
credit agreements will be paid from internally generated funds of
Marvel or from other sources, which may include the sale of debt
securities of Marvel. Management also anticipates that internally
generated funds, as well as proceeds from borrowings under the
revolving credit portion of the existing Amended and Restated Agreement
or any amendment thereto, will be sufficient to meet working capital,
capital expenditure and investment requirements.
(b) NWCG
----
At March 31, 1995, NWCG has total outstanding debt, net of
restricted cash, of $1,023.0 The increase in debt from December
31, 1994 includes the assumption of the Argyle Television
Holdings, Inc. debt of $283.6, a drawdown of the Acquisition
Credit Agreement of $95.0, the incurrence of approximately $40.4
of non-recourse debt to Fox and a drawdown of the Entertainment
Line of Credit of $57.0. Further, NWCG repaid $19.7 of the Bank
Credit Agreement Loans and $77.3 of the Step-up Notes from the net
proceeds of the WSBK sale and paid $8.0 of the Step-up Notes as a
scheduled payment. NWCG expects to receive an additional $62.8
when certain of the Argyle stations affiliate with the Fox
Network. NWCG plans to extinguish the Argyle Television Holdings,
Inc. debt in the second quarter of 1995 by borrowing funds under
the Acquisition Credit Agreement.
In order to service the currently outstanding broadcast debt,
the primary source of funds will be broadcasting operating cash
flow. Broadcasting operating cash flow from stations recently
acquired will provide NWCG with the ability to service additional
debt incurred in connection with broadcast station acquisitions.
NWCG believes that broadcasting operating cash flow and financing
activities permitted under existing debt agreements will be
sufficient to enable NWCG to satisfy current requirements for
operating, investing and financing activities of NWCG and its
subsidiaries, including debt service prior to final maturity.
NW Entertainment obtained a $100.0 credit facility
collateralized by certain assets of the production and
distribution segment. At March 31, 1995, $57.0 is outstanding
under this facility. NWCG believes production and distribution
segment cash flow will be sufficient to service this debt.
In order to meet principal payments upon the final maturity
of its various debt facilities outstanding, the earliest of which
occurs in 1998, NWCG will be required to adopt one or more
alternatives, such as refinancing or restructuring its
indebtedness, selling material assets or operations or seeking
additional capital contributions. There can be no assurance that
any of such actions could be effected on satisfactory terms, that
they would enable NWCG to continue to satisfy NWCG's capital
requirements or that they would be permitted by the terms of
existing or future debt agreements.
NWCG's capital budget for 1995 is approximately $25.0,
primarily for the broadcasting segment. In connection with the
broadcast stations' change in affiliation to the Fox Network, the
broadcasting segment provides more locally-produced programming
which requires additional capital expenditures and operating
expenses.
NWCG has entered into an agreement in principle with Stephen
J. Cannell to acquire his production company, Cannell
Entertainment Inc., for convertible securities valued at $30.0 and
certain other consideration. NWCG believes that any financing
required for this acquisition would be obtained through internal
cash flow or an additional bank credit facility. However, no
assurance can be given that the acquisition will be finalized or
that financing will be obtained.
NWCG currently anticipates that any other necessary financing
would be obtained through additional bank credit facilities, the
issuance of debt securities and, possibly, through additional
equity financings. Should such additional sources of financing be
needed to fund acquisitions or operations and not be obtainable,
NWCG's liquidity would be severely adversely affected.
(c) Corporate and other subsidiaries
--------------------------------
The Company's corporate cash requirements consist primarily
of debt service and administrative expenses. The Company's
principal source of liquidity at the corporate level is expected
to consist of advances from Mafco Holdings and affiliates. At May
2, 1995, an aggregate of 78.4 million shares of common stock of
Marvel owned by the Company were pledged to secure the
indebtedness and letters of credit of Marvel Holdings, Parent
Holdings, Holdings III and Four Star Holdings and 2.4 million
shares of common stock of Marvel are subject to a negative pledge
under the terms of the Marvel Holdings Notes. At May 2, 1995, an
aggregate of 34.5 million shares of NWCG owned by the Company were
pledged to secure the NWCG Holdings Notes.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On March 26, 1993, Parent Holdings commenced a tender offer
for up to 22,000,000 shares of common stock at $12.50 per share.
On or about April 19, 1993 and April 23, 1993, three lawsuits,
Joseph H. Weiss v. Ronald O. Perelman, et al. (C.A. No. 12945),
John Mortensen v. Ronald O. Perelman, et al. (C.A. No. 12952), and
Nicholas D. Gravina v. Ronald O. Perelman, et al. (C.A. No.
12954), were filed in the Court of Chancery of the State of
Delaware in and for New Castle County against Parent Holdings,
Marvel and certain of Marvel's directors. These lawsuits were
consolidated under the caption Joseph H. Weiss v. Ronald O.
Perelman, et al. (C.A. No. 12945), and on June 23, 1993, the
plaintiffs filed a consolidated amended complaint. The
consolidated action purported to be a class action on behalf of
all of Marvel's public stockholders, and, in the consolidated
amended complaint, alleged that the original $12.50 per share
offer was grossly inadequate and coercive; the offering statement,
the amended offering statement and Marvel's 14d-9 filings were
false and misleading; and Marvel's Board of Directors and its
special committee failed adequately to protect the interest of
Marvel's stockholders. The consolidated amended complaint sought
damages, an accounting and fees for the plaintiffs' attorneys for
purportedly causing an increase in the tender offer price from
$12.50 to $15 per share. On February 20, 1994, the plaintiffs
voluntarily dismissed each of these actions and filed a single new
action in the United States District Court for the Southern
District of New York. The new action names as defendants the same
defendants as the prior actions, as well as MacAndrews Holdings
and Mafco Holdings; makes essentially the same allegations and
further alleges that the revised tender offer price was also
grossly inadequate; purports to state claims under Sections 10(b),
14(e) and 20(a) of the Securities Exchange Act of 1934, as
amended; and seeks supplemental disclosure, rescission of the
tender and/or rescissory damages, commencement of a new and
"improved" tender offer and other, related equitable and legal
relief. The Company believes that the new action is without merit
and, on May 2, 1994, moved to dismiss the complaint because, among
other reasons, it fails to state a claim. Legal briefs have been
submitted to the court, and the parties are awaiting the court's
ruling on such motion.
