<PAGE> 1
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: 1-6739
SPELLING ENTERTAINMENT GROUP INC.
(Exact name of registrant as specified in its charter)
FLORIDA 59-0862100
- ---------------------------------- ---------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5700 WILSHIRE BOULEVARD
LOS ANGELES, CALIFORNIA 90036
- ----------------------------------------- -------------
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (213) 965-5700
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 .
----- ------
On May 10, 1995, the registrant had outstanding 88,327,011 shares of
Common Stock, $.10 par value.
<PAGE> 2
SPELLING ENTERTAINMENT GROUP INC.
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets -
March 31, 1995 and December 31, 1994 (Unaudited) 3
Condensed Consolidated Statements of
Operations - Three Months Ended
March 31, 1995 and 1994 (Unaudited) 4
Condensed Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1995 and 1994 (Unaudited) 5
Notes to Unaudited Condensed Consolidated Financial Statements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 13
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 18
</TABLE>
2
<PAGE> 3
SPELLING ENTERTAINMENT GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Data)
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
-------- ----------
<S> <C> <C>
ASSETS:
Cash and cash equivalents $ 21,450 $ 22,400
Accounts receivable, net 204,888 242,127
Entertainment product, net 321,825 325,643
Property, plant and equipment, net 19,207 16,161
Other assets 25,135 19,678
Intangible assets 398,137 400,751
-------- ----------
$990,642 $1,026,760
======== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Accounts payable, accrued expenses and other liabilities $ 69,478 $ 101,484
Accrued participation expense 81,404 83,493
Deferred revenue 6,405 11,275
Bank and other debt 239,482 248,853
Income and other taxes 30,006 24,355
Net liabilities related to discontinued operations 25,102 27,061
-------- ----------
Total Liabilities 451,877 496,521
-------- ----------
Minority interest 1,765 1,792
Commitments and contingent liabilities
Shareholders' Equity:
Preferred stock, $.10 par value; authorized
20,000,000 shares; none outstanding - -
Common stock, $.10 par value; authorized
300,000,000 shares; issued and outstanding
88,295,986 and 87,983,329 shares, respectively 8,830 8,798
Capital in excess of par value 548,299 546,843
Accumulated deficit (20,677) (27,287)
Cumulative translation adjustment 548 93
-------- ----------
Total Shareholders' Equity 537,000 528,447
-------- ----------
$990,642 $1,026,760
======== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 4
SPELLING ENTERTAINMENT GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------
1995 1994
--------- --------
<S> <C> <C>
Revenue $ 185,148 $ 80,413
Costs and expenses:
Entertainment product costs 144,742 59,531
Selling, general and administrative 23,367 8,731
--------- --------
Operating income 17,039 12,151
Interest income 1,057 524
Interest expense (4,699) (656)
Other income, net 53 --
--------- --------
Income from continuing operations
before income taxes and minority interest 13,450 12,019
Provision for income taxes (6,206) (5,165)
--------- --------
Income from continuing operations before minority interest 7,244 6,854
Minority interest 27 --
--------- --------
Net income $ 7,271 $ 6,854
========= ========
Average number of common and common equivalent shares 88,125 64,579
========= ========
Net income per common and common equivalent share $ 0.08 $ 0.11
========= ========
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 5
SPELLING ENTERTAINMENT GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------
1995 1994
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 7,271 $ 6,854
Adjustments to reconcile net income to cash flows
from operating activities:
Depreciation and amortization 3,788 1,289
Amortization of entertainment product costs 132,332 39,875
Additions to entertainment product costs (128,514) (35,271)
Changes in operating assets and liabilities:
Decrease in accounts receivable 37,239 11,187
Increase (decrease) in accounts payable
accrued expenses, other liabilities and income taxes (25,894) 4,785
Decrease in accrued participation expense (2,089) (3,330)
Decrease in deferred revenue (4,870) (7,629)
Other, net (6,261) 1,220
--------- --------
13,002 18,980
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment, net (4,110) (189)
Changes in net liabilities related to
discontinued operations (1,959) (1,771)
--------- --------
(6,069) (1,960)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under credit facilities 19,598 50,000
Repayments of credit facilities (28,969) (59,580)
Cash dividends paid on Common Stock -- (1,291)
Issuances of Common Stock 1,488 865
--------- --------
(7,883) (10,006)
--------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (950) 7,014
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 22,400 12,682
--------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 21,450 $ 19,696
========= ========
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE> 6
SPELLING ENTERTAINMENT GROUP INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(000's omitted in all tables except per share data)
1. INTERIM FINANCIAL STATEMENTS
The accompanying unaudited condensed consolidated financial statements of
Spelling Entertainment Group Inc. and subsidiaries (the "Company") have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission. The Company believes that the disclosures contained herein are
adequate to make the information presented not misleading; however, these
unaudited condensed consolidated financial statements should be read in
conjunction with the more detailed financial statements and notes thereto
included in the Company's most recent Annual Report on Form 10-K.
The financial statements reflect, in the opinion of management, all normal
recurring adjustments necessary to present fairly the Company's financial
position and results of operations. In order to maintain consistency and
comparability between periods presented, certain amounts have been reclassified
from the previously reported financial statements in order to conform with the
financial statement presentation in the current period.
Blockbuster Entertainment Corporation ("BEC") owned 67,673,702 shares of the
Company's outstanding common stock ("Common Stock") at September 29, 1994 (see
Note 2 regarding the issuance of Common Stock in connection with the
acquisition of Virgin Interactive Entertainment Limited ("VIEL," together with
its subsidiaries, "VIE")). Effective as of that date, BEC merged with and into
Viacom Inc. ("Viacom"), with Viacom being the surviving corporation. As a
result of the merger, Viacom currently owns approximately 77% of the Company's
Common Stock.
