================================================================================
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 September 30, 1996
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 1-5706
_______________
METROMEDIA INTERNATIONAL GROUP, INC.
(Exact name of registrant, as specified in its charter)
DELAWARE 58-0971455
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
945 East Paces Ferry Road, Suite 2210, Atlanta, Georgia 30326
(Address and zip code of principal executive offices)
(404) 261-6190
(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___
The number of shares of Common Stock outstanding as of November 4, 1996 was
66,126,713
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<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
INDEX TO
QUARTERLY REPORT ON FORM 10-Q
Page
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Condensed Statements of Operations 2
Consolidated Condensed Balance Sheets 3
Consolidated Condensed Statements of Cash Flows 4
Consolidated Condensed Statement of Stockholders' Equity 5
Notes to Consolidated Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 19
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 34
Item 4. Submission of Matters to a Vote of Security Holders 35
Item 6. Exhibits and Reports on Form 8-K 36
Signature 37
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
Consolidated Condensed Statements of Operations
(in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
--------------------------- ----------------------------
September 30, September 30, September 30, September 30,
1996 1995 1996 1995
-------- -------- --------- ---------
<S> <C> <C> <C> <C>
Revenues $ 44,379 $ 35,468 $ 113,175 $ 113,901
Costs and expenses:
Cost of rentals and operating expenses 33,123 30,873 87,957 102,885
Selling, general and administrative 19,889 11,067 50,430 35,554
Depreciation and amortization 3,940 532 7,630 1,553
-------- -------- --------- ---------
Operating loss (12,573) (7,004) (32,842) (26,091)
Interest expense, including
amortization of debt discount 10,051 8,534 26,006 25,704
Interest income 3,189 960 5,590 2,658
-------- -------- --------- ---------
Interest expense, net 6,862 7,574 20,416 23,046
Loss before provision for income taxes,
equity in losses of joint ventures, discontinued
operations and extraordinary item (19,435) (14,578) (53,258) (49,137)
Provision for income taxes 323 -- 723 300
Equity in losses of Joint Ventures 2,292 1,568 6,060 3,789
-------- -------- --------- ---------
Loss before discontinued operation and
extraordinary item (22,050) (16,146) (60,041) (53,226)
Discontinued operation:
Write-down of investment in Roadmaster stock (16,305) -- (16,305) --
-------- -------- --------- ---------
Loss before extraordinary item (38,355) (16,146) (76,346) (53,226)
Extraordinary item:
Early extinguishment of debt (4,505) -- (4,505) --
-------- -------- --------- ---------
Net loss $(42,860) $(16,146) $ (80,851) $ (53,226)
-------- -------- --------- ---------
Primary loss per common share:
Continuing operations $ (0.34) $ (0.77) $ (1.19) $ (2.54)
======== ======== ========= =========
Discontinued operations $ (0.25) $ -- $ (0.32) $ --
======== ======== ========= =========
Extraordinary item $ (0.07) $ -- $ (0.09) $ --
======== ======== ========= =========
Net loss $ (0.66) $ (0.77) $ (1.60) $ (2.54)
======== ======== ========= =========
</TABLE>
See accompanying notes to the consolidated condensed financial statements.
2
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
Consolidated Condensed Balance Sheets
(in thousands, except share amounts)
September 30, December 31,
1996 1995
------------- ------------
ASSETS: (Unaudited)
Current assets:
Cash and cash equivalents $ 122,600 $ 26,889
Short-term investments -- 5,366
Accounts receivable, net of
allowance for doubtful accounts
of $13,639 at September 30, 1996
and $11,913 at December 31, 1995 29,183 29,452
Film inventories 66,091 59,430
Other assets 7,279 6,314
--------- ---------
Total current assets 225,153 127,451
Investments in and advances to joint ventures 56,573 36,934
Asset held for sale - Roadmaster Industries, Inc. 31,150 47,455
Asset held for sale - Snapper, Inc. 73,800 79,200
Property, plant and equipment, net of
accumulated depreciation 41,178 6,021
Film inventories 217,321 137,233
Long-term film accounts receivable 23,719 31,308
Intangible assets, net of accumulated amortization 239,108 119,485
Other assets 13,571 14,551
--------- ---------
Total assets $ 921,573 $ 599,638
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 9,307 $ 4,695
Accrued expenses 89,170 96,113
Participations and residuals 25,422 19,143
Current portion of long-term debt 79,687 40,597
Deferred revenues 19,655 15,097
--------- ---------
Total current liabilities 223,241 175,645
Long-term debt 348,140 264,046
Participations and residuals 38,318 28,465
Deferred revenues 56,756 47,249
Other long-term liabilities 390 395
--------- ---------
Total liabilities 666,845 515,800
--------- ---------
Commitments and contingencies
Stockholders' equity:
Preferred Stock, authorized 70,000,000
shares, none issued -- --
Common Stock, $1.00 par value, authorized
400,000,000 shares, issued and
outstanding 66,126,713 shares at
September 30, 1996 and 42,613,738
shares at December 31, 1995 66,127 42,614
Paid-in surplus 959,389 728,747
Other (1,831) 583
Accumulated deficit (768,957) (688,106)
--------- ---------
Total stockholders' equity 254,728 83,838
--------- ---------
Total liabilities and shareholders' equity $ 921,573 $ 599,638
========= =========
See accompanying notes to the consolidated condensed financial statements.
3
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
Consolidated Condensed Statements of Cash Flows
(in thousands)
(Unaudited)
Nine Months Ended
----------------------------
September 30, September 30,
1996 1995
------------ -------------
Operating activities:
Net loss $ (80,851) $(53,226)
Adjustments to reconcile net loss to
net cash provided by (used in)
operating activities:
Equity in losses of joint ventures 6,060 3,789
Amortization of film costs 39,906 67,149
Amortization of debt discounts 3,718 11,591
Depreciation and amortization 7,630 1,553
Loss on write-down of investment 16,305 --
Loss on early extinguishment of debt 4,505 --
Other 507 323
Change in assets and liabilities, net of
effect of acquisitions:
Decrease in accounts receivable 14,518 5,532
Increase in other assets (965) (581)
Decrease in accounts payable and accrued
expenses (10,103) (1,123)
Accrual of participations and residuals 23,234 15,936
Payments of participations and residuals (15,517) (18,429)
Decrease in deferred revenues (9,485) (12,331)
Other, net (3,515) 112
--------- --------
Cash provided by (used in) operations (4,053) 20,295
--------- --------
Investing activities:
Investments in and advances to Joint Ventures (25,384) (15,249)
Proceeds from sale of short-term investments 5,366 --
Proceeds from repayment of advances to Snapper 5,400 --
Investment in film inventories (48,870) (4,118)
Additions to property, plant and equipment (2,253) (2,917)
Other investing activities, net (4,442) 1,151
--------- --------
Cash used in investing activities (70,183) (21,133)
--------- --------
Financing activities:
Proceeds from issuance of long-term debt 294,543 32,156
Proceeds from issuance of stock related to
public stock offering, net 190,604 --
Payments on long-term debt (305,367) (37,525)
Proceeds from issuance of stock related
to incentive plans 867 --
Payments of deferred financing costs (10,700) --
--------- --------
Cash provided by (used in) financing activities 169,947 (5,369)
--------- --------
Net increase (decrease) in cash in cash equivalents 95,711 (6,207)
Cash and cash equivalents at beginning of period 26,889 13,869
--------- --------
Cash and cash equivalents at end of period $ 122,600 $ 7,662
========= ========
See accompanying notes to consolidated condensed financial statements.
4
<PAGE>
METROMEDIA INTERNATIONAL GROUP,INC.
Consolidated Condensed Statement of Stockholders' Equity
(in thousands, except share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1996
-------------------------------------------------------------------------------
Common Stock
----------------------
Number of Paid-in Accumulated
Shares Amount Surplus Other Deficit Total
---------- -------- -------- ------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1995 42,613,738 $ 42,614 $728,747 $ 583 $(688,106) $ 83,838
Net loss -- -- -- -- (80,851) (80,851)
Issuance of stock related to
public offering, net 18,400,000 18,400 172,204 -- -- 190,604
Issuance of stock related to
the acquisitions of The Samuel
Goldwyn Company and Motion
Picture Corporation of America 4,708,564 4,709 54,527 -- -- 59,236
Issuance of stock related to
incentive plans 404,411 404 3,911 (3,174) -- 1,141
Foreign currency translation
adjustment -- -- -- 496 -- 496
Amortization of restricted stock -- -- -- 264 -- 264
---------- -------- -------- ------- --------- ---------
Balances, September 30, 1996 66,126,713 $ 66,127 $959,389 $(1,831) $(768,957) $ 254,728
========== ======== ======== ======= ========= =========
</TABLE>
See accompanying notes to the consolidated condensed financial statements.
5
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
Notes to Consolidated Condensed
Financial Statements
- --------------------------------------------------------------------------------
1. Basis of Presentation
- --------------------------------------------------------------------------------
The accompanying consolidated condensed financial statements include the
accounts of Metromedia International Group, Inc. ("MMG" or the "Company") and
its wholly-owned subsidiaries, Orion Pictures Corporation ("Orion"), and
Metromedia International Telecommunications, Inc. ("MITI"), and their
subsidiaries. Another wholly-owned subsidiary, Snapper, Inc. ("Snapper"), is
included in the accompanying consolidated condensed financial statements as an
asset held for sale. All significant intercompany transactions and accounts have
been eliminated.
On November 1, 1995, the Company, Orion, MITI and MCEG Sterling
Incorporated ("Sterling") consummated a series of mergers (the "November 1
Mergers"), pursuant to which Orion and MITI were merged into wholly-owned
subsidiaries of the Company and Sterling was merged into the Company and
subsequently contributed to Orion. In connection with the November 1 Mergers,
the Company changed its name from The Actava Group Inc. ("Actava") to Metromedia
International Group, Inc. For accounting purposes only, Orion and MITI were
deemed to be the joint acquirors of Actava and Sterling. The acquisitions of
Actava and Sterling were accounted for as a reverse acquisition. As a result of
the reverse acquisition, the historical financial statements of the Company for
periods prior to November 1, 1995 are those of Orion and MITI, rather than
Actava. The operations of Actava and Sterling have been included in the
accompanying consolidated condensed financial statements from November 1, 1995,
the date of acquisition.
Investments in other companies and Joint Ventures ("Joint Ventures") which
are not majority owned, or in which the Company does not have control but
exercises significant influence, are accounted for using the equity method. The
Company reflects its net investments in Joint Ventures under the caption
"Investments in and advances to Joint Ventures." The Company accounts for its
equity in earnings (losses) of the Joint Ventures on a three month lag.
Certain reclassifications have been made to the prior year financial
statements to conform to the September 30, 1996 presentation.
The accompanying interim consolidated condensed financial statements have
been prepared without audit pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations, although the Company believes that the disclosures made
are adequate to make the information presented not misleading. These financial
statements should be read in conjunction with the consolidated financial
statements and related footnotes included in the Company's latest Annual Report
on Form 10-K (the "1995 Form 10-K"). In the opinion of management, all
adjustments necessary to present fairly the financial position of the Company as
of September 30, 1996, the results of its operations for the three and nine
month periods ended September 30, 1996 and 1995, and its cash flows for the nine
month periods ended September 30, 1996 and 1995 have been included. The results
of operations for the interim periods are not necessarily indicative of the
results which may be realized for the full year.
6
<PAGE>
- --------------------------------------------------------------------------------
2. Entertainment Group Acquisitions
- --------------------------------------------------------------------------------
On July 2, 1996, the Company consummated its acquisition (the "Goldwyn
Merger") of The Samuel Goldwyn Company ("Goldwyn"). Upon consummation of the
Goldwyn Merger, Goldwyn was renamed Goldwyn Entertainment Company. Holders of
Goldwyn common stock received .3335 shares of the Company's common stock (the
"Common Stock") for each share of Goldwyn Common Stock in accordance with a
formula set forth in the Agreement and Plan of Merger relating to the Goldwyn
Merger (the "Goldwyn Merger Agreement"). Pursuant to the Goldwyn Merger, the
Company issued 3,122,972 shares of Common Stock. Goldwyn is a producer and
distributor of motion pictures and television product and has a film and
television library of over 850 titles. In addition, Goldwyn owns Landmark
Theatre Corporation, which the Company believes is the leading specialized
theatre circuit in the United States with 140 screens.