On March 9, 1995, a complaint, purporting to be a class
action, was filed against SkyBox, certain of SkyBox's officers and
directors and Marvel in the Court of Chancery in the State of
Delaware in and for New Castle County, entitled Strougo v. Lorber,
et al., C.A. No. 14107 ("Strougo"). The complaint generally
alleges that SkyBox and certain of its officers and directors
breached their fiduciary duties by accepting the cash tender offer
and the merger at an unfair and inadequate price by failing to
consider other potential purchasers in a manner designed to obtain
the highest possible price for SkyBox's stockholders and by not
acting in the best interest of stockholders. The complaint also
alleges that Marvel aided and abetted the breaches of fiduciary
duty committed by the other defendants named in the complaint.
The complaint seeks preliminary and permanent injunctions against
consummation of the merger, damages, costs and experts' fees and
expenses.
On March 16, 1995, a complaint, purporting to be a class
action, was filed against SkyBox and certain of SkyBox's officers
and directors in the Court of Chancery in the State of Delaware in
and for New Castle County, entitled Krim and Gerber v. SkyBox
International Inc., et al., C.A. No. 14127. The complaint
generally makes allegations similar to those contained in the
Strougo complaint and seeks similar injunctive and other relief.
In connection with the appeal to the United States Court of
Appeals for the Seventh Circuit by the plaintiff in the Eckstein
and Majeski Actions (see Andrews Group 1994 10-K), oral argument
was held on April 17, 1995.
On March 10, 1994, Steven Cooperman commenced an action, on
behalf of himself and purportedly derivatively on behalf of SCI
Television, Inc. (or its purported successor corporation, NWCG)
and as a class action, against certain of the officers and
directors of NWCG, certain of their respective affiliates and
certain of their advisors, asserting, among other things, breaches
of fiduciary duty, unjust enrichment, constructive fraud and abuse
of control in connection with the transactions contemplated by the
Agreement (the "Action"). The Action is entitled Steven
Cooperman, On Behalf of Himself and Derivatively on Behalf of SCI
Television, Inc., a Delaware corporation (or its successor
corporation, SCI Parent Corporation to be re-named New World
Communications Group, Inc.) v. Ronald O. Perelman, et al., and SCI
Television, Inc., a Delaware corporation (or its successor
corporation, SCI Parent Corporation to be re-named New World
Communications Group, Inc.), Case No. BC100359 (Superior Court of
the State of California, County of Los Angeles). The Action seeks
equitable relief and damages. Preliminary agreement has been
reached on a settlement of this litigation. Under the terms of the
settlement, NWCG will issue 2 million warrants for the purchase of
NWCG stock at the market price on the day of issue. The warrants
will be exercisable over a 90-day period, 5 years from the date of
issue. There will also be a payment of cash consideration. In
addition, Andrews Group will contribute the stock of L.C.
Holdings, a company with an educational film library, to NWCG.
The settlement is subject to final documentation and court
approval. It is anticipated that submission for court approval
will take place prior to June 30, 1995. When the securities are
issued, the fair value of the securities will be reflected in
NWCG's common stockholders' equity with a corresponding reduction
to additional paid-in-capital.
The Company and its subsidiaries are also parties to various
other litigation, which have arisen in the ordinary course of
business. The Company believes that it is unlikely that the
outcome of all pending litigation in the aggregate will have a
material adverse effect on the consolidated financial condition of
the Company and its subsidiaries taken as a whole.
ITEM 5. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 - Financial Data Schedule
(b) Report on Form 8-K
March 31, 1995 (Item 7)
<PAGE>
SIGNATURES
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.
ANDREWS GROUP INCORPORATED
(Registrant)
By: /s/ Joseph P. Page
------------------------
May 12, 1995 Joseph P. Page
Executive Vice President and
Chief Financial Officer
<PAGE>
SIGNATURES
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.
ANDREWS GROUP INCORPORATED
(Registrant)
By: /s/ Laurence Winoker
-----------------------
May 12, 1995 Laurence Winoker
Vice President and Controller
(Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Andrews
Group and Subsidiaries Consolidated Condensed Balance Sheets and Statements of
of Earnings and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<CIK> 0000277025
<NAME> ANDREWS GROUP INCORPORATED AND SUBSIDIARIES
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 106
<SECURITIES> 0
<RECEIVABLES> 405
<ALLOWANCES> 40
<INVENTORY> 68
<CURRENT-ASSETS> 769
<PP&E> 316
<DEPRECIATION> 45
<TOTAL-ASSETS> 3734
<CURRENT-LIABILITIES> 525
<BONDS> 2552
<COMMON> 0
247
0
<OTHER-SE> (380)
<TOTAL-LIABILITY-AND-EQUITY> 3734
<SALES> 274
<TOTAL-REVENUES> 274
<CGS> 172
<TOTAL-COSTS> 172
<OTHER-EXPENSES> 13
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 65
<INCOME-PRETAX> 5
<INCOME-TAX> 43
<INCOME-CONTINUING> (37)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (37)
<EPS-PRIMARY> 0
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</TABLE>