The first quarter of 1995 reflects $5,026,000 of operating income that resulted
from the Company conforming its accounting policies, with respect to Statement
of Financial Accounting Standards ("SFAS") No. 53, to those of Viacom. In
addition, such operating income includes a net adjustment of approximately
$5,500,000 attributable to prior years. Also, in the first quarter of 1995,
the Company recognized write-downs to net realizable value of approximately
$9,077,000 with respect to certain of the Company's entertainment product.
2. MERGER AND ACQUISITION
On April 26, 1994, the Company, acquired all of the outstanding shares of
Republic Entertainment Inc. (formerly Republic Pictures Corporation)
("Republic"), through a cash merger (the "Merger").
6
<PAGE> 7
SPELLING ENTERTAINMENT GROUP INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(000's omitted in all tables except per share data)
(Continued)
On July 30, 1994, the Company acquired from BEC (the "Acquisition") 8,686,984
ordinary shares (the "Ordinary Shares") of VIEL and an option to acquire 550,000
Ordinary Shares of VIEL (collectively, the "VIE Interests") in exchange for
22,015,062 shares of the Company's Common Stock. BEC had acquired a majority of
the VIE Interests from third parties on July 29, 1994. As a result of the
Acquisition, the Company acquired approximately 90% of VIEL's Ordinary Shares.
In connection with the Acquisition, the Company also entered into put- and
call-option agreements with BEC (now Viacom) with respect to the Ordinary Shares
of VIEL not owned by the Company. Under these agreements, at certain dates over
the next three years the Company may acquire, or be required by Viacom to
purchase, these shares from Viacom at an agreed-upon price. At the option of
the Company, such purchase price may be paid in cash or shares of the
Company's Common Stock. (See Note 10.)
The Company has accounted for the Merger and the Acquisition under the purchase
method of accounting. The results of operations of Republic and VIEL are
included in the Company's results of operations subsequent to acquisition. The
assets and liabilities of Republic and VIEL are included in the accompanying
condensed consolidated balance sheets as of March 31, 1995 and December 31,
1994, at estimated fair value, with the preliminary differences between purchase
price and such fair values being included in intangible assets. The Company has
completed a preliminary evaluation of the assets and liabilities of Republic and
VIEL. The excess of the purchase price over net assets and liabilities acquired
is being amortized on a straight-line basis over forty years.
3. ENTERTAINMENT PRODUCT, NET
Entertainment product, net includes production or acquisition costs (including
advance payments to producers), capitalized overhead and interest, home video
and interactive manufacturing costs, and prints, advertising and other related
distribution costs expected to benefit future periods. These costs are
amortized, and third-party participations and residuals are accrued, on an
individual product basis in the ratio that current year gross revenue bears to
estimated future gross revenue.
7
<PAGE> 8
SPELLING ENTERTAINMENT GROUP INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(000's omitted in all tables except per share data)
(Continued)
Entertainment product, net is stated at the lower of cost less amortization or
estimated net realizable value, generally on an individual film product basis.
Estimates of total gross revenue, costs and participations are reviewed
quarterly and revised as necessary. When estimates of total revenue and costs
indicate that an individual product will realize an ultimate loss, additional
amortization is provided to fully recognize such loss in that period.
Entertainment product, net is comprised of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
--------- ------------
<S> <C> <C>
Entertainment product:
Released $185,822 $ 162,147
In process and other 38,749 53,615
Entertainment product rights 97,254 109,881
-------- ---------
$321,825 $ 325,643
======== =========
</TABLE>
Entertainment product rights include advances to producers and acquisition
costs for distribution or other rights to entertainment product not produced by
the Company.
4. DEBT
Debt consisted of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
--------- ------------
<S> <C> <C>
Viacom Facility, average interest at
7.38% at March 31, 1995 $170,000 $181,805
Credit Agreement, average interest at
7.12% at March 31, 1995 69,274 54,313
UK Facility, interest at 7.75%
at March 31, 1995 147 8,943
Other credit facilities 61 3,792
-------- --------
$239,482 $248,853
======== ========
</TABLE>
In January 1994, the Company entered into a three-year credit agreement with
BEC. As a result of the merger of BEC with and into Viacom, Viacom succeeded
to BEC's position under the credit agreement (the "Viacom Facility"). This
agreement was amended and restated in
8
<PAGE> 9
SPELLING ENTERTAINMENT GROUP INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(000's omitted in all tables except per share data)
(Continued)
January 1995 to reflect certain amendments to the facility which were effective
as of December 7, 1994, including a $25,000,000 increase in the amount
available under the facility. The Viacom Facility, as amended, provides for
(i) a term loan of $100,000,000 and (ii) a revolving credit facility of
$100,000,000 to fund the Company's working capital and other requirements. All
outstanding borrowings mature on March 31, 1997. Under the Viacom Facility,
the Company pays an annual fee (currently 0.375%) based on the unused portion
of the facility, as well as certain facility and administration fees, all based
on the similar fees payable by Viacom under its separate credit facilities.
Interest on all outstanding borrowings is payable, at the Company's option, at
LIBOR plus a spread (currently 1.25%) or at prime rate; both rates are
determined by reference to the corresponding rates payable by Viacom under its
separate credit facilities.
Borrowings under the Viacom Facility are secured by all of the assets of the
Company and its domestic subsidiaries and the entire amount outstanding under
the Viacom Facility may be accelerated if Viacom's borrowings under its
separate credit facilities were to be accelerated.
On December 23, 1993, a wholly-owned subsidiary of VIEL established a
multi-currency credit agreement with a bank in the U.S. (the "Credit
Agreement"). The Credit Agreement initially provided for maximum borrowings of
$15,000,000, subject to a borrowing base test. Following the Acquisition, the
amount of borrowings allowable under the Credit Agreement was increased to
$75,000,000, and the borrowing base test and other ratio tests were eliminated,
based on the guarantee of all borrowings under the Credit Agreement by BEC (now
Viacom). All outstanding borrowings under the Credit Agreement are due August
31, 1995. Interest is payable monthly at the bank's reference rate or, at the
Company's option, certain alternative rates. Additionally, the Company must
pay a commitment fee of 0.125% on the unused portion of the available credit.