The purchase price, including stock options and transaction costs, related
to the Goldwyn Merger was approximately $43.8 million.
Also on July 2, 1996, the Company consummated its acquisition (the "MPCA
Merger", together with the Goldwyn Merger, the "July 2 Mergers") of Motion
Picture Corporation of America ("MPCA"). In connection with the MPCA Merger, the
Company (i) issued 1,585,592 shares of Common Stock to MPCA's sole stockholders,
and (ii) paid such stockholders approximately $1.2 million in additional
consideration, consisting of promissory notes. The purchase price, including
transaction costs, related to the acquisition of MPCA was approximately $21.9
million.
Following the consummation of the Mergers, the Company contributed its
interests in Goldwyn and MPCA to Orion, with Goldwyn and MPCA becoming wholly
owned subsidiaries of Orion. Orion, Goldwyn and MPCA are collectively referred
to as the Entertainment Group. The purchases of Goldwyn and MPCA have been
recorded in accordance with the purchase method of accounting for business
combinations. The purchase price to acquire both Goldwyn and MPCA were allocated
to the net assets acquired according to management's estimate of their
respective fair values and the results of those purchased businesses have been
included in the accompanying consolidated condensed financial statements from
July 2, 1996, the date of acquisition.
The following unaudited proforma information illustrates the effect of the
July 2 Mergers on revenues, loss from continuing operations, net loss and net
loss per share for the nine months ended September 30, 1996 and 1995, and
assumes that the July 2 Mergers occurred at the beginning of each period, the
November 1 Merger occurred at the beginning of 1995 and does not account for
refinancing of certain indebtedness of Goldwyn and MPCA debt as discussed in
Note 4 (in thousands except per share amounts):
Nine Months Ended
-----------------
September 30, September 30,
1996 1995
---- ----
Revenues $ 178,207 $ 197,687
========== =========
Loss from continuing operations (73,423) (66,125)
========== =========
Net loss (94,233) (66,867)
========== =========
Net loss per share $ (1.76) $ (1.41)
========== =========
7
<PAGE>
- --------------------------------------------------------------------------------
3. Earnings Per Share of Common Stock
- --------------------------------------------------------------------------------
Primary earnings per share are computed by dividing net income (loss) by
the weighted average number of common and common equivalent shares outstanding
during the year. Common equivalent shares include shares issuable upon the
assumed exercise of stock options using the treasury stock method when dilutive.
Computations of common equivalent shares are based upon average prices during
each period.
Fully diluted earnings per share are computed using such average shares
adjusted for any additional shares which would result from using end-of-year
prices in the above computations, plus the additional shares that would result
from the conversion of the 6 1/2% Convertible Subordinated Debentures. Net
income (loss) is adjusted by interest (net of income taxes) on the 6 1/2%
Convertible Subordinated Debentures. The computation of fully diluted earnings
per share is used only when it results in an earnings per share number which is
lower than primary earnings per share.
The loss per share amounts for the three and nine month periods ended
September 30, 1995 have been calculated using the combined Orion and MITI common
shares converted at the exchange rates used in the November 1 Mergers.
- --------------------------------------------------------------------------------
4. Long-term Debt
- --------------------------------------------------------------------------------
On July 2, 1996 Orion entered into a $300 million credit facility (the
"Orion Credit Facility") with a syndicate of lenders, led by Chase Manhattan
Bank ("Chase"), as agent. Proceeds of the loan were used, in part, to refinance
indebtedness of Orion and certain indebtedness related to the Goldwyn and MPCA
mergers, as described in Note 2. Proceeds of the loan will also be used to fund
the production, acquisition and distribution of motion picture and other
entertainment product. The $300 million facility consists of a secured term loan
of $200 million (the "Term Loan") and a revolving credit facility of $100
million, including a $10 million letter of credit subfacility, (the "Revolving
Credit Facility"). Proceeds from the Term Loan and $24 million of the Revolving
Credit Facility were used to refinance Orion's, Goldwyn's and MPCA's existing
indebtedness. At September 30, 1996, the amounts outstanding under the Term Loan
and Revolving Credit Facility were $192.5 million and $44.5 million,
respectively.
Borrowings under Orion's Credit Facility which do not exceed the
"borrowing base" as defined in the agreement will bear interest at Orion's
option at a rate of LIBOR plus 2-1/2% or Chase's alternative base rate plus
1-1/2%, and borrowings in excess of the borrowing base, which have the benefit
of the guarantee referred to below, will bear interest at Orion's option at a
rate of LIBOR plus 1% or Chase's alternative base rate. The Term Loan has a
final maturity date of June 30, 2001 and will amortize in 20 equal quarterly
installments of $7.5 million commencing on September 30, 1996, with the
remaining principal amount due at the final maturity date. If the outstanding
balance under the Term Loan exceeds the borrowing base, the Company will be
required to pay down such excess amount. The Term Loan and the Revolving Credit
Facility are secured by a first priority lien on all of the stock of Orion and
its subsidiaries and on substantially all of Orion's assets, including its
accounts receivable and film and television libraries. Amounts outstanding under
the Revolving Credit Facility in excess of the applicable borrowing base are
also guaranteed jointly and severally by Metromedia Company, and John W. Kluge,
its general partner. To the extent the borrowing base exceeds the amount
outstanding under the Term Loan, such excess will be used to support the
Revolving Credit Facility so as to reduce the exposure of the guarantors under
such facility.
8
<PAGE>
The Orion Credit Facility contains customary covenants including
limitations on the issuance of additional indebtedness and guarantees, on the
creation of new liens, development costs and budgets for films, the aggregate
amount of unrecouped print and advertising costs Orion may incur, on the amount
of Orion's leases, capital and overhead expenses (including specific limitations
on Orion's theatrical exhibition subsidiary's capital expenditures),
prohibitions on the declaration of dividends or distributions by Orion (except
as defined in the agreement), limitations on the merger or consolidation of
Orion or the sale by Orion of any substantial portion of its assets or stock and
restrictions on Orion's line of business, other than activities relating to the
production, distribution and exhibition of entertainment product. Orion's Credit
Facility also contains financial covenants, including requiring maintenance by
Orion of certain cash flow and operational ratios.
The Revolving Credit Facility contains certain events of default,
including nonpayment of principal or interest on the facility, the occurrence of
a "change of control" (as defined in the agreement) or an assertion by the
guarantors of such facility that the guarantee of such facility is
unenforceable. The Term Loan portion of Orion's Credit Facility also contains a
number of customary events of default, including non-payment of principal and
interest and the occurrence of a "change of management" (as defined in the
agreement), violation of covenants, falsity of representations and warranties in
any material respect, certain cross-default and cross-acceleration provisions,
and bankruptcy or insolvency of Orion or its material subsidiaries.
In connection with the refinancing of the Orion Credit Facility, Orion
expensed the deferred financing costs associated with old debt and recorded an
extraordinary loss of approximately $4.5 million in the quarter ended September
30, 1996.
9
<PAGE>
- --------------------------------------------------------------------------------
5. Assets Held for Sale
- --------------------------------------------------------------------------------
The Company has identified its wholly owned subsidiary Snapper, and its
investment in Roadmaster Industries, Inc. ("Roadmaster"), as non-strategic
assets and the Company's investment in both entities has been included in the
balance sheet as assets held for sale. Management regularly monitors and
evaluates the net realizable value of its assets held for sale to determine
whether their carrying values have been impaired. During the quarter ended
September 30, 1996, the Company reduced the carrying value of its investment in
Roadmaster to $31.2 million, which amount reflects the market value of the
Roadmaster Common Stock (as hereinafter defined) as of September 30, 1996. The
Company's $16.3 million write-down of its investment in Roadmaster reflects both
the reduction in market value of the Roadmaster Common Stock and management's
assessment of the net realizable value of such asset. The Company's write-down
of its investment in Roadmaster of $16.3 million is reflected as a discontinued
operation in the consolidated condensed statement of operations.
The Company's intention is to continue to pursue the disposal of both
Snapper and Roadmaster. Generally accepted accounting principles require that
their results of operations be reflected in the statement of operations after
October 31, 1996. Commencing November 1, 1996, one year since the date of the
mergers, the Company will reflect its proportionate share of the net income or
loss of Snapper and Roadmaster as discontinued operations
The Company and Deutsche Financial Services Corp. ("DFS") are parties to a
Finance and Security Agreement effective as of October 23, 1992, as amended (the
"Loan Agreement"). Effective November 1, 1995, the Company assigned all of its
right, title and interest under such agreement to its wholly owned subsidiary,
Snapper, Inc. The total borrowing capacity under the loan agreement is $45
million, $37 million of which is outstanding at September 30, 1996. The loan is
secured by all of the tangible and intangible assets of Snapper. The Company has
guaranteed Snapper's obligations under the Loan Agreement and has pledged to DFS
all of the issued and outstanding stock of Snapper. Further, Snapper delivered
to DFS $5 million as additional collateral to secure the obligations of Snapper
under the Loan Agreement. The agreement contains restrictions concerning cash
and asset transfers to the Company. The agreement terminates on November 30,
1996.
On November 12, 1996, Snapper entered into a commitment letter with
AmSouth Bank of Alabama ("AmSouth") pursuant to which AmSouth has agreed,
subject to certain conditions, to provide Snapper with a $55 million revolving
credit facility (the "Snapper Revolver"), the proceeds of which will be used to
refinance Snapper's obligations to DFS and for working capital purposes. The
Snapper Revolver will mature on January 1, 1999 and will be guaranteed by the
Company. The Snapper Revolver is subject to the negotiation, execution and
delivery of definitive documentation, which will include standard
representations and warranties, conditions precedent and events of default.
Roadmaster Industries, Inc.
As of September 30, 1996, the Company owned approximately 38% of the
issued and outstanding shares of common stock (the "Roadmaster Common Stock") of
Roadmaster Industries, Inc. based on the approximate 49,800,000 shares of
Roadmaster Common Stock outstanding at August 9, 1996.
10
<PAGE>
The carrying value of the Company's investment in Roadmaster at December
31, 1995 was approximately $47.5 million, based on the anticipated proceeds from
its sale at that time.
The latest available summarized financial information for Roadmaster is
shown below (in thousands):
As of and for the
Six Months Ended
June 30, 1996
-----------------
Net sales $ 233,752
Gross profit 27,185
Net loss (503)
Current assets 303,186
Non-current assets 126,557
Current liabilities 170,481
Non-current liabilities 204,574
Total shareholders' equity 54,688
Snapper, Inc.
At September 30, 1996 and December 31, 1995, the carrying value of Snapper
was approximately $73.8 million and $79.2 million, respectively. The carrying
value of Snapper represents the Company's estimated proceeds from the sale of
Snapper and the repayment of intercompany loans, through the anticipated the
date of sale. For the nine months ended September 30, 1996, the Company has
received $5.4 million of cash from Snapper. Accordingly, the carrying value of
Snapper at December 31, 1995 has been reduced by $5.4 million.
The results of operations of Snapper for the nine months ended September
30, 1996, which are excluded from the accompanying consolidated condensed
statement of operations, are as follows (in thousands):
Net Sales $ 116,630
Operating expenses 135,492
---------
Operating loss (8,862)
Interest expense (6,244)
Other income 1,021
---------
Net loss $ (24,085)
=========
Snapper has from time to time reacquired the inventories and less frequently has
purchased the accounts receivable of distributors it has terminated. The
purchases of inventories are accounted for by reducing sales for the amount
credited to accounts receivable from the terminated distributor. Included in
Snapper's results of operations for the nine months ended September 30, 1996 are
the effects of commitments to repurchase inventories and account receivable of
$12.8 million.
11
<PAGE>
- --------------------------------------------------------------------------------
6. Film Inventories
- --------------------------------------------------------------------------------
The following is an analysis of film inventories (in thousands):
September 30, December 31,
1996 1995
---- ----
Current:
Theatrical and Television Product
Released, less amortization $ 60,151 $ 59,430
Completed, not released 2,991 --
In process and other 2,949 --
-------- --------
66,091 59,430
-------- --------
Non Current:
Theatrical and Television Product
Released, less amortization 147,773 137,233
In process and other 69,548 --
-------- --------
217,321 137,233
-------- --------
$283,412 $196,663
======== ========
In the past, Orion has recorded substantial writeoffs to its released product.