As of March 31, 1995, the Company had approximately $2,915,000 in letters of
credit outstanding under the Credit Agreement to guarantee its purchases of
interactive entertainment product.
On September 8, 1993, another wholly-owned subsidiary of VIEL established a
5,000,000 pounds sterling credit facility (the "UK Facility") with a bank in
the United Kingdom. On April 12, 1994, the UK Facility was increased to
10,000,000 pounds sterling, based in part on the personal guarantee of two of
the directors of the subsidiary. Following the Acquisition, the Company
guaranteed the UK Facility and the guarantees of the two directors were
terminated. (See Note 2.) Advances under the credit facility bear interest at
the bank's prime rate plus 1.5% and are due on demand. The UK Facility matures
on April 30, 2005.
During the first quarter of 1995, the Company's other credit facilities were
paid off and terminated.
9
<PAGE> 10
SPELLING ENTERTAINMENT GROUP INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(000's omitted in all tables except per share data)
(Continued)
Pursuant to the separate credit facilities under which Viacom is a borrower,
certain subsidiaries of Viacom, including the Company, are restricted from
incurring indebtedness (other than indebtedness owing to Viacom) without the
prior consent of Viacom's lenders. Such consent has been given with respect to
the Credit Agreement and the UK Facility.
5. SHAREHOLDERS' EQUITY
The following is a summary of the changes in the components of shareholders'
equity:
<TABLE>
<CAPTION>
Capital in Cumulative
Common Excess of Accumulated Translation
Stock Par Value Deficit Adjustment Total
------- --------- ------- ----------- -----
<S> <C> <C> <C> <C> <C>
Balance at
December 31, 1994 $8,798 $ 546,843 $(27,287) $ 93 $ 528,447
Sales of common stock 32 1,456 -- -- 1,488
Unrealized holding gain, net -- -- (661) -- (661)
Net income for the period -- -- 7,271 -- 7,271
Cumulative translation adjustment -- -- -- 455 455
------ --------- -------- ---- ---------
Balance at March 31, 1995 $8,830 $ 548,299 $(20,677) $548 $ 537,000
====== ========= ======== ==== =========
</TABLE>
Effective January 1, 1994, the Company adopted SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities." This statement requires the
Company to adjust the carrying value of a common stock investment, which is
classified as "available for sale" under the applicable provisions of SFAS No.
115, to fair market value with a corresponding adjustment to Shareholders'
Equity. The adjustment recorded in the first quarter of 1995 was a decrease of
$661,000, net of tax. The carrying value of this investment is included in
other assets.
6. INCOME TAXES
Income taxes have been provided in each period based on the Company's
anticipated annual effective income tax rate.
10
<PAGE> 11
SPELLING ENTERTAINMENT GROUP INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(000's omitted in all tables except per share data)
(Continued)
7. NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE
Net income per common and common equivalent share amounts are based on the
weighted average number of common shares outstanding during the respective
periods. Primary and fully-diluted net income per common and common equivalent
share are not presented as they result in a dilution of less than 3% from basic
net income per common and common equivalent share.
8. LEGAL MATTERS
The Company is involved in certain legal proceedings which arise in the
ordinary course of conducting its entertainment business operations. The
Company believes such legal proceedings should not have a material adverse
effect on the Company's consolidated results of operations or financial
condition.
The Company also is subject to pending and contingent claims relating to the
Company's discontinued operations, including certain claims involving
environmental matters. Some of the parties involved in such actions seek
significant damages. While the outcome of these claims cannot be predicted with
certainty, the Company believes based upon (i) its knowledge of the facts and
circumstances and applicable law; (ii) allowances for estimated losses on
disposal of the discontinued operations, and (iii) an indemnity agreement, that
the ultimate resolution of such claims will not have a material adverse effect
on the Company's consolidated results of operations or financial condition.
9. RELATED PARTY TRANSACTIONS
See Note 4 regarding the Company's credit facility with Viacom and Viacom's
guarantee of the Company's credit agreement with a bank. The Company paid
interest and fees to Viacom of $2,901,000 and to BEC of $322,000 during the
three months ended March 31, 1995 and 1994, respectively, in connection with
this facility.
During the three months ended March 31, 1995 and 1994, the Company recorded
revenue, net of returns, of approximately $1,215,000 and $53,000, respectively,
from the sale of home videocassettes and interactive entertainment product to
BEC (subsequent to September
11
<PAGE> 12
SPELLING ENTERTAINMENT GROUP INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(000's omitted in all tables except per share data)
(Continued)
29, 1994, Blockbuster Entertainment Group, a division of Viacom "BEG"). At
March 31, 1995, the Company had a net receivable due from BEG of approximately
$122,000 resulting from these sales and associated returns.
Viacom (BEC) provided the Company with management services for which the
Company was charged $150,000 by Viacom and $125,000 by BEC for the three months
ended March 31, 1995 and 1994, respectively. As of March 31, 1995 the Company
had a net payable to Viacom of approximately $401,000 with respect to such
expenses.
Prior and subsequent to the merger of BEC into Viacom, the Company licensed
certain entertainment product to Showtime Networks Inc. ("Showtime"), a
subsidiary of Viacom, and certain television stations owned by Viacom. Revenue
from sales to Showtime were not material for the three months ended March 31,
1995. Sales to the television stations consist of both cash and barter
contracts. Revenue from cash contracts was $710,000 for the three months ended
March 31, 1995 and the Company has a receivable due from Viacom of $2,332,000
as of March 31, 1995. The Company realized $276,000 in revenue from
third-party advertisers with respect to the sale of advertising time received
under the barter contracts.
Additionally, prior and subsequent to the merger of BEC into Viacom, the
Company licensed certain entertainment product to USA Network and Sci-Fi
Channel in which Viacom has equity interests. Revenue from such sales were
$2,659,000 for the three months ended March 31, 1995, and the Company has
receivables at March 31, 1995 due from USA Network and Sci-Fi Channel of
$6,066,000 associated with such sales.
In the ordinary course of business, the Company has and expects to continue to
do business with Viacom and it affiliates, including BEG, Showtime and
Paramount Pictures Corporation.
10. SUBSEQUENT EVENTS
On April 21, 1995, BEG entered into an agreement to acquire the remaining
Ordinary Shares of VIEL not owned by the Company for approximately $22,973,000
plus other costs associated with the transaction. These shares are subject to
put- and call-option agreements between the Company and BEG. (See Note 2.)
12
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Company's
unaudited condensed consolidated financial statements and the related notes
thereto. References to Notes refer to the notes to such statements.
RESULTS OF CONTINUING OPERATIONS
The results of operations for any period are significantly affected by the
quantity and performance of the Company's entertainment product which is
licensed or sold to, and available for exhibition by, licensees or customers in
various media and territories. Consequently, results of operations may vary
significantly between periods, and the results of operations in any one period
may not be indicative of results of operations in future periods.
REVENUE
The following table sets forth the components of revenue from the Company's
major media and markets for the three months ended March 31 (in thousands):
<TABLE>
<CAPTION>
1995* 1994
-------- ---------
<S> <C> <C>
U.S. Networks $ 33,236 $ 34,594
Other domestic television distribution 42,309 9,948
International television distribution 49,036 23,087
Worldwide interactive entertainment 36,264 --
Worldwide home video 18,990 4,019
International film distribution 2,009 2,104
Worldwide licensing and merchandising 3,181 4,964
Other 123 1,697
-------- --------
$185,148 $ 80,413
======== ========
</TABLE>
* Includes operations of Republic and VIE, which were acquired after March 31,
1994.
Television programming revenue is derived from network license fees, first-
run syndication sales and fees arising from domestic and international
television licensing agreements. During the initial years of a one-hour
network television series, network and international license fees normally
approximate the production costs of the series, and accordingly the Company
recognizes only minimal profit or loss during this period. With respect to
half-hour network television programming and first-run syndication television
programming, the production costs can significantly exceed the combination of
the network or other domestic revenue and international license fees. However,
if a sufficient number of episodes of a series are produced, the Company is
reasonably assured that it will also be able to sell the series in the
domestic off-network market, and the Company would then expect to be able to
reduce its loss or realize a profit with respect to the series.
13
<PAGE> 14
SPELLING ENTERTAINMENT GROUP INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Network revenue decreased $1,358,000 for the three months ended March 31, 1995.
The Company delivered fewer hours of programming in the three months ended
March 31, 1995, than in the comparable period in 1994, which was partially
offset by an increase in network license fees in the first quarter of 1995 for
"Beverly Hills, 90210" and "Melrose Place."
Other domestic television distribution revenue increased $32,361,000 for the
three months ended March 31, 1995 from the comparable period in 1994. The
increase was primarily attributable to (i) the distribution of "Beverly Hills,
90210" in domestic syndication; (ii) the distribution of three one-hour dramas,
"Robin's Hoods," "University Hospital," and "Heaven Help Us," in first-run
syndication; (iii) exploitation of the Company's library, including that
attributable to prior periods; and (iv) conforming the Company's accounting
policies to those of Viacom. (See Note 1.)
International television distribution revenue increased $25,949,000 for the
three months ended March 31, 1995 from the comparable period in 1994. The
increase was primarily attributable to (i) the increase in network and
first-run syndication programming available for international distribution; and
(ii) conforming the Company's accounting policies to those of Viacom. (See
Note 1.)
Revenue from interactive entertainment product resulted from the acquisition of
VIE during the third quarter of 1994. A significant portion of the interactive
entertainment product revenue is denominated in foreign currencies and as such
is subject to exchange fluctuations. The Company from time to time hedges its
position in such foreign currencies.
Home video revenue increased $14,971,000 for the three month period ended March
31, 1995, from the comparable period in 1994, primarily as a result of the
acquisition of the operations of Republic.
Licensing and merchandising revenue decreased $1,783,000 for the three months
ended March 31, 1995 from the comparable period in 1994. The decrease was
primarily due to the decline in licensing revenue related to "Beverly Hills,
90210."
ENTERTAINMENT PRODUCT COSTS
Entertainment product costs consist primarily of the amortization of
capitalized product costs and the accrual of third-party participations and
residuals. The increases in such costs of $85,211,000 during the three months
ended March 31, 1995, as compared to the same period in 1994, resulted
primarily from the increases in revenue described above.
14
<PAGE> 15
SPELLING ENTERTAINMENT GROUP INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Additionally, the percentage relationship between such costs and the related
revenue increased to 78% in the first quarter of 1995 as compared to 74% in the
first quarter of 1994. This percentage relationship is a function of (i) the
mix of entertainment product generating revenue in each period and (ii) changes
in the projected profitability of individual entertainment product based on the
Company's estimates of such product's ultimate revenue and costs. The Company
recorded write-downs to net realizable value with respect to its entertainment
product of $9,077,000 and $2,021,000 for the three months ended March 31, 1995
and 1994, respectively. The increase was primarily attributable to the
Company's increased activities in first-run syndication programming.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses increased $14,636,000 during the
three months ended March 31, 1995, compared to the same period of 1994,
primarily due to the selling, general and administrative costs related to the
operations of VIE and Republic, including the amortization of intangible
assets. In addition, there were increased administrative costs commensurate
with the Company's growth.
INTEREST EXPENSE
Interest expense increased $4,043,000 during the three months ended March 31,
1995 in comparison to the prior year period, as a result of higher total
indebtedness, including that related to the Republic merger. (See Note 4.)
The Company's interest expense is dependent upon the interest rates on its
outstanding obligations, which are largely tied to the interest rates under
Viacom's separate credit facilities, and the Company could experience
fluctuations in interest expense resulting solely from increases or decreases
in such interest rates.
PROVISION FOR INCOME TAXES
The Company computes its interim provision for income taxes based upon an
estimated annual effective tax rate computed in accordance with SFAS No. 109.