As a result, approximately one-half of the film inventories are stated at
estimated net realizable value and will not result in the recording of gross
profit upon the recognition of related revenues in future periods.
Since the date of the Orion's quasi-reorganization (February 28, 1982),
when Orion's inventories were restated to reflect their then current market
value, Orion has amortized 92% of the gross cost of its film inventories,
including those produced or acquired subsequent to the quasi-reorganization.
Approximately 98% of such gross film inventory costs will have been amortized by
September 30, 1999. As of September 30, 1996, approximately 61% of the
unamortized balance of film inventories will be amortized within the next
three-year period based upon the Orion's revenue estimates at that date.
- --------------------------------------------------------------------------------
7. Investments in and Advances to Joint Ventures
- --------------------------------------------------------------------------------
The Communications Group has recorded its investments in Joint Ventures at
cost, net of its equity in earnings or losses. Advances to the Joint Ventures
are generally made pursuant to lines of credit between MITI and such Joint
Venture. Advances under the line of credit agreements are reflected based on
amounts which MITI expects to receive under the credit agreement, plus accrued
interest.
Advances are made to Joint Ventures in the form of cash, for working
capital purposes and for payment of expenses or capital expenditures; or in the
form of equipment purchased on behalf of the Joint Ventures. Pursuant to the
credit agreements, MITI charges interest to the Joint Ventures at rates which
range from prime rate to prime rate plus 6%. The credit agreements generally
provide for the payment of principal and interest from 90% of the Joint
Ventures' available cash flow, as defined in such agreements, prior to any
substantial distributions of dividends to the Joint Venture partners. MITI has
entered into credit agreements with its Joint Ventures to provide up to $59.1
million in funding, $15.2 million of which remains available at September 30,
1996. MITI funding commitments are contingent on its approval of the Joint
Ventures' business plans.
12
<PAGE>
MITI investments in the Joint Ventures, at cost, net of adjustments for its
equity in earnings or losses, were as follows (in thousands):
<TABLE>
<CAPTION>
Investments in and
advances to
Joint Ventures
------------------- Year Date
Sept. 30, Dec. 31, Ownership Venture Operations
Name 1996 1995 % Formed Commenced
---- ---- ---- - ------ ---------
<S> <C> <C> <C> <C> <C>
Wireless Cable TV
- -----------------
Kosmos TV, Moscow, Russia $ 2,199 $ 4,317 50% 1991 May, 1992
Baltcom TV, Riga Latvia 9,071 6,983 50% 1991 June, 1992
Ayety TV, Tbilisi, Georgia 4,605 3,630 49% 1991 September,1993
Kamalak, Tashkent, Uzbekistan(1) 5,397 3,731 50% 1992 September,1993
Sun TV, Kishinev, Moldova 1,986 1,613 50% 1993 October, 1994
Alma-TV, Almaty, Kazakstan(1) 2,492 1,318 50% 1994 September, 1994
------- -------
25,750 21,592
------- -------
Paging
- ------
Baltcom Paging, Tallin, Estonia 3,326 2,585 39% 1992 December, 1993
Baltcom Plus, Riga, Latvia 1,876 1,412 50% 1994 April, 1995
Tbilisi Paging, Tbilisi, Georgia 640 619 45% 1993 November, 1994
Raduga Paging, Nizhny, Novgorod 392 364 45% 1993 October, 1994
St. Petersburg Paging, St. Petersburg, Russia 892 527 40% 1994 October, 1995
------- -------
7,126 5,507
------- -------
Radio Broadcasting
- ------------------
SAC-Radio 7, Moscow, Russia 199 1,174 51% 1994 January, 1994
Radio Katusha, St. Petersburg, Russia 272 561 50% 1993 May, 1995
Radio Socci, Socci, Russia 242 269 51% 1995 December, 1995
------- -------
713 2,004
------- -------
Telephony
- ---------
Telecom Georgia, Tbilisi, Georgia 3,110 2,078 30% 1994 September, 1994
------- -------
Pre-Operational
- ---------------
Raduga TV, Nizhny Novgorod 222 254 50% 1994 Pre-Operational
Minsk Cable, Minsk, Belarus 1,712 918 50% 1993 Pre-Operational
Vilnius Cable, Vilnius, Lithuania 1,142 81 55% 1996 Pre-Operational
Batumi Paging, Batumi, Georgia 248 -- 24% 1996 Pre-Operational
Golden Cellular Communications Co.,
Peoples Republic of China 3,267 -- 60% 1996 Pre-Operational
Latcom Wireless Telephone Co. 2,664 -- 48% 1996 Pre-Operational
Other 10,619 4,500
------- -------
Sub-total 19,874 5,753
------- -------
Total $56,573 $36,934
======= =======
</TABLE>
(1) includes Paging Operations
13
<PAGE>
The ability of MITI and its Joint Ventures to establish profitable
operations is subject to among other things, special political, economic and
social risks inherent in doing business in Eastern Europe and certain republics
of the former Soviet Union. These include matters arising out of government
policies, economic conditions, imposition of taxes or other similar charges by
governmental bodies, foreign exchange fluctuations and controls, civil
disturbances, deprivation or unenforceability of contractual rights, and taking
of property without fair compensation.
MITI has obtained political risk insurance policies from the Overseas
Private Investment Corporation ("OPIC") for certain of its Joint Ventures. The
policies cover loss of investment and losses due to business interruption caused
by political violence or expropriation. Recently, the House of Representatives
rejected a bill to renew the insuring authority of OPIC, but then extended its
authority for one year. If its authorization is not further renewed, it will be
unable to write any new insurance policies or underwrite new investments.
In 1995, the Russian Federation legislature proposed legislation that
would limit to 35%, the interest which a foreign person is permitted to own in
entities holding broadcast licenses. While such proposed legislation was not
enacted, it is possible that such legislation could be reintroduced and enacted
in Russia. Further, even if enacted, such law may be challenged on
constitutional grounds and may be inconsistent with Russian Federation treaty
obligations. It is unclear how Russian federation regulators would interpret and
apply the law to existing license holders. However, if the legislature passes a
law restricting foreign ownership of broadcast license holding entities and such
a law is found to be constitutional and fails to contain a grandfathering clause
to protect existing companies, it could require MITI to reduce its ownership
interests in its Russian Joint ventures. It is unclear how such reductions would
be effected.
The Republic of Latvia passed legislation in September, 1995 which
purports to limit to 20% the interest which a foreign person is permitted to own
in entities engaged in certain communications businesses such as radio, cable
television and other systems of broadcasting. This legislation will require MITI
to reduce to 20% its existing ownership interest in Joint Ventures which operate
a wireless cable television system and an FM radio station in Riga, Latvia.
Management believes that the ultimate outcome of this matter will not have a
material adverse impact on the Company's financial position and results of
operations.
14
<PAGE>
Summarized combined financial information of Joint Ventures accounted for
under the equity method that have commenced operations as of the dates indicated
are as follows (in thousands):
Combined Balance Sheets
June 30, September 30,
Assets 1996 1995
---- ----
Current assets $ 26,475 $ 6,937
Investments in wireless systems and equipment, net 36,250 31,349
Other assets 3,265 2,940
-------- --------
Total Assets $ 65,990 $ 41,226
======== ========
Liabilities and Joint Ventures' Capital (Deficit)
Current liabilities $ 30,182 $ 10,954
Amount payable under MITI credit facility 41,324 33,699
-------- --------
71,506 44,653
Joint Ventures' Capital (Deficit) (5,516) (3,427)
-------- --------
Total Liabilities and Joint Ventures'
Capital (Deficit) $ 65,990 $ 41,226
======== ========
Combined Statement of Operations
Nine Months Ended
-----------------
June 30, June 30,
1996 1995
---- ----
Revenues $ 34,327 $ 12,082
-------- --------
Expenses:
Cost of service 14,706 6,362
Selling, general and administrative 16,994 5,847
Depreciation and amortization 4,912 3,186
Other 20 323
-------- --------
Total Expenses 36,632 15,718
-------- --------
Operating Loss (2,305) (3,636)
Interest Expense (2,614) (1,134)
Other Income (Loss) 7 (52)
Foreign Currency Translation 1,224 (70)
-------- --------
Net Loss $ ( 3,688) $ (4,892)
======== ========
Financial information for Joint Ventures which are not yet operational is
not included in the above summary. MITI's investment in and advances to those
Joint Ventures and for those entities whose venture agreements are not yet
finalized at September 30, 1996 amounted to approximately $19.9 million.
15
<PAGE>
The following tables represent summary financial information for all
operating entities being grouped as indicated as of and for the nine months
ended September 30, 1996 (in thousands):
<TABLE>
<CAPTION>
Wireless Radio
Cable TV Paging Broadcasting Telephony Total
-------- ------ ------------ --------- -----
<S> <C> <C> <C> <C> <C>
Consolidated Subsidiaries and
Joint Ventures
Revenues $ 57 $ 2,283 $ 5,238 $ -- $ 7,578(1)
Depreciation and amortization 203 252 426 -- 881
Operating income (loss) before taxes (204) 75 1,540 -- 1,411
Assets 980 3,453 2,972 -- 7,405
Capital expenditures 935 573 562 -- 2,070
Unconsolidated Equity Joint Ventures
Revenues $ 11,991 $ 4,101 $ 1,325 $16,910 $ 34,327
Depreciation and amortization 4,006 411 80 415 4,912
Operating income (loss) before taxes (3,464) (851) (1,759) 3,769 (2,305)
Assets 28,030 7,633 844 29,483 65,990
Capital expenditures 4,033 766 122 256 5,177
Net investment in Joint Ventures 25,750 7,126 713 3,110 36,699
MITI equity in losses of
unconsolidated investees (4,244) (1,147) (1,974) 1,305 (6,060)
Combined
Revenues $ 12,048 $ 6,384 $ 6,563 $16,910 $ 41,905
Depreciation and amortization 4,209 663 506 415 5,793
Operating income (loss) before taxes (3,668) (776) (219) 3,769 (894)
Assets 29,010 11,086 3,816 29,483 73,395
Capital expenditures 4,968 1,339 684 256 7,247
Subscribers 62,568 37,636 n/a n/a 100,204
</TABLE>
(1) Does not reflect revenue of MITI's headquarters of approximately $2.7
million
More than 90% of the Company's assets are located in, and substantially
all of the Company's operations are derived from, Republics in the Commonwealth
of Independent States or Eastern Europe.
On March 18, 1996 Metromedia Asia Limited ("MAL"), MITI's 90% subsidiary,
entered into a Joint Venture agreement with Golden Cellular Communications,
Ltd., ("GCC") a company located in the People's Republic of China ("PRC"). The
purpose of the Joint Venture is to provide wireless local loop ("WLL") telephone
equipment, network planning, technical support and training to domestic
telephone operators throughout the PRC. Total required equity contributions to
the venture is $8 million of which 60% will be contributed by MAL and 40% will
be contributed by GCC.
On July 15, 1996, MITI entered into a Credit Agreement with Asian American
Telecommunications Corporation ("AAT")pursuant to which MITI agreed to loan to
AAT the principal amount of $10 million at an interest rate of 10% per annum.
The principal amount of the loan is convertible into equity of AAT upon the
satisfaction of certain conditions precedent, including the Business Combination
(as hereinafter defined). The loan is secured by the shares of common stock of
AAT owned by Max Bobbit, AAT's President. The proceeds of the loan are to be
used by AAT to fund equity contributions to a Joint Venture.
MAL and AAT are in discussions regarding combining their respective
businesses (the "Business Combination"). AAT is engaged in the
telecommunications business in China and hardware in China. No assurance can be
given that the parties will ultimately enter into a definitive Business
Combination Agreement.
16
<PAGE>
On May 17, 1996, MITI acquired 56% of Protocall Ventures, Ltd.
("Protocall") for a purchase price of approximately $2.6 million. Protocall is a
United Kingdom company that has ownership interests in nine companies providing
trunked mobile radio services in certain cities in Portugal, Spain, Belgium and
Germany.
In October 1996, MITI's wholly owned subsidiary Telcell Wireless LLC
("Telcell") entered into a Joint Venture agreement to design, construct, install
and operate a mobile radio network in Tblisi, Georgia. The total equity
contribution to the Joint Venture is $5 million of which 49% was contributed by
Telcell.
- --------------------------------------------------------------------------------
8. Stockholders' Equity
- --------------------------------------------------------------------------------
On July 2, 1996, the Company completed a public offering of 18.4 million
shares of common stock, generating net proceeds of approximately $190.6 million.