The Company's provision for income taxes for the three months ended March 31,
1995, increased $1,041,000, as compared to the first quarter of 1994, largely
as a result of the increase in income for the period and the increase in the
effective tax rate. The effective tax rate, while greater than the rate for
15
<PAGE> 16
SPELLING ENTERTAINMENT GROUP INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
the same quarter last year, is consistent with the annual effective tax rate
for 1994.
LIQUIDITY AND CAPITAL RESOURCES
The Company's operations require the production of entertainment product and the
acquisition of distribution or other rights to entertainment product produced by
third parties. The Company's expenditures in this regard totaled $128,514,000
and $35,271,000 in the three months ended March 31, 1995 and 1994, respectively.
The cost of producing network television programming is largely funded through
the receipt of the related network license fees. The deficit financing of its
network programming and the cost of other production and acquisition activities
is funded through the Company's operating cash flow and borrowings under its
credit arrangements.
The Company's principal credit agreement is with Viacom. (See Note 4.) The
Viacom Facility provides for a three-year term loan facility of $100,000,000,
which funded the Company's acquisition of Republic, and a revolving credit
facility of $100,000,000 (increased in December 1994 from $75,000,000) to fund
the Company's working capital and other requirements.
A wholly-owned subsidiary of VIEL has a multi-currency credit agreement for
$75,000,000 with a bank in the U.S. As of March 31, 1995, the Company had
$2,915,000 in letters of credit outstanding under the Credit Agreement to
guarantee its purchases of interactive entertainment product. (See Note 4.)
Viacom has guaranteed all of the borrowings under the Credit Agreement, which
are due August 31, 1995. The Company has entered into negotiations with the
bank to extend the term of the loan for at least twelve months. The Company
believes that it will be able to obtain this extension, or, alternatively,
obtain similar financing from Viacom.
Another wholly-owned subsidiary of VIEL has a 10,000,000 pounds sterling credit
facility with a bank in the United Kingdom, which the Company has guaranteed.
The UK Facility has been extended until April 2005. (See Note 4.)
As a result of the merger of BEC into Viacom in September 1994, Viacom
currently owns approximately 77% of the Company's Common Stock. Pursuant to
the separate credit facilities under which Viacom is a borrower, certain
subsidiaries of Viacom, including the Company, are restricted from incurring
indebtedness (other than indebtedness owing to Viacom) without the prior
consent of Viacom's lenders. Such consent has been given with respect to the
Credit Agreement and the UK Facility.
16
<PAGE> 17
SPELLING ENTERTAINMENT GROUP INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
The Company believes that its financial condition remains strong and that it
has the financial resources necessary to meet its anticipated capital
requirements. The Company has sufficient resources available from the cash
provided by operating activities and that available under its credit facility
to meet its ongoing plans for the production, acquisition and distribution of
entertainment product and to take advantage of internal and external
development and growth opportunities.
UNCERTAINTIES
The Company is subject to pending and contingent claims relating to the
Company's discontinued operations, including certain claims involving
environmental matters. Some of the parties involved in such actions seek
significant damages. While the outcome of these claims cannot be predicted with
certainty, the Company believes based upon (i) its knowledge of the facts and
circumstances and applicable law; (ii) allowances for estimated losses on
disposal of the discontinued operations, and (iii) an indemnity agreement, that
the ultimate resolution of such claims will not have a material adverse effect
on the Company's consolidated results of operations or financial condition.
17
<PAGE> 18
SPELLING ENTERTAINMENT GROUP INC. AND SUBSIDIARIES
PART II.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
10.18 Employment Agreement, dated as of January 10, 1994, between
Registrant and Kathleen Coughlan, and Amendment to Employment
Agreement, dated as of September 1, 1994.
11 Computation of net income per common and common equivalent share.
27 Financial Data Schedule.
(b) Reports on Form 8-K:
None
18
<PAGE> 19
SPELLING ENTERTAINMENT GROUP INC. AND SUBSIDIARIES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SPELLING ENTERTAINMENT GROUP INC.
May 12, 1995 By: /s/ Thomas P. Carson
----------------------------------------------
Thomas P. Carson
Executive Vice President, Chief Financial
Officer and Treasurer
(Principal Financial Officer)
By: /s/ Kathleen Coughlan
----------------------------------------------
Kathleen Coughlan
Senior Vice President and Corporate Controller
(Principal Accounting Officer)
19
<PAGE> 1
EXHIBIT 10.18
AGREEMENT
THIS AGREEMENT ("Agreement") is made and entered into as of January 10, 1994
(the "Commencement Date"), by and between SPELLING ENTERTAINMENT GROUP INC., a
Florida corporation ("Employer") and KATHLEEN COUGHLAN ("Employee"). The
parties agree to the following:
1. DUTIES: Employer engages Employee to serve in the capacity of Vice
President - Corporate Controller. During the term of this Agreement, Employer
shall determine in its discretion, consistent with the scope of Employee's
contemplated duties, the specific duties and responsibilities of Employee as
well as determine the particular office or offices, if any, to be held by
Employee with Employer or its affiliates or subsidiaries. Employee shall report
to the Chief Financial Officer or such other person as may be designated by
Employer from time to time. Employee shall furnish such other services to
Employer as may be reasonably requested by Employer. Employee shall furnish his
services to Employer on an exclusive basis, provided that Employer acknowledges
that Employee has a non exclusive consulting agreement with MGM (a copy of
which has been supplied to Employer). Employee shall not perform services which
would interfere with the performance of his services hereunder for any
individual, partnership, corporation or other entity, or engage in self
employment, without the prior written consent of Employer and shall not engage
in any activity which would interfere with the performance of his services
hereunder. Employee shall not become financially interested in or associated
with, directly or indirectly, any other individual, partnership, corporation or
other entity in connection with the production, distribution or exhibition of
motion pictures, television programs, sound recordings, theatrical plays, any
visual and/or audio recordings of any kind, in the broadcasting and/or music
publishing businesses, or any other entertainment related business or activity;
provided, however, that the foregoing shall not prevent Employee from (i)
holding a passive legal or beneficial interest in any partnership, corporation
or other entity which is not a competitor of Employer (or any subsidiary of
Employer) in any of the Employer's (or any of its subsidiaries) major lines of
business or (ii) from holding a legal or beneficial interest not exceeding one
percent (1%) of the outstanding stock of any publicly traded corporation
whether or not such publicly traded corporation competes with Employer (or any
of its subsidiaries) in any of Employer's (or any of its subsidiaries') major
lines of business.
2. TERM OF EMPLOYMENT: Subject to prior termination of this Agreement as
hereinafter provided, Employer hereby employs Employee and Employee hereby
accepts employment with Employer, under the terms and conditions set forth in
this Agreement, for a period of two (2) years, commencing on the Commencement
Date and terminating on January 10, 1996 (the "Employment Term").
1
<PAGE> 2
3. COMPENSATION:
3.1 Base Salary: As compensation for the performance by Employee of all
his obligations hereunder, Employer shall pay Employee a base salary ("Base
Salary") as follows: Employee's Base Salary during the first year of the
Employment Term shall be $175,000. Employee's Base Salary for the second year
of the Employment Term shall be no less than $175,000 and shall be subject to
review. All compensation under this section shall be payable in accordance with
Employer's normal practices. No additional compensation shall be payable to
Employee by reason of any hours worked on Saturdays, Sundays, holidays or
otherwise.
3.2 Bonus Compensation: Employee may also be eligible to receive a
discretionary bonus, but the decision whether to award a bonus and, if so, the
amount of any such bonus, shall be determined by Employer in Employer's sole
and absolute discretion.
4. BENEFITS:
4.1 Expenses: Employer agrees to repay or reimburse Employee for ordinary
and necessary business expenses compatible with Employer's general policies,
upon the presentation of itemized statements of such business expenses on the
form generally used by executives of Employer within forty-five (45) days of
the incurrence of the expense. Employee shall obtain the express, specific
permission of the Chief Financial Officer of Employer before incurring any
significant business expenses out of the ordinary course.
4.2 Medical and Insurance Benefits: During the Employment Term, Employer
shall provide Employee with those group medical and insurance benefits
generally available to executives of a comparable level, as such benefits may
be modified from time to time in Employer's sole and absolute discretion.
4.3 Stock Options: Employee shall be granted 50,000 stock options to
purchase common stock of Employer, at a purchase price equal to the closing
price on January 10, 1994, pursuant to the terms of the SEGI Stock
Participation Plan. Said options shall vest in four (4) equal annual
installments commencing January 10, 1995. Vesting of stock options shall cease
upon termination of Employee's employment for any reason, and Employee's right
to exercise stock options shall cease after termination of Employee's
employment for any reason in accordance with the terms of the SEGI Stock
Participation Plan.
4.4 Vacation: During the Employment Term, Employee shall be entitled to
four (4) weeks vacation per year without reduction in Employee's Base Salary,
in accordance with the policies established from time to time by Employer.
2
<PAGE> 3
4.5 Pension: Employee shall be eligible to participate in Employer's
401(k) plan offered to its employees, on the same terms and conditions
applicable to all employees of similar stature under the plan.
4.6 Travel: If Employee is required to travel on company business,
Employee's travel arrangements (i.e., class of travel and level of
accommodations) shall be in accordance with Employer's policies, as the
same may be modified from time to time, applicable to other employees of
similar position.
4.7 Benefits: All the benefits described in this Section shall cease
immediately upon the termination of Employee's employment with Employer
for any reason, subject to Employee's rights under COBRA.
5. TERMINATION BY EMPLOYER FOR CAUSE: Notwithstanding anything to the
contrary in this Agreement, if at any time Employee commits any act or
omission, which constitutes "cause", as defined below, then Employee shall be
in breach of this Agreement, and Employer shall have the right to terminate
Employee's employment immediately and retain any rights in equity or law
including rights of offset against Employee for such breach, and Employee's
compensation and benefits shall cease immediately, subject only to such rights
Employee may have under COBRA. As used herein, the term "cause" shall mean:
(i) Employee's conviction of any crime (whether or not involving
Employer) which constitutes a crime of moral turpitude or is punishable
by imprisonment of one year or more;
(ii) Actions or omissions by Employee involving willful malfeasance
or gross negligence, or constituting a material breach of this Agreement
or Employer's duties to Employer;
(iii) Employee's commission of a material act of fraud or dishonesty,
whether prior or subsequent to the date hereof;
(iv) Employee's knowing failure or willful refusal to perform
Employee's duties as required by this Agreement on an exclusive and full-
time basis;
(v) Employee's knowing or willful violation of any rule or
regulation of Employer applicable to other employees of similar stature;
or
(vi) Any other act, omission or event constituting justifiable legal
cause as determined by a court of competent jurisdiction.
6. MITIGATION: If Employee's employment is terminated by Employer without
cause, Employee shall be entitled to payment through the end of the Employment
Term of Employee's Base Salary and an amount equal to Employee's COBRA
payments; provided, Employee shall have an affirmative duty to use good faith
efforts to seek substitute employment,
3
<PAGE> 4
and Employer shall be entitled to reduce the amount of Base Salary and
applicable benefits payable to Employee under this Agreement by the amount of
salary, bonus and/or benefits or other compensation of any kind, earned or
received by Employee from any third party and/or any amounts or compensation
earned via self employment from the date of termination through the end of the
Employment Term.