Proceeds of the offering were used to pay existing bank debt of MMG, and MITI's
revolving credit bridge loan from Metromedia Company. Proceeds will also be used
to finance the build-out of the Company's communications operations in Eastern
Europe and other emerging markets, and for general corporate purposes, including
the working capital needs of MMG and its subsidiaries, and for potential future
acquisitions.
As part of the MPCA acquisition, the Company issued 256,504 shares of
restricted common stock to certain employees. The common stock vests on a
pro-rata basis over a three year period ending in July 1999. The total market
value of the shares at the time of issuance is treated as unearned compensation
and is charged to expense over the vesting period. Unearned compensation charged
to expense for the period ended September 30, 1996 was $264,000.
On August 29, 1996, the Company held its annual meeting and the
stockholders voted to increase the number of authorized shares of common stock
to 400,000,000. In addition, the stockholders approved the adoption of the
Metromedia International Group, Inc. 1996 Incentive Stock Option Plan (the
"Plan"). The aggregate number of shares of common stock that may be the subject
of awards under the Plan is 8,000,000. The maximum number of shares with respect
to awards to any one grantee under the Plan shall not exceed 250,000 in the
aggregate. The Company has issued 2,898,221 stock options at fair market value
as of the date of issuance.
- --------------------------------------------------------------------------------
9. Supplemental Disclosure of Cash Flow Information
- --------------------------------------------------------------------------------
The following information reflects significant non-cash investing and
financing activities (in thousands)
Goldwyn and MPCA acquisition:
Fair value of assets acquired $ 124,640
Fair value of liabilities assumed 180,991
---------
$ (56,351)
=========
In connection with the acquisition of MPCA, the Company issued debt of
$1.2 million and restricted common stock valued at $3.2 million.
17
<PAGE>
- --------------------------------------------------------------------------------
10. Contingent Liabilities
- --------------------------------------------------------------------------------
Litigation
Fuqua Industries, Inc. Shareholder Litigation
Between February 25, 1991 and March 4, 1991, three lawsuits were filed
against the Company (formerly named Fuqua Industries, Inc.) in the Delaware
Chancery Court. On May 1, 1991, these three lawsuits were consolidated by the
Delaware Chancery Court in In re Fuqua Industries, Inc. Shareholders Litigation,
Civil Action No. 11974. The named defendants are certain current and former
members of the Company's Board of Directors and certain former members of the
Board of Directors of Intermark, Inc. ("Intermark"). Intermark is a predecessor
to Triton Group Ltd., which formerly owned approximately 25% of the outstanding
shares of the Company's Common Stock. The Company was named as a nominal
defendant in this lawsuit. The action was brought derivatively on behalf of the
Company and purportedly was filed as a class action lawsuit on behalf of all
holders of the Company's Common Stock, other than the defendants. The complaint
alleges, among other things, a long-standing pattern and practice by the
defendants of misusing and abusing their power as directors and insiders of the
Company by manipulating the affairs of the Company to the detriment of the
Company's past and present stockholders. The complaint seeks (i) monetary
damages from the director defendants, including a joint and several judgment for
$15,700,000 for alleged improper profits obtained by Mr. J.B. Fuqua in
connection with the sale of his shares in the Company to Intermark; (ii)
injunctive relief against the Company, Intermark and its former directors,
including a prohibition against approving or entering into any business
combination with Intermark without specified approval; and (iii) costs of suit
and attorneys' fees. On December 28, 1995, plaintiffs filed a consolidated
second amended derivative and class action complaint, purporting to assert
additional facts in support of their claim regarding an alleged plan, but
deleting their prior request for injunctive relief. On January 31, 1996, all
defendants moved to dismiss the second amended complaint and filed a brief in
support of that motion. On November 6, 1996, a hearing was held regarding the
motion to dismiss. A decision is pending.
The Company and its subsidiaries are contingently liable with respect to
various matters, including litigation in the ordinary course of business and
otherwise. Some of the pleadings in the various litigation matters contain
prayers for material awards. Based upon management's review of the underlying
facts and circumstances and consultation with counsel, management believes such
matters will not result in significant additional liabilities which would have a
material adverse effect upon the consolidated financial position or results of
operations of the Company.
Environmental Protection
The Company has been involved in various environmental matters involving
property owned and operated by Snapper, including clean-up efforts at landfill
sites and the remediation of groundwater contamination. The costs incurred by
the Company with respect to these matters have not been material. As of
September 30, 1996, the Company had a remaining reserve of approximately
$1,250,000 to cover its obligations to Snapper.
During 1995, the Company was notified by certain potentially responsible
parties at a superfund site in Michigan that a former subsidiary may be a
potentially responsible party at such site. The Company's liability, if any, has
not been determined but the Company believes that such liability will not be
material.
The Company, through a wholly-owned subsidiary, owns approximately 17
acres of real property located in Opelika, Alabama (the "Opelika Property"). The
Opelika Property was formerly owned by Diversified Products Corporation, a
former subsidiary of the Company, and was transferred to a wholly owned
subsidiary of the Company in connection with the sale of the Company's former
sporting goods business to Roadmaster. The Company believes that reserves of
approximately $1.8 million previously established by the Company for the Opelika
Property will be adequate to cover the cost of the remediation plan that has
been developed.
18
<PAGE>
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
consolidated condensed financial statements and related notes thereto.
General
In connection with the November 1 Mergers, the Company changed its name
from "The Actava Group Inc." to "Metromedia International Group, Inc." For
accounting purposes only, Orion and MITI were deemed to be the joint acquirors
of Actava and Sterling. The acquisitions of Actava and Sterling were accounted
for as reverse acquisitions. As a result of the reverse acquisitions, the
historical financial statements of the Company for periods prior to the November
1 Mergers are the combined financial statements of Orion and MITI, rather than
Actava's.
The operations of Actava and Sterling have been included in the
accompanying consolidated financial statements from November 1, 1995, the date
of acquisition. During December 1995, the Company adopted a formal plan to
dispose of Snapper. In addition, the Company's investment in Roadmaster has been
deemed to be a non-strategic asset. The Company is pursuing its intention to
dispose of Snapper and its investment in Roadmaster. Snapper and Roadmaster are
included in the consolidated condensed financial statements of the Company as
assets held for sale.
On July 2, 1996 the Company completed the Goldwyn Merger and the MPCA
Merger (see Note 2 to the notes to the Company's consolidated condensed
financial statements). The acquisition of Goldwyn provides the Company with a
valuable library of over 850 films and television titles, including numerous
Hollywood classics and critically acclaimed recent films. Goldwyn also owns the
leading specialized theatre circuit in the United States, with 52 theatres with
140 screens. The acquisition of MPCA enhances the Company's ability to produce
and acquire new film product. The acquisitions of Goldwyn and MPCA are important
steps in MMG's plan to enhance its role as a leading global entertainment, media
and communications company.
The Company intends to continue to pursue a strategy of making selective
acquisitions of attractive entertainment, media and communications assets that
complement its existing business groups. In particular, the Company is
interested in expanding its library of proprietary motion picture rights and in
expanding the network through which it distributes various entertainment, media
and communications products and services.
The business activities of the Company consist of two business segments:
(i) the Entertainment Group, which specializes in the development, production,
acquisition, exploitation and worldwide distribution in all media of motion
pictures, television programming and other filmed entertainment product (the
"Entertainment Group"), and (ii) the Communications Group, which provides
wireless cable television, paging services, radio broadcasting, and various
types of telephony services (the "Communications Group").
The Entertainment Group
The Entertainment Group consists of Orion and, as of July 2, 1996, Goldwyn
and MPCA and their respective subsidiaries. Until November 1, 1995, Orion
operated under the terms of its Modified Third Amended Joint Consolidated Plan
of Reorganization (the "Plan"), which severely limited Orion's ability to
finance and produce additional theatrical motion pictures. Therefore, Orion's
primary activity prior to the November 1 Mergers was the ongoing distribution of
its library of theatrical motion pictures and television programming. Orion
believes the lack of a continuing flow of newly produced theatrical product
while operating under the Plan adversely affected its results of operations. As
a result of the removal of the restrictions on the Entertainment Group to
finance, produce, and acquire entertainment products in connection with the
November 1 Mergers, the Entertainment Group has begun to produce and acquire new
theatrical product.
19
<PAGE>
Theatrical motion pictures are produced initially for exhibition in
theatres. Initial theatrical release generally occurs in the United States and
Canada. Foreign theatrical exhibition generally begins within the first year
after initial release. Home video distribution in all territories usually begins
six to twelve months after theatrical release in that territory, with pay
television exploitation beginning generally six months after initial home video
release. Exhibition of the Company's product on network and on other free
television outlets begins generally three to five years from the initial
theatrical release date in each territory.
The Communications Group
The Communications Group, through MITI and its subsidiaries, is the owner
of various interests in Joint Ventures that are currently in operation or
planning to commence operations in certain republics of the former Soviet Union
and in certain other Eastern European countries. During 1995, the company began
to pursue opportunities to extend its communications businesses into emerging
markets in the Pacific Rim.
The Joint Ventures currently offer wireless cable television, radio paging
systems, radio broadcasting, trunked mobile radio services and various types of
telephony services. Joint Ventures are principally entered into with
governmental agencies or ministries under the existing laws of the respective
countries.
The consolidated financial statements include the accounts and results of
operations of MITI, its majority owned and controlled Joint Ventures, CNM
Paging, Radio Juventas, Radio Skonto and Romsat , and their subsidiaries.
Investments in other companies and Joint Ventures which are not majority owned,
or in which the Company does not have control, but exercises significant
influence, have been accounted for using the equity method.
20
<PAGE>
The following tables set forth the operating results of the Company's
Entertainment Group, Communications Group and Corporate Headquarters for the
three months and nine months ended September 30, 1996 and 1995. Financial
information summarizing the results of operations of Snapper, which is
classified as an asset held for sale, is presented in Note 5 to the notes to the
consolidated condensed financial statements. Segment Information Management's
Discussion & Analysis Table
Segment Information
Management's Discussion & Analysis Table
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
--------------------------------------------------------
September 30, September 30, September 30, September 30,
1996 1995 1996 1995
-------- -------- --------- ---------
<S> <C> <C> <C> <C>
Entertainment Group:
Revenues $ 39,997 $ 33,374 $ 102,850 $ 108,491
Cost of Rentals and
Operating Expenses (33,123) (30,873) (87,957) (102,885)
Selling, General & Administrative (7,091) (5,530) (16,716) (17,451)
Depreciation & Amortization
(2,393) (173) (2,989) (469)
-------- -------- --------- ---------
Operating Loss
(2,610) (3,202) (4,812) (12,314)
-------- -------- --------- ---------
Communications Group:
Revenues 4,380 2,094 10,319 5,410
Cost of Rentals and Operating
Expenses -- -- -- --
Selling, General & Administrative (9,201) (5,537) (25,695) (18,103)
Depreciation & Amortization
(1,545) (359) (4,628) (1,084)
---------
Operating Loss
(6,366) (3,802) (20,004) (13,777)
-------- -------- --------- ---------
Corporate Headquarters:
Revenues 2 -- 6 --
Cost of Rentals and
Operating Expenses -- -- -- --
Selling, General & Administrative (3,597) -- (8,019) --
Depreciation & Amortization
(2) -- (13) --
-------- -------- --------- ---------
Operating Loss
(3,597) -- (8,026) --
-------- -------- --------- ---------
Consolidated:
Revenues 44,379 35,468 113,175 113,901
Cost of Rentals and
Operating Expenses (33,123) (30,873) (87,957) (102,885)
Selling, General & Administrative (19,889) (11,067) (50,430) (35,554)
Depreciation & Amortization
(3,940) (532) (7,630) (1,553)
-------- -------- --------- ---------
Operating Loss
(12,573) (7,004) (32,842) (26,091)
-------- -------- --------- ---------
Interest Expense (10,051) (8,534) (26,006) (25,704)
Interest Income 3,189 960 5,590 2,658
Provision for Income Taxes (323) -- (723) (300)
Equity in Losses of Joint Ventures (2,292) (1,568) (6,060) (3,789)
Discontinued Operation (16,305) -- (16,305) --
Extraordinary Item
(4,505) -- (4,505) --
-------- -------- --------- ---------
Net Loss $(42,860) $(16,146) $ (80,851) $ (53,226)
======== ======== ========= =========
</TABLE>
21
<PAGE>
MMG Consolidated - Results of Operations
Three Months Ended September 30, 1996 Compared to Three Months Ended September
30, 1995.