7. CONFIDENTIALITY: During the term of Employee's employment and
thereafter, Employee shall keep in confidence and shall not use for Employee or
others, or divulge to others, any secret or confidential information,
knowledge, data or plans of Employer, including without limitation, matters of a
business nature such as information about costs and profits, records, customer
lists, customer data, and sales data, or matters of a creative nature including
without limitation matters regarding or including ideas of a literary or
dramatic nature, or regarding any form of motion pictures. The preceding
sentence shall not apply to any such knowledge, information, data or plan which
(i) is now or becomes generally available to the public other than as a result
of Employee's breach of this Section, (ii) was in Employee's possession on a
non-confidential basis prior to its being obtained by Employee in Employee's
capacity as an employee, officer or director of Employer, or (iii) is now or
becomes available to Employee on a non-confidential basis from a source other
than Employer, provided Employee does not know (or have reason to know) of any
breach by such source of any confidentiality obligations they may have with
respect thereto. Any and all records, files, drawings, documents, models,
equipment and the like relating to Employer's business which Employee shall
prepare or use, or come into contact with shall not be removed from Employer's
premises without Employer's written consent, except as required in the course of
Employee's employment during the term of Employee's employment, and shall be
returned to Employer immediately upon the termination of Employee's employment
hereunder. If Employee breaches any of the covenants in this Section, then
Employer shall have the right to enforce any legal or equitable remedy
(including, without limitation, preliminary and permanent injunctive relief and
accounting for all profits and benefits) that may be available. Employee
acknowledges that any breach of such covenants could cause irreparable harm to
Employer.
8. DISABILITY: At any time that Employee is Materially Disabled (as
hereinafter defined) during the Employment Term, Employer may at its election
terminate this Agreement thereof to Employee, and both Employee and Employer
shall thereupon be released and discharged of and from all further obligations
when this Agreement hereunder except for obligations under Sections 7 and 10
and 11 hereof. "Materially Disabled" shall mean any instance where Employee is
not able to render full services as contemplated hereby for any period
aggregating more than three (3) consecutive months or four (4) months in the
aggregate during any twelve (12) month period. Employee acknowledges the
critical nature of her position and the functions Employee exercises with
Employer and that Employee's continued employment after she is materially
disabled would constitute an undue hardship to Employer for which no further
reasonable accommodation would be possible.
4
<PAGE> 5
9. DEATH: In the event of Employee's death, at any time during the term
hereof, this Agreement shall terminate, and both Employee and Employer shall
thereupon be released and discharged from all further obligations hereunder
except for any vested benefits and earned and unpaid earned Base Salary for
time worked.
10. SOLICITATION: Upon the termination of the employment relationship
between Employer and Employee, and for a period of one (1) year thereafter,
Employee agrees not to induce or attempt to induce any employees of Employer to
seek or to accept employment with any entity other than Employer.
11. OWNERSHIP OF IDEAS: Employer shall own, and Employee hereby transfers
and assigns to it, all rights, of every kind and character throughout the
world, in perpetuity, in and to any material and/or ideas and all results and
proceeds of Employer and Employee's services hereunder, or conceived of or
produced during the term of Employee's Employment by either of them, whether
the same consists of literary, dramatic, musical, motion picture, mechanical,
or any other form of works, themes, ideas, inventions, creations, products or
compositions. Employee agrees to execute and deliver to Employer such
assignments, certificates of authorship, or other instruments in accordance
with standard industry practice as Employer may require from time to time to
evidence ownership of the results and proceeds of Employer's and Employee's
services. Employee's agreement to assign to Employer any of his rights as set
forth in this Section 11 does not apply to any invention which qualifies fully
under the provisions of Section 2870 of the California Labor Code, where no
equipment, supplies, facility, or trade secret information of Employer was used
and which was developed entirely upon Employee's own time, and which (i) does
not relate to the business of Employer or to its actual or demonstrably
anticipated research or development, or (ii) which does not result from any
work performed by Employee for Employer.
12. REPRESENTATIONS AND WARRANTIES: Employee represents and warrants that
Employee has all right, power, authority, and capacity, and is free, to enter
into this Agreement; and that by doing so Employee will not violate or
interfere with the rights of any other person or entity; and that Employee is
not subject to any contract, understanding, or obligation which will or might
prevent, interfere with, or impair the performance of this Agreement by
Employee. Employee will indemnify, defend and hold Employer harmless with
respect to any losses, liabilities, demands, claims, fees, expenses, damages,
and costs (including attorneys' fees and court costs) resulting from or arising
out of any breach or alleged breach of any representation, warranty or covenant
of Employee contained herein. Employee is familiar with the requirements of
Section 507 (regarding the acceptance or payment of money or other
consideration for the inclusion of program matter) of the Federal
Communications Act, is aware that the violation of Section 507 constitutes a
criminal offense, has not violated and will not violate any of the provisions
of said Section 507, and has not and will not do any act which would require
disclosure pursuant to said Section 507. Employer shall indemnify, defend and
hold harmless Employee for any claims, losses or damages (including reasonable
attorney's fees) arising out of the carrying out of Employee's duties under
this Agreement, except for claims, losses and damages arising out of the gross
negligence or malfeasance of Employee.
5
<PAGE> 6
13. SERVICES UNIQUE: It is mutually understood and agreed that Employee's
services and covenants, being personal to Employee are special, unique,
unusual, extraordinary and of an intellectual character giving them a peculiar
value, for the loss of which Employer cannot be reasonably compensated in
damages in an action at law, and therefore in the event of any breach by
Employee of this Agreement, Employer shall be entitled to make application to a
court of competent jurisdiction for equitable relief by way of injunction or
otherwise. This provision shall not, however, be construed as a waiver of any
of the rights which Employer may have for damages under this Agreement or
otherwise, and all of Employer's rights and remedies shall be unrestricted.
14. COMPLETE AGREEMENT; MODIFICATION: This Agreement constitutes the
entire agreement between Employer and Employee and no further or other
agreement, condition or stipulation affecting the particular matters or things
agreed upon in this Agreement, except as specifically provided for or
identified herein, shall be valid or binding unless the same be in writing and
executed by Employer and Employee.
15. SEVERABILITY: If any provision of this Agreement is declared invalid,
illegal, or incapable of being enforced by any court of competent jurisdiction,
all the remaining provisions of this Agreement shall nevertheless continue in
full force and effect and no provision shall be deemed dependent upon any other
provision unless so expressed herein.
16. ASSIGNMENT: This Agreement shall not be assignable by Employee.
Notwithstanding the foregoing, Employer shall be free to assign this Agreement
to any subsidiary or affiliate or successor of Employer or, if Employer is
reorganized, any successor's corporation. For example, change of control of
Employer shall not be deemed to be an assignment for purposes of this
provision.
17. PAYMENT OF TAXES: To the extent that any taxes become payable by
Employee by virtue of any payments made or benefits conferred by Employer,
Employer shall not be liable to pay or obligated to reimburse Employee for any
such taxes or to make any adjustment under this Agreement. Any payments
hereunder to Employee, including but not limited to the Base Salary, shall be
made net of any required withholding and other appropriate payroll deductions.
18. OBLIGATION TO SUBSIDIARIES AND AFFILIATES OF EMPLOYER: Employee
acknowledges and agrees that all of Employee's covenants and obligations to
Employer shall run in favor of and shall be enforceable by any and all
subsidiaries and affiliates of Employer, and Employee acknowledges that wherein
Employee has an obligation or covenant
6
<PAGE> 7
running in favor of Employer, the term "Employer" shall include all
subsidiaries and affiliates of Employer.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
SPELLING ENTERTAINMENT GROUP INC.
By: /s/ THOMAS P. CARSON
-----------------------------
Its: Senior Vice President
-----------------------------
/s/ KATHLEEN COUGHLAN
----------------------------------
Kathleen Coughlan
7
<PAGE> 8
AMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment to Employment Agreement ("Amendment") is made and entered
into as of September 1, 1994, by and between SPELLING ENTERTAINMENT GROUP INC.,
a Florida corporation ("Employer") and KATHLEEN COUGHLAN ("Employee"). The
parties agree that this Amendment amends and modifies that certain employment
agreement by and between the parties hereto entered into as of January 10, 1994
("Agreement") in the following respects, and the following respects only:
1. DUTIES. Employer engages Employee to serve in the capacity of Senior
Vice President--Corporate Controller as of the date of this Amendment.
2. TERM OF AGREEMENT. Subject to prior termination as provided for in
the Agreement, Employer hereby extends the Employment Term, and Employee hereby
accepts such extension of the Employment Term, under the terms and conditions
set forth in the Agreement, for a period of an additional one (1) year.
Accordingly, the Employment Term, as amended herein, will expire on January 9,
1997, rather than on January 9, 1996.
3. COMPENSATION. Employee's Base Salary is subject to review and
possible adjustment after each year of employment hereunder. Although Employee
acknowledges that Employer's agreement to so review Employee's Base Salary
after each year of employment hereunder does not obligate Employer to increase
her Base Salary, Employee's Base Salary shall not be decreased below $175,000
per annum.
4. BENEFITS. Any stock options granted to Employee will continue to vest
during the Employment Term if Employee is terminated without cause as defined
in Paragraphs 5 and 6 of the Agreement.
5. COMPLETE AGREEMENT AND AMENDMENT; MODIFICATION. This Amendment,
together with the Agreement as amended by this Amendment, constitutes the
entire agreement between Employer and Employee and no further or other
agreement, amendment, modification, condition or stipulation affecting the
Agreement or Amendment shall be valid or binding unless the same be in writing
and executed by the Chief Executive Officer and President of Employer, or Chief
Financial Officer of Employer, and Employee.
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the date and year first above written.
SPELLING ENTERTAINMENT GROUP INC.
By: /s/ THOMAS P. CARSON
-----------------------------
Its: Executive Vice President
-----------------------------
By: /s/ KATHLEEN COUGHLAN
----------------------------
KATHLEEN COUGHLAN
-2-
<PAGE> 1
SPELLING ENTERTAINMENT GROUP INC. AND SUBSIDIARIES
EXHIBIT 11 - COMPUTATION OF NET INCOME PER COMMON
AND COMMON EQUIVALENT SHARE
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1995 1994
------- -------
<S> <C> <C>
Net income $ 7,271 $ 6,854
======= =======
Shares:
Basic shares - weighted average of
common shares outstanding 88,125 64,579
Additional shares assuming
conversion of stock options and warrants 1,633 1,505
------- -------
Primary shares 89,758 66,084
Additional shares, when dilutive, assuming
full dilution of stock options and warrants 28 --
------- -------
Fully-diluted shares 89,786 66,084
======= =======
Basic, primary, and fully-diluted net income
per common and common equivalent share: $ 0.08 $ 0.11
======= =======
</TABLE>
Note 1: This calculation is submitted in accordance with the Securities
Exchange Act of 1934 although not required by footnote 2 to paragraph
14 of APB Opinion No. 15 because the calculation of primary and
fully-diluted net income per common and common equivalent share results
in a dilution of less than 3%.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1995
AND THE UNAUDITED CONDENSED STATEMENT OF OPERATIONS FOR THE THREE MONTHS THEN
ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 21,450
<SECURITIES> 0
<RECEIVABLES> 233,520
<ALLOWANCES> (28,632)
<INVENTORY> 321,825
<CURRENT-ASSETS> 418,973
<PP&E> 30,269
<DEPRECIATION> (11,062)
<TOTAL-ASSETS> 990,642
<CURRENT-LIABILITIES> 229,296
<BONDS> 0
<COMMON> 8,830
0
0
<OTHER-SE> 528,170
<TOTAL-LIABILITY-AND-EQUITY> 990,642
<SALES> 185,148
<TOTAL-REVENUES> 185,148
<CGS> 144,742
<TOTAL-COSTS> 144,742
<OTHER-EXPENSES> 23,367
<LOSS-PROVISION> 0<F1>
<INTEREST-EXPENSE> 4,699
<INCOME-PRETAX> 13,450
<INCOME-TAX> 6,206
<INCOME-CONTINUING> 7,244
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,271
<EPS-PRIMARY> 0.08
<EPS-DILUTED> 0.08
<FN>
<F1>Note 1 - Amounts are not presented as permitted under Rule 10-01(a) of Article
10 of Regulation S-X.
</FN>
</TABLE>