Net loss increased to $42.9 million in the three month period ended
September 30, 1996 from $16.1 million for the three months ended September 30,
1995.
The $26.8 million increase in the Company's consolidated loss for the
three month period ended September 30, 1996 versus September 30, 1995 is
primarily attributable to the write-down of the investment in Roadmaster and the
loss associated with the refinancing of the Orion debt facility and increases in
operating losses in the Communications Group, corporate overhead and equity in
net losses of Joint Ventures, offset by decreases in operating losses at the
Company's Entertainment Group.
The improvement in the Entertainment Group's operations was attributed to
positive results from the newly acquired theatrical exhibition group partially
offset by increased amortization of goodwill related to the Mergers.
The Communications Group experienced increases in selling, general and
administrative expenses as a result of expansion efforts and due to the start up
nature of many of its Joint Ventures. Corporate overhead increased to $3.6
million in 1996 from zero for the three months ended September 30, 1995 as a
result of the addition of MMG's corporate headquarters after the November 1
Mergers.
Interest expense increased $1.5 million to $10.1 million for the three
month period ended September 30, 1996. The increase in interest expense was
primarily due to the interest on the debt at corporate headquarters. The
increase was partially offset by the reduction in interest expense for the
Communications Group since the funding of their operations is from MMG, and a
reduction in interest expense and for the Entertainment Group due principally t
o lower interest rates on the debt balance in each respective period.
Interest income increased $2.2 million to $3.2 million principally as a
result of MITI's increasing advances to the Joint Ventures for their operating
and investing cash requirements and from funds invested at corporate
headquarters.
Nine Months Ended September 30, 1996 Compared to Nine Months Ended September 30,
1995.
Net loss increased to $80.9 million in the nine month period ended
September 30, 1996 from $53.2 million for the nine months ended September 30,
1995.
The $27.7 million increase in the Company's consolidated loss for the nine
month period ended September 30, 1996 versus September 30, 1995 is primarily
attributable to the write-down of the investment in Roadmaster and the loss
associated with the refinancing of the Orion debt facility. In addition, the
Company experienced increases in operating losses in the Communications Group,
increases in corporate overhead and equity in net losses of Joint Ventures,
offset by decreases in operating losses in the Entertainment Group.
The improvement in the Entertainment Group's operations was primarily a
result of writedowns of film inventory totaling approximately $9.4 million in
the first nine months of 1995, compared to nominal writedowns for the current
nine month period.
The Communications Group experienced increases in selling, general and
administrative expenses as it continues to expand its business and due to start
up of many of its Joint Ventures. As a result of the November 1 Mergers, MMG
became a holding company and overhead increased to $8.0 million in 1996 from
zero for the nine months ended September 30, 1995.
22
<PAGE>
Interest expense increased $.3 million to $26.0 million for the nine month
period ended September 30, 1996. The increase in interest expense was primarily
due to the interest on the debt at corporate headquarters as a result of the
addition of MMG's corporate headquarters after the November 1 Mergers. In
addition, corporate headquarters funded the Communications Groups operations
through a credit facility which was repaid on July 2, 1996. The increase was
partially offset by the reduction in interest expense for the Communications
Group since the funding of their operations is from MMG and a reduction in
interest expense for the Entertainment Group due principally to the refinancing
of Orion's debt prior to the July 2 Mergers, and to lower interest rates on the
debt balance in each respective period after the July 2 Mergers.
Interest income increased $2.9 million to $5.6 million principally as a
result of the Communications Group's increasing advances to the Joint Ventures
for their operating and investing cash requirements and from funds invested at
corporate headquarters.
The Entertainment Group - Results of Operations
Three months ended September 30, 1996 versus three months ended September 30,
1995
Revenues
Total revenues for the three months ended September 30, 1996 were $40.0
million, an increase of $6.6 million or 20% from the three months ended
September 30, 1995.
Revenues increased during the current quarter reflecting the addition of
Goldwyn and MPCA ("Acquired Businesses") revenues, including the revenues from
the theatrical exhibition business. This increase was partially offset by the
decrease in revenues in home video, pay and free television, which resulted from
Orion's reduced theatrical schedule. Although Orion released five pictures
theatrically during the current quarter, several of these titles were acquired
for domestic theatrical distribution only and will not generate ancilliary
revenues. Orion anticipates that its reduced theatrical release schedule during
the last few years, as well as the acquisition of limited distribution rights
for certain current titles, will continue to have an adverse effect on its
ancilliary revenues.
Theatrical revenues for the current quarter were $4.0 million, an increase
of $2.4 million from the previous year's third quarter. Such increase was due to
the theatrical release of four pictures during the current quarter compared to
two theatrical releases in the prior year's third quarter.
Domestic home video revenues for the current quarter were $4.7 million, a
decrease of $4.9 million or 51% from the previous year's third quarter. The
decrease in domestic home video revenue was due primarily to Orion's reduced
theatrical release schedule in 1995 as well as the release of three direct to
video titles in the prior year's third quarter to the home video marketplace
with no comparable release in the current quarter.
Home video subdistribution revenues for the third quarter and the prior
year's quarter were $1.8 million and $1.9 million, respectively, due to Orion's
reduced theatrical schedule in 1995.
Pay television revenues were $4.8 million in the current quarter, a
decrease of $3.7 million or 43% from the previous year's third quarter. The
decrease in pay television revenues was primarily due to no titles becoming
available during the current quarter in the domestic pay cable market compared
to two titles which became available in the previous year's second quarter
offset partially by pay revenues on the newly acquired Goldwyn library.
Free domestic and international television revenues for the current
quarter were $9.9 million, a decrease of $2.0 million or 17% from the previous
year's second quarter. The decrease during the current quarter, which was
partially offset by the various basic cable revenues associated with the newly
acquired Goldwyn library, was due to the lack of availability under a cable
agreement.
Film exhibition revenues for the current quarter were $14.9 million. Due
to the acquisition of this business on July 2, 1996, the Entertainment Group did
not report film exhibition revenues for the previous year's third quarter.
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Selling, General & Administrative Expenses
Selling, general and administrative expenses increased $1.6 million to
$7.1 million during the current third quarter from $5.5 million during the
previous year's third quarter. The increase is attributed to the inclusion of
the Acquired Businesses' selling, general and administrative expenses for the
current quarter partially offset by a reduction in insurance costs and outside
computer consulting costs.
Operating Income (Loss)
Operating loss of $2.6 million in the current quarter was an improvement
over an operating loss of $3.2 million in the previous year's third quarter.
Such improvement was attributed to positive results from the newly acquired
theatrical exhibition group partially offset by increased amortization related
to the goodwill associated with the Acquired Businesses. However results of
operations continue to be adversely affected due to the restrictions which
existed prior to the November 1 Mergers, as described above, and that
approximately one-half of film inventories are stated at estimated realizable
value and do not generate gross profit upon recognition of revenues.
Nine months ended September 30, 1996 versus nine months ended September 30, 1995
Revenues
Total revenues for the nine months ended September 30, 1996 were $102.9
million, a decrease of $5.6 million or 5% from the nine months ended September
30, 1995.
Although Orion released new product during the current nine month period,
and acquired Goldwyn and MPCA during the current quarter, the revenue from such
product was not sufficient to offset the decrease in revenues in home video, pay
television and free television, which resulted from Orion's reduced theatrical
schedule prior to November 1, 1995. Of the ten titles released theatrically
during the current nine month period, six of these titles were acquired for
domestic theatrical distribution only and will not generate ancilliary revenues.
Orion anticipates that its reduced theatrical release schedule during the last
few years, as well as the acquisition of limited distribution rights for certain
current titles, will continue to have an adverse effect on its ancilliary
revenues.
Theatrical revenues for the current nine months were $15.7 million, an
increase of $12.9 million from the previous year's nine months. Such increase
was due to the theatrical release of nine pictures during the current nine
months compared to three theatrical releases in the previous year's nine month
period. Of the nine releases, approximately 80% of the current nine months
domestic theatrical revenues were derived from the distribution of two films,
The Substitute and The Arrival.
Domestic home video revenues for the current nine months were $17.5
million, a decrease of $14.8 million or 46% from the previous year's nine
months. The decrease in domestic home video revenue was due primarily to Orion's
reduced theatrical release schedule in 1995. In the prior year's nine months'
revenue the release of Blue Sky to the home video marketplace attributed to 23%
of the revenue with no comparable releases in the current year's nine months.
Home video subdistribution revenues for the current nine months were $5.0
million, an increase of $1.9 million from the previous year's first nine months.
These revenues are primarily generated in the foreign marketplace through a
subdistribution agreement with Sony Pictures Entertainment, Inc. The increase
was primarily due to the release of the last titles under this agreement in some
major territories during the first quarter of 1996. All 23 pictures covered by
this agreement have been released theatrically.
Pay television revenues were $16.2 million in the current nine months, a
decrease of $10.0 million or 38% from the previous year's nine month period. The
decrease in pay television revenues was primarily due to the lack of available
titles during the current nine month period in the domestic pay cable market
compared to six available titles during the previous year's nine months. This
decrease was partially offset by an increase in the number of available titles
under various foreign pay cable license agreements.
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Free domestic and international television revenues for the current nine
months were $33.7 million, a decrease of $10.5 million or 24% from the previous
year's nine months. The decrease in free television revenues was due to seven
titles becoming available in the basic cable market during the current nine
month period compared to twelve titles becoming available during the previous
year's nine months. This decrease was partially offset by the availability of
certain titles in the domestic syndication marketplace.
Film exhibition revenues for the current nine months were $14.9 million.
Revenues have been included from the acquisition of this business on July 2,
1996.
Selling, General & Administrative Expenses
Selling, general and administrative expenses for the current nine month
period remained relatively constant when compared to the previous nine month
period. Any decrease in selling, general and administrative expenses due to a
reduction in insurance and outside computer consulting costs was offset by the
addition of the selling, general and administrative expenses related to the
Acquired Businesses.
Operating Loss
Operating loss decreased by $7.5 million in the current nine months to
$4.8 million from an operating loss of $12.3 million in the previous year's nine
months. The previous year's nine months results were adversely affected by
writedowns to estimated net realizable value of the carrying amounts on certain
film product totaling approximately $9.4 million compared to nominal writedowns
for the current nine months. In addition, approximately one-half of film
inventories are stated at estimated realizable value and do not generate gross
profit upon recognition of revenues therefore adversely affecting results of
operations.
The Communications Group - Results of Operations
Three Months Ended September 30, 1996 compared to Three Months Ended September
30, 1995.
Revenues
Revenues increased to $4.4 million in the three months ended September 30,
1996 from $2.1 million for the three months ended September 30, 1995. This
growth in revenue has resulted primarily from an increase in radio operations in
Hungary, paging service operations in Romania and an increase in management and
licensing fees. Revenue from radio operations increased to $2.7 million for the
three months ended September 30, 1996 from $1.7 million in the three months
ended September 30, 1995. Radio paging services generated revenues of $.9
million for the three months ended September 30, 1996 as compared to $.3 million
for the three months ended September 30, 1995. Management fees and licensing
fees increased to $.7 million in the three months ended September 30, 1996 from
$.1 million in the three months ended September 30, 1995. On December 31, 1995
the Communications Group changed its policy of accounting for its majority owned
and controlled Joint Ventures, such that the Communications Group's results of
operations for the three months ended September 30, 1996 include the results of
operations for these ventures for the three months ended June 30, 1996. The
Communications Group's results of operations for the three months ended
September 30, 1995 included the results of operations for these ventures for the
three months ended September 30, 1995. Had the Communications Group applied this
method from January 1, 1995 the net effect on reported operating results for the
three months ended September 30, 1995 would not have been material.
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Selling, General and Administrative Expense
Selling, general and administrative expense increased by $3.7 million or
66% for the three months ended September 30, 1996 as compared to the three
months ended September 30, 1995. The increase from 1995 to 1996 relates
principally to the hiring of additional staff and additional expenses associated
with the increase in the number of Joint Ventures and the need for the
Communications Group to support and assist the operations of the Joint Ventures
as well as additional staffing at the radio station and radio paging operations.
Equity in Losses of Joint Ventures
The Communications Group recognized equity in losses of Joint Venture
investees of approximately $2.3 million for the three months ended September 30,
1996 as compared to $1.6 million for the three months ended September 30, 1995.
The losses recorded for the three months ended September 30, 1996 and 1995
represent the Communications Group's equity in losses of the venture operations
for the three months ended June 30, 1996 and September 30, 1995, respectively.
Foreign Currency
The Communications Group limits its foreign currency exposure by insuring
that in areas with unstable currencies, it bills and collects all revenues in
United States dollars or an equivalent local currency amount, adjusted on a
monthly basis for currency fluctuation. The Communications Group's Joint
Ventures are generally permitted to maintain US dollar accounts to service their
dollar denominated credit lines, thereby significantly reducing foreign currency
exposure. As the Communications Group and its Joint Venture investees grow and
become more dependent on local currency based transactions, the Communications
Group expects that its foreign currency risk and exposure may increase, however,
the Communications Group also anticipates that with the passage of time, and the
anticipated strengthening of the local economies and their currencies, that
exposure may not require hedging. The Communications Group does not hedge
against foreign currency exchange rate risks at the present time.
Nine Months Ended September 30, 1996 compared to Nine Months Ended September 30,
1995.
Revenues
Revenues increased to $10.3 million in the nine months ended September 30,
1996 from $5.4 million for the nine months ended September 30, 1995. This growth
in revenue has resulted primarily from an increase in radio operations in
Hungary and paging service operations in Romania. During 1995, the
Communications Group changed its policy of accounting for majority owned and
controlled Joint Ventures, such that the Communications Group's results of
operations for the nine months ended September 30, 1996 include the results of
operations for these ventures for the nine months ended June 30, 1996. The
Communications Group's results from operations for the nine months ended
September 30, 1995 included the results of operations for these ventures for the
nine months ended September 30, 1995. Had the Communications Group applied this
method from January 1, 1995 the net effect on reported operating results for the
nine months ended September 30, 1995 would not have been material. Revenue from
radio operations for the first nine months of 1996 was $6.4 million as compared
to $4.3 million in the first nine months of 1995. Radio paging services
generated revenues of $2.3 million for the first nine months of 1996 as compared
to $.7 million in the first nine months of 1995. Income from management fees and
licensing fees increased to $1.6 million in the nine months ended September 30,
1996 from $.4 million in the nine months ended September 30, 1995.
Selling, General and Administrative Expense
General and administrative expense increased by $7.6 million or 42% for
the nine months ended September 30, 1996 as compared to the nine months ended
September 30, 1995. The increase from 1995 to 1996 relates principally to the
hiring of additional staff and additional expenses associated with the increase
in the number of Joint Ventures and the need for the Communications Group to
support and assist the operations of the Joint Ventures as well as additional
staffing at the radio station and radio paging operations.
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Equity in Losses of Joint Ventures
The Communications Group recognized equity in losses of Joint Venture
investees of approximately $6.1 million for the nine months ended September 30,
1996 as compared to $3.8 million for the nine months ended September 30, 1995.
The losses recorded for the nine months ended September 30, 1996 and 1995
represent the Communications Group's equity in losses of the venture operations
for the nine months ended June 30, 1996 and September 30, 1995, respectively.
Subscriber Growth - Many of the Joint Ventures are start up concerns and
as such, ordinarily generate operating losses in the first years of operation.
The Company believes that growth of subscribers is a good indicator for the
reader to evaluate the progress of the subscriber based businesses. The
following table presents the aggregated paging and Cable TV ventures subscriber
growth .
Wireless
Cable TV Paging
-------- ------
December 31, 1995 37,900 14,460
March 31, 1996 44,632 20,683
June 30, 1996 53,706 29,107
September 30, 1996 62,568 37,636
Foreign Currency
The Communications Group limits its foreign currency exposure by insuring
that in areas with unstable currencies, it bills and collects all revenues in
United States dollars or an equivalent local currency amount, adjusted on a
monthly basis for currency fluctuation. The Communications Group's Joint
Ventures are generally permitted to maintain US dollar accounts to service their
dollar denominated credit lines, thereby significantly reducing foreign currency
exposure. As the Communications Group and its Joint Venture investees grow and
become more dependent on local currency based transactions, the Communications
Group expects that its foreign currency risk and exposure may increase, however,
the Communication Group also anticipates that with the passage of time and the
anticipated strengthening of the local economies and their currencies, that
exposure may not require hedging. The Communications Group does not hedge
against foreign currency exchange rate risks at the present time.
Liquidity and Capital Resources
MMG Consolidated
Cash Flows from Operating Activities
Cash used in operations for the nine months ended September 30, 1996 was
$4.1 million, a decrease in cash from operations of $24.3 million from the same
period in the prior year.
Losses from operations include significant non-cash items of depreciation,
amortization and equity in losses of Joint Ventures. Non-cash items decreased
$5.8 million from $84.4 million to $78.6 for the nine month periods ended
September 30, 1995 and 1996, respectively. The decrease in non-cash items
principally relates to amortization of film costs and debt discounts which was
partially offset by the loss on write-down of the investment in Roadmaster and
the early extinguishment of debt and the increase in equity losses of Joint
Ventures and depreciation and amortization of fixed and intangible assets. Net
changes in assets and liabilities decreased cash flows for the nine months ended
September 30, 1996 and 1995 by $1.8 million and $10.9 million, respectively.
The decrease in cash flows for the nine months ended September 30, 1996
generally resulted from the reduction in revenues caused by Orion's reduced
theatrical release schedule and increased losses in the Communications Group's
consolidated and equity Joint Ventures due to the start-up nature of these
operations, and increases in selling, general and administrative expenses at the
Communications Group and corporate headquarters. Net interest expense has
decreased principally due to the increase in advances to the Joint Ventures for
their operating and investing cash requirements. The Orion
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reduced theatrical release schedule, which is the result of the restrictions
imposed upon Orion while operating under the Plan, has negatively impacted and
will continue to negatively impact cash provided from operations. As a result of
the removal of the restrictions on the Entertainment Group to finance, produce
and distribute entertainment product as a result of the November 1 Mergers, and
acquisitions of Goldwyn and MPCA, the Entertainment Group intends to acquire and
produce new theatrical product.
Cash Flows from Investing Activities
Cash used in investing activities was $70.2 million and $21.1 million for
the nine months ended September 30, 1996 and 1995, respectively. During the nine
months ended September 30, 1995, the principal use of cash in investing
activities was $15.2 million invested or advanced to Joint Ventures and $4.1
million investment in film inventories. During the nine months ended September
30, 1996 the Company collected $5.4 million from Snapper as partial repayment of
a $23.1 million loan and approximately $5.4 million from the proceeds from sale
of short-term investments and paid $25.4 million and $48.9 million for
investments in and advances to Joint Ventures and investments in film
inventories, respectively.
The increase in investment in film inventories reflects the removal of the
restrictions of the Plan in connection with the November 1 Mergers. The
Entertainment Group has begun to increase its investing activities by increasing
its investment in films as well as the related releasing costs.
Cash Flows From Financing Activities
Cash provided by financing activities was $170.0 million for the nine
months ended September 30, 1996 as compared to cash used in financing activities
of $5.4 million for the nine months ended September 30, 1995.
For the nine months ended September 30, 1996, the company issued 18.4
million shares of common stock and the proceeds from the public offering, net of
transaction costs was $190.6 million. Of the $294.5 million in additions to
long-term debt, $29.0 million was borrowed under the old Orion Credit Agreement,
$200.0 million represents the new Entertainment Group Term Loan, and $56.3
million was borrowed under the Entertainment Group Revolving Credit Facility.
Such borrowings were principally for the acquisition, production and
distribution of theatrical product as well as the payments on outstanding
obligations. Of the $305.4 million payments, $152.7 million were payments of the
old Orion Credit Agreement, $86.1 million were payments on the outstanding debt
of Goldwyn and MPCA, $11.8 million were payments on the new Entertainment Group
Revolving Credit Facility, and $7.5 million was payment of the first installment
under the new Entertainment Group Term Loan, and the repayment of a $28.8
million revolving credit agreement with MMG. For the nine months ended September
30, 1995 the $32.1 million of proceeds from issuance of long-term debt was for
funds received to finance the Communications Group's operations and investments
in and advances to Joint Ventures. Payments on notes and subordinated debt were
principally related to payments on Orion's bank debt of $36.9 million.
The Company
On July 2, 1996 the Company completed a public offering of 18.4 million
shares of common stock. Net proceeds from the public offering were $190.6
million. In addition, on July 2, 1996 Orion entered into the $300 million
Entertainment Group Credit Facility. Proceeds from the Entertainment Group
Credit Facility were used, in part, to refinance indebtedness of Orion and
certain indebtedness related to the Goldwyn Merger and the MPCA Merger. The
Company intends to use these funds, together with cash flow from operations, to
fund its businesses, including (i) the Communications Group's further expansion
in Eastern Europe, certain republics of the former Soviet Union and the Pacific
Rim and (ii) the Entertainment Group's production and acquisition of
entertainment product. MMG believes that these resources will enable it to
realize the value of its assets, by providing capital necessary to operate such
businesses.
MMG is a holding company which operates through its subsidiaries and,
therefore, does not itself generate cash flow. In addition to providing funds to
its operating subsidiaries, MMG is obligated to make principal and interest
payments under its various indentures in addition to funding its working capital
needs, which consist principally of corporate overhead and payments on
self-insurance claims. For the remainder of the year ended December 31, 1996 and
in the years ended December 31, 1997 and 1998, MMG will be required to make
principal payments of approximately zero, $15.9 million and $60.3 million,
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respectively, to meet the scheduled maturities of its outstanding long-term
debt. MMG does not currently anticipate receiving dividends from its
subsidiaries but intends to use its cash on hand and proceeds from asset sales
described below to meet these cash requirements.
During December 1995, the Company adopted a formal plan to dispose of
Snapper. At September 30, 1996 the carrying value of Snapper was $73.8 million.
The carrying value of Snapper represents the Company's estimated proceeds from
the sale of Snapper and the projected cash flows from the operations of Snapper,
primarily repayment of intercompany loans, through the date of sale. The
carrying value of the Company's investment in Roadmaster at September 30, 1996
was $31.2 million, which reflects a write-down of $16.3 million, which reduction
reflects both the reduction in market value of the Roadmaster Common Stock and
management's assessment of the net realizable value of such stock. The Company
is pursuing its intention of disposing of both Snapper and its investment in
Roadmaster. There can be no assurance that MMG will dispose of these assets
during the time period anticipated or that it will realize proceeds upon such
sales equal to the carrying value of its investments.
The Company and Deutsche Financial Services Corp. are parties to a Finance
and Security Agreement effective as of October 23, 1992, as amended. Effective
November 1, 1995, the Company assigned all of its right, title and interest
under such agreement to its wholly owned subsidiary, Snapper, Inc. The total
borrowing capacity under the loan agreement is $45 million, $37 million of which
is outstanding at September 30, 1996. The loan is secured by all of the tangible
and intangible assets of Snapper. The Company has guaranteed Snapper's
obligations under the Loan Agreement and has pledged to DFS all of the issued
and outstanding stock of Snapper. Further, Snapper delivered to DFS $5 million
as additional collateral to secure the obligations of Snapper under the Loan
Agreement. The agreement contains restrictions concerning cash and asset
transfers to the Company. The agreement terminates on November 30, 1996.
On November 12, 1996, Snapper entered into a commitment letter with
AmSouth of Alabama pursuant to which AmSouth has agreed, subject to certain
conditions, to provide Snapper with a $55 million revolving credit facility, the
proceeds of which will be used to refinance Snapper's obligations to DFS and for
working capital purposes. The Snapper Revolver will mature January 1, 1999 and
will be guaranteed by the Company. The Snapper Revolver is subject to the
negotiation, execution and delivery of definitive documentation, which will
include standard representations and warranties, conditions precedent and events
of default.
The Company's Entertainment Group requires capital to fund the production
of filmed entertainment product and to meet its general working capital needs,
including interest and principal payments required under the Entertainment Group
Credit Facility. After the consummation of the Goldwyn and MPCA acquisitions and
the Entertainment Group Credit Facility, the Entertainment Group had
approximately $224.0 million outstanding indebtedness under the Entertainment
Group Credit Facility and borrowing capacity of approximately $76.0 million on a
revolving basis to fund its working capital and production needs. MMG believes
that the amounts available under the Entertainment Group Credit Facility
together with cash generated from operations will provide the Entertainment
Group with sufficient working capital to implement its production and
distribution activities and to meet debt obligations during 1996 and 1997. The
Entertainment Group Credit Facility restricts the Entertainment Group's ability
to pay dividends to MMG.
The Communications Group is in the early stages of constructing and
developing its communications businesses. As a result, the Communications Group
does not generate operating cash flow and is dependent upon MMG for the capital
required to fund its businesses. MMG has contributed approximately $37 million
to the Communications Group during the nine months ended September 30, 1996. MMG
believes that the remaining proceeds of the public offering and sales of assets,
after satisfying its own working capital needs and its debt service obligations,
will enable MMG to provide the Communications Group with the capital it requires
for the anticipated funding needs for its existing and planned projects for the
remainder of during 1996 and 1997. However, the Communications Group's capital
needs could vary substantially depending upon the stage of development of its
existing projects and its acquisition of new licenses or businesses.
The Company believes that it will report significant operating losses for
the fiscal year ended December 31, 1996. In addition, because its communications
business is in the early stages of development, the Company expects the
Communication's Group to continue to generate significant net losses as it
continues to build out and market its services. Accordingly, the Company expects
to generate consolidated net losses for the foreseeable future.
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The Entertainment Group
Since the consummation of the Goldwyn Merger and the MPCA Merger on July
2, 1996, the Entertainment Group's strategy has been to (i) expand its
production of feature films, (ii) exploit its film and television library and
(iii) enhance the value of its theatre circuit.
Motion Picture Production: The Entertainment Group plans to maintain a
conservative theatrical production, acquisition and distribution strategy
which it believes will generate more stable cash flows than the approach
of the major motion picture studios. The Entertainment Group intends to
produce or acquire and release 10 to 14 theatrical features per year,
consisting primarily of commercial and specialized films with a
well-defined target audience and marketing campaign and with the
Entertainment Group's portion of the production cost generally ranging
from $5.0 million to $10.0 million per picture. The Entertainment Group
also expects to spend between $4.0 million and $8.0 million in domestic
print and advertising costs for each film it produces or acquires. This
production strategy has been used by, and is based on the prior success
of, the management of MPCA. The Entertainment Group also plans to continue
to engage in the production, acquisition and distribution of specialized
motion pictures and art films, including those films management believes
may have crossover commercial potential. In order to expand its production
capabilities and reduce its exposure to the performance of any particular
film, the Entertainment Group intends to finance a significant portion of
each film's budget by relicensing foreign distribution rights.
Exploiting the Existing Library: The Entertainment Group expects its
library to generate significant cash flow due to existing, long-term
distribution contracts and from further exploitation of its film and
television library in traditional domestic and international media, such
as free and pay television and home video. In addition, as the
Entertainment Group expands its production business, it expects the cash
flows from and value of its existing library to increase as it will be
able to market new films together with its existing library.
Motion Picture Exhibition: The Entertainment Group believes it is the
largest exhibitor of specialized motion pictures and art films in the
United States. The Company's theatre circuit currently consists of 52
theatres with a total of 140 screens. The Entertainment Group's strategy
is to: (i) expand in existing and new major markets through internal
growth and acquisitions, (ii) upgrade and multiplex existing locations
where there is demand for additional screens and (iii) continue to reduce
operating and overhead costs as a percentage of revenue.
Prior to the consummation of the November 1 Mergers, Orion's ability to
produce or acquire new theatrical product was severely limited by agreements
entered into in connection with the Plan. At the filing date, all new production
was halted, leaving Orion with only 12 largely completed but unreleased motion
pictures. Accordingly, Orion released six, three and three theatrical motion
pictures in the domestic marketplace in 1994, 1993 and 1992, respectively. In
1995, there were no theatrical releases that were fully or substantially
financed by Orion. This reduced release schedule has had and will continue to
have an adverse impact on results of operations for the immediately foreseeable
future.
In connection with the consummation of the November 1 Mergers, the
restrictions imposed by the agreements entered into in connection with the Plan,
which hindered Orion's ability to produce and acquire new motion picture
product, were eliminated. As a result, Orion has begun producing, acquiring and
financing theatrical films consistent with the covenants set forth in the credit
agreement relating to the Entertainment Group Credit Facility. The principal
sources of funds required for the Entertainment Group's motion picture
production, acquisition and distribution activities will be cash generated from
operations, proceeds from the presale of subdistribution and exhibition rights,
primarily in foreign markets, and borrowings under the Entertainment Group's
Revolving Credit Facility.
The cost of producing theatrical films varies depending on the type of
film produced, casting of stars or established actors, and many other factors.
The industry-wide trend over recent years has been an increase in the average
cost of producing and releasing films. The revenues derived from the production
and distribution of a motion picture depend primarily upon its acceptance by the
public, which cannot be predicted and does not necessarily correlate to the
production or distribution costs incurred. The Company will attempt to reduce
the risks inherent in its motion picture production activities by closely
monitoring the production and distribution costs of individual films and
limiting Orion's investment in any single film.
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The Entertainment Group Credit Facility consists of a $200 million Term
Loan, which requires quarterly repayments of $7.5 million commencing September
1996 and a final payment of $50 million on maturity (June 30, 2001); and the
Entertainment Group Revolving Credit Facility, which has a final maturity of
June 30, 2001. For the remainder of the year ended December 31, 1996, and in the
years ended December 31, 1997 and 1998, the Entertainment Group will be required
to make principal payments of approximately $8.7 million, $31.6 million, and
$31.4 million, respectively, to meet the scheduled maturities of its outstanding
long-term debt.
The credit agreement relating to the Entertainment Group Credit Facility
contains customary covenants, including limitations on the incurrence of
additional indebtedness and guarantees, the creation of new liens, restrictions
on the development costs and budgets for new films, limitations on the aggregate
amount of unrecouped print and advertising costs the Entertainment Group may
incur, limitations on the amount of the Entertainment Group's leases, capital
and overhead expenses, (including specific limitations on the Entertainment
Group's theatre group subsidiary's capital expenditures) prohibitions on the
declaration of dividends or distributions by Orion to MMG (other than $15
million of subordinated loans which may be repaid to MMG), limitations on the
merger or consolidation of the Entertainment Group or the sale by the
Entertainment Group of any substantial portion of its assets or stock and
restrictions on the Entertainment Group's line of business, other than
activities relating to the production and distribution of entertainment product
and other covenants and provisions described above. See Note 4 to the Notes to
the Consolidated Condensed Financial Statements.
Management believes that the the Entertainment Group Revolver, together
with cash generated from operations, will provide the Entertainment Group with
sufficient resources to finance anticipated levels of production and
distribution activities and to meet debt obligations as they become due during
1996 and 1997.
The Communications Group
The Communications Group has invested significantly (in cash through
capital contributions, loans and management assistance and training) in its
Joint Ventures. The Communications Group has also incurred significant expenses
in identifying, negotiating and pursuing new wireless telecommunications
opportunities in emerging markets. The Communications Group and primarily all of
its Joint Venture investees are experiencing continuing losses and negative
operating cash flow since the businesses are in the development and start up
phase of operations.
The wireless cable television, paging, fixed wireless loop telephony, and
international toll calling businesses are capital intensive. The Communications
Group generally provides the primary source of funding for its Joint Ventures
both for working capital and capital expenditures. The Communications Group's
Joint Venture agreements generally provide for the initial contribution of
assets or cash by the Joint Venture partners, and for the provision of a line of
credit from the Communications Group to the Joint Venture. Under a typical
arrangement, the Communications Group's Joint Venture partner contributes the
necessary licenses or permits under which the Joint Venture will conduct its
business, studio or office space, transmitting tower rights and other equipment.
The Communications Group's contribution is generally cash and equipment, but may
consist of other specific assets as required by the Joint Venture agreement.
Credit agreements with the Joint Venture are intended to provide such
ventures with sufficient funds for operations and equipment purchases. The
credit agreements generally provide for interest to be accrued at the
Communications Group's current cost of borrowing in the United States and for
payment of principal and interest from 90% of the Joint Venture's available cash
flow, as defined, prior to any distributions of dividends to the Communications
Group or its partners. The credit agreements also often provide the
Communications Group the right to appoint the general director of the Joint
Venture and the right to approve the annual business plan of the Joint Venture.
Advances under the credit agreements are made to the Joint Ventures in the form
of cash, for working capital purposes, as direct payment of expenses or
expenditures, or in the form of equipment, at the cost of the equipment plus
cost of shipping. As of September 30, 1996 and December 31, 1995, the
Communications Group was committed to provide funding under the various credit
lines in an aggregate amount of approximately $59.1 million and $46.8 million,
respectively, of which $15.2 million and $16.9 million, respectively, remained
unfunded. The Communications Group's funding commitments under the credit
agreements are generally contingent upon its approval of the Joint Venture's
business plan and the attainment of such business plans. The Communications
Group
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reviews the actual results of operations on a periodic basis. If the review
indicates a material variance from the approved business plan, the
Communications Group may terminate or revise its commitment to fund the credit
agreements.
The Communications Group's consolidated and unconsolidated Joint Ventures'
ability to generate positive operating results is dependent upon the sale of
commercial advertising time, the ability to attract subscribers to its systems
and its ability to control operating expenses. Management's current plans with
respect to the Joint Ventures are to increase subscriber and advertiser bases
and thereby their operating revenues by developing a broader band of programming
packages for wireless cable and radio broadcasting and offering additional
services and options for paging and telephony services. By offering the large
local populations of the countries in which the Joint Ventures operate desired
services at attractive prices, management believes that the Joint Ventures can
increase their subscriber and advertiser bases and generate positive operating
cash flow, reducing their dependence on the Communications Group for funding of
working capital. Additionally, advances in wireless subscriber equipment
technology are expected to reduce capital requirements per subscriber. Further
initiatives to develop and establish profitable operations include reducing
operating costs as a percentage of revenue and assisting Joint Ventures to
develop management information systems and automated customer care and service
systems. No assurance can be given that such initiatives will be successful.
The Communications Group's investments in the Joint Ventures are not
expected to become profitable or generate significant cash flows in the near
future. Additionally, if the Joint Venture investees do become profitable and
generate sufficient cash flows in the future, there can be no assurance that the
Joint Ventures will pay dividends or return capital at any time.
The ability of the Communications Group and its consolidated and
unconsolidated Joint Ventures to establish profitable operations is also subject
to special political, economic and social risks inherent in doing business in
emerging markets such as Eastern Europe, certain republics of the former Soviet
Union and the Pacific Rim. These include matters arising out of government
policies, economic conditions, imposition of or changes to taxes or other
similar charges by governmental bodies, foreign exchange fluctuations and
controls, civil disturbances, deprivation or unenforceablility of contractual
rights, and taking of property without fair compensation.
Prior to the November 1st Mergers, the Communications Group had relied on
certain shareholders for capital, in the form of both debt and equity, to fund
its operating and capital requirements. Notes payable were due within one year
of the note and carried interest rates ranging from the prime rate to the prime
rate plus 2%.
On November 1, 1995, the Communications Group received equity
contributions of approximately $62.0 million from MMG, representing cash and
notes payable to an affiliate, that were converted into equity of the Company at
the time of the November 1 Mergers.
Proceeds of the Communications Group's borrowings and equity issuance were
used, in part, to purchase and provide equipment to its Joint Venture investees
under credit lines, to fund initial equity contributions to Joint Ventures and
for the Communications Group's operating activities, primarily selling, general
and administrative expenses.
Funds invested in Joint Ventures for the nine months ended September
30,1996 and 1995 were to fund the Communications Group's capital contributions
as required by the respective Joint Venture agreements and to provide equipment
and working capital under lines of credit. These capital requirements amounted
to approximately $25.4 million for the first nine months of 1996 and $21.2
million for 1995. The Communications Group continues to seek out and enter into
arrangements whereby it can offer communications services through Joint Venture
arrangements. The Communications Group is considering investing in additional
Joint Ventures in countries in which the Communications Group currently has
investments, and in new target markets in the Far East. Capital expenditures for
the Communications Group for the first nine months of 1996 as well as capital
expenditures in 1995 were primarily the result of expanding the Communications
Group's operations and establishing offices in Moscow, Russia, Vienna, Austria,
Budapest, Hungary and Hong Kong.
32
<PAGE>
The Communications Group's capital commitments for fiscal years 1996 and
1995 were comprised of four primary categories: (i) subscriber equipment, (ii)
working capital advances, (iii) expansion of existing facilities and (iv) new
construction. Most of the Communications Group's Joint Ventures, once
operational, require subscriber equipment and working capital infusions for a
significant period of time until funds generated by operations are sufficient to
cover operating expenses and capital expenditure requirements. In some cases,
the Joint Venture and the Communications Group agree to expand the existing
facilities to increase or enhance existing services. In those cases, where the
Joint Venture cannot provide these funds from operations, the Communications
Group provides the funds required to build out the project.
The Communications Group's investments and advances to its Joint Ventures
for the fiscal year 1995 and for the nine months ending September 30, 1996 are
detailed below.
Nine Months
1995 1996
------------------------------------
Cable TV $ 12.2 $ 10.2
Paging 3.3 3.5
Broadcast Radio 1.3 .6
Telephony 1.9 --
Wireless Local Loop -- 5.4
GSM -- 2.7
Trunk Mobile Radio -- 3.0
Other 2.5 --
------------------------------------
$ 21.2 $ 25.4
====================================
For the nine months ended September 30, 1996, the Communications Group's
primary source of funds was from the Company in the form of non-interest bearing
intercompany loans.
Until the Communications Group's consolidated and unconsolidated
operations generate positive cash flow, the Communications Group will require
significant capital to fund its operations, and to make capital contributions
and loans to its Joint Ventures. The Communications Group relies on the Company
to provide the financing for these activities. The Company believes that as more
of the Communications Group's Joint Ventures commence operations and reduce
their dependence on the Communications Group for funding, the Communications
Group will be able to finance its own operations and commitments from its
operating cash flow, and the Communications Group will be able to attract its
own financing from third parties. There can, however, be no assurance that
additional capital in the form of debt or equity will be available to the
Communications Group at all or on terms and conditions that are acceptable to
the Company, and as a result, the Communications Group will continue to depend
upon the Company for its financing needs for the foreseeable future.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this report under the caption "Management's
Discussion and Analysis of Financial Condition and Results of Operations," and
elsewhere in this report constitute "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995 (the "Reform
Act"). Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Company, or industry results, to be materially different
from any future results, performance, or achievements expressed or implied by
such forward-looking statements. Such factors include, among others, the
following: general economic and business conditions, which will, among other
things, impact demand for the Company's products and services; industry
capacity, which tends to increase during strong years of the business cycle;
changes in public taste, industry trends and demographic changes, which may
influence the exhibition of films in certain areas; competition from other
entertainment and communications companies, which may affect the Company's
ability to generate revenues; political, social and economic conditions and
laws, rules and regulations, particularly in Eastern Europe, certain republics
of the former Soviet Union and other emerging markets, which may affect the
Company's results of operations; timely completion of construction projects for
new systems for the Joint Ventures in which the Company has invested, which may
impact the costs of such projects;
33
<PAGE>
developing legal structures in Eastern Europe, certain republics of the former
Soviet Union and other emerging markets which may affect the Company's results
of operations; cooperation of local partners for the Company's communications
investments in Eastern Europe and certain republics of the former Soviet Union;
the loss of any significant customers; changes in business strategy or
development plans, which may, among other things, prolong the time it takes to
achieve the performance results included herein; the significant indebtedness of
the Company, including the Company's ability to service its indebtedness and to
comply with certain restrictive covenants; quality of management; availability
of qualified personnel; changes in, or the failure to comply with government
regulations; and other factors referenced in this report.
Part II Other Information
Item 1. Legal Proceedings
For a description of legal proceedings, reference is made to the
company's annual report on Form 10-K for the fiscal year ending
December 31, 1995 and Form 10-Q for the quarter ended March 31, 1996 and
the following:
Fuqua Industries Inc. Shareholder Litigation
Between February 25, 1991 and March 4, 1991, three lawsuits were
filed against the Company (formerly named Fuqua Industries, Inc.) in the
Delaware Chancery Court. On May 1, 1991, these three lawsuits were
consolidated by the Delaware Chancery Court in In re Fuqua Industries,
Inc. Shareholders Litigation, Civil Action No. 11974. The named defendants
are certain current and former members of the Company's Board of Directors
and certain former members of the Board of Directors of Intermark, Inc.
("Intermark"). Intermark is a predecessor to Triton Group Ltd., which
owned approximately 25% of the outstanding shares of the Company's Common
Stock. The Company was named as a nominal defendant in this lawsuit. The
action was brought derivatively in the right of and on behalf of the
Company and purportedly was filed as a class action lawsuit on behalf of
all holders of the Company's Common Stock other than the defendants. The
complaint alleges, among other things, a long standing pattern and
practice by the defendants of misusing and abusing their power as
directors and insiders of the Company by manipulating the affairs of the
Company to the detriment of the Company's past and present stockholders.
The complaint seeks (i) monetary damages from the director defendants,
including a joint and several judgment for $15.7 million for alleged
improper profits obtained by Mr. J.B. Fuqua in connection with the sale of
his shares in the Company to Intermark; (ii) injunctive relief against the
Company, Intermark and its former directors, including a prohibition
against approving or entering into any business combination with Intermark
without specified approval; and (iii) costs of suit and attorney's fees.
On December 28, 1995, plaintiffs filed a consolidated second amended
derivative and class action complaint, purporting to assert additional
facts in support of their claim regarding an alleged plan, but deleting
their prior request for injunctive relief. On January 31, 1996, all
defendants moved to dismiss the second amended complaint and filed a brief
in support of that motion. A hearing regarding the motion to dismiss was
held on November 6, 1996. The decision relating to the motion is pending.
On May 20, 1996 a purported class action lawsuit against Goldwyn and
its directors was filed in the Superior Court of the State of California
for the County of Los Angeles, Michael Shores v. Samuel Goldwyn Company,
et al., BC 150360. In the complaint, plaintiff alleged that Goldwyn's
Board of Directors breached its fiduciary duties to Goldwyn Stockholders
by agreeing to sell Goldwyn to MMG at a premium, yet providing Mr.
Goldwyn, the Goldwyn Family Trust and Mr. Gottlieb with benefits, and
sought to enjoin consummation of the Goldwyn Merger. The Company intends
to vigorously defend such action.
34
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
An annual meeting of Stockholders of the Company was held on August 29,
1996 for the purpose of enabling the stockholders to consider and vote on the
following matters: (i) to amend MMG's Restated Certificate of Incorporation to
increase the number of authorized shares of Common Stock from 100,000,000 to
400,000,000; (ii) to elect three Class I Directors for a three-year term ending
in 1999; (iii) to approve the Metromedia International Group, Inc. 1996
Incentive Stock Plan; and (iv) to ratify the selection of KPMG Peat Marwick LLP
as MMG's independent accountants for the year ending December 31, 1996.
At such meeting, a majority of the Company's stockholders voted to approve
(i) the amendment to MMG's Restated Certificate of Incorporation, (ii) the
election of three Class I directors for a three year term, (iii) the MMG
Incentive Stock Option Plan; and (iv) the selection of KPMG Peat Marwick LLP as
MIG's independent accountants for the year ending December 31, 1996.
The following is a summary of the voting results with respect to each of the
proposals
PROPOSAL FOR AGAINST ABSTAIN
-------- --- ------- -------
1. Amendment to 50,244,179 5,003,868 186,181
Restated Certificate
of Incorporation
2. Election of Class I Directors
Name
----
FOR WITHHELD
--- --------
John W. Kluge 54,334,758 1,264,298
Stuart Subotnick 54,342,054 1,271,594
John Imlay 54,750,077 856,275
FOR AGAINST ABSTAIN
--- ------- -------
3. Approval of 35,635,768 8,185,996 245,100
1996 Incentive
Stock Plan
4. Ratification of 52,648,756 77,194 151,475
Election of Auditors
No other matters were submitted to a vote of the Company's Stockholders,
through the solicitation of proxies or otherwise, during the third quarter of
the fiscal year ended December 31, 1996.
35
<PAGE>
Item 6. Exhibits and Reports on Form 10-K
(a) Exhibit 3.3 Amendment to Company's Restate Certificate of Incorporation
dated August 29, 1996 (incorporated by reference to Appendix A to the
Company's 1996 Annual Proxy Statement)
Exhibit 11* Computation of EPS
Exhibit 27* Financial Data Schedule
(b) Reports on Form 8-K
The Company's current report on Form 8-K dated July 2, 1996,
reporting the acquisitions of The Samuel Goldwyn Company and Motion
Picture Corporation of America and the consummation of a public offering
of 18,400,000 shares of Commons Stock and the closing of an amended and
restated $300 million revolving credit facility by Orion Pictures
Corporation.
*Filed herewith
36
<PAGE>
Signature
Pursuant to the requirements of Section 13 or 15(d) 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.
Metromedia International Group, Inc.
By: /s/ Silvia Kessel
-----------------
Name: Silvia Kessel
Title: Executive Vice President,
Chief Financial Officer and
Treasurer
Dated: November 14, 1996
37
EXHIBIT 11
METROMEDIA INTERNATIONAL GROUP, INC.
Computation of Earnings Per Share
(in thousands, except per share amounts)
Three Months Ended
--------------------------
September 30, September 30,
1996 1995
------------- -------------
Loss Per Share - Primary
Loss from continuing operations before
discontinued operations and
extraordinary item $(22,050) $(16,146)
Discontinued operations (16,305) --
Extraordinary item (4,505) --
-------- --------
Net loss available for Common
Stock and Common Stock equivalents $(42,860) $(16,146)
======== ========
Common Stock and Common Stock Equivalents (A)
Weighted average common shares outstanding
during the period 65,482 20,952
======== ========
Loss Per Share - Primary
Continuing operations $ (0.34) $ (0.77)
Discontinued operations (0.25) --
Extraordinary item (0.07) --
-------- --------
Net Loss $ (0.66) $ (0.77)
======== ========
Loss Per Share - Assuming Full Dilution $ n/a (B) $ n/a (B)
======== ========
Nine Months Ended
----------------------------
September 30, September 30,
1996 1995
------------ -------------
Loss Per Share - Primary
Loss from continuing operations before
discontinued operations and
extraordinary item $(60,041) $(53,226)
Discontinued operations (16,305) --
Extraordinary item (4,505) --
-------- --------
Net loss available for Common
Stock and Common Stock equivalents $(80,851) $(53,226)
-------- --------
Common Stock and Common Stock Equivalents (A)
Weighted average common shares outstanding
during the period 50,311 20,944
-------- --------
Loss Per Share - Primary
Continuing operations $ (1.19) $ (2.54)
Discontinued operations (0.32) --
Extraordinary item (0.09) --
-------- --------
Net Loss $ (00.60) $ (2.54)
======== ========
Loss Per Share - Assuming Full Dilution $ n/a (B) $ n/a (B)
======== ========
(A)- Common stock equivalents are not included in primary loss per share in
the Three and Nine Months Ended September 30, 1996 and 1995 because they
would be anti-dilutive.
(B)- Fully diluted loss per share is not used in the Three and Nine Months
Ended September 30, 1996 and 1995 because it is less than primary loss per
share.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS FILED AS PART OF THE QUARTERLY
REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1996
<CASH> 122,600
<SECURITIES> 0
<RECEIVABLES> 42,822
<ALLOWANCES> (13,639)
<INVENTORY> 66,091
<CURRENT-ASSETS> 225,153
<PP&E> 45,909
<DEPRECIATION> (4,731)
<TOTAL-ASSETS> 921,573
<CURRENT-LIABILITIES> 223,241
<BONDS> 348,140
0
0
<COMMON> 66,127
<OTHER-SE> 188,601
<TOTAL-LIABILITY-AND-EQUITY> 254,728
<SALES> 113,175
<TOTAL-REVENUES> 113,175
<CGS> 87,957
<TOTAL-COSTS> 146,017
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20,416
<INCOME-PRETAX> (59,318)
<INCOME-TAX> 723
<INCOME-CONTINUING> (60,041)
<DISCONTINUED> (16,305)
<EXTRAORDINARY> (4,505)
<CHANGES> 0
<NET-INCOME> (80,851)
<EPS-PRIMARY> (1.60)
<EPS-DILUTED> (1.60)
</TABLE>
