<PAGE>
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the period ended June 30, 1997
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
(State or other jurisdiction 58-0971455
of incorporation or (I.R.S. Employer
organization) Identification No.)
One Meadowlands Plaza, East Rutherford, NJ 07073-2137
(Address and zip code of principal executive offices)
(201) 531-8000
(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 August 6, 1997
was 67,132,195.
===============================================================================
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
INDEX TO
QUARTERLY REPORT ON FORM 10-Q
PART I--FINANCIAL INFORMATION
Page
----
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 .......................... 22
PART II--OTHER INFORMATION
Item 1. Legal Proceedings ............................................ 40
Item 4. Submission of Matters to a Vote of Security Holders .......... 40
Item 6. Exhibits and Reports on Form 8-K ............................. 41
Signature ............................................................ 42
1
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
Consolidated Condensed Statements of Operations
(in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
---------------------- ----------------------
<S> <C> <C> <C> <C>
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1997 1996 1997 1996
---------- ---------- ---------- ----------
Revenues.......................................................... $ 63,770 $ 2,775 $ 139,768 $ 5,939
Cost and expenses:
Cost of sales and rentals and operating expenses................ 41,221 -- 92,286 --
Selling, general and administrative............................. 34,626 11,782 63,123 20,933
Depreciation and amortization................................... 5,427 1,638 10,463 3,094
---------- ---------- ---------- ----------
Operating loss.................................................... (17,504) (10,645) (26,104) (18,088)
Interest expense, including amortization of debt discount......... 6,652 4,785 12,458 9,609
Interest income................................................... 2,094 979 4,801 2,193
---------- ---------- ---------- ----------
Interest expense, net............................................. 4,558 3,806 7,657 7,416
Loss before provision for income taxes, equity in losses of
investees, minority interest, discontinued operations and
extraordinary item.............................................. (22,062) (14,451) (33,761) (25,504)
Provision for income taxes........................................ (225) -- (323) --
Equity in losses of Joint Ventures................................ (587) (1,985) (2,185) (3,768)
Equity in losses of and writedown of investment in RDM Sports
Group, Inc....................................................... (25,122) -- (25,122) --
Minortiy interest, including $1,199 and $2,089 attributable to
Metromedia Asia Corporation for the three and six months ended
June 30, 1997................................................... 1,387 8 2,627 21
---------- ---------- ---------- ----------
Loss from continuing operations................................... (46,609) (16,428) (58,764) (29,251)
Discontinued operations:
Loss from operations from Entertainment Group (less income
taxes of $200 for the three months ended June 30, 1996 and
$200 and $400 for the six months ended June 30, 1997
and 1996)..................................................... (25,263) (2,422) (35,366) (8,740)
---------- ---------- ---------- ----------
Loss before extraordinary item.................................... (71,872) (18,850) (94,130) (37,991)
Extraordinary item:
Equity in early extinguishment of debt of RDM Sports Group,
Inc............................................................. (1,094) -- (1,094) --
---------- ---------- ---------- ----------
Net loss.......................................................... $ (72,966) $ (18,850) $ (95,224) $ (37,991)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Primary loss per common share:
Continuing operations........................................... $ (.70) $ (0.38) $ (.89) $ (0.69)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Discontinued operations......................................... $ (0.38) $ (0.06) $ (0.53) $ (0.20)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Extraordinary Item.............................................. (.02) -- (.02) --
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net loss........................................................ $ (1.10) $ (0.44) $ (1.44) $ (0.89)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
See accompanying notes to consolidated condensed financial statements
2
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
Consolidated Condensed Balance Sheets
(in thousands, except share amounts)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
----------- ------------
<S> <C> <C>
(UNAUDITED)
ASSETS:
Current assets:
Cash and cash equivalents........................................................... $ 10,262 $ 89,400
Accounts receivable:
Snapper, net...................................................................... 33,315 36,843
Other, net........................................................................ 3,911 3,686
Inventories......................................................................... 81,407 54,404
Other assets........................................................................ 4,572 4,331
----------- ------------
Total current assets............................................................. 133,467 188,664
Investments in and advances to Joint Ventures......................................... 99,852 65,447
Investment in RDM Sports Group, Inc................................................... 4,934 31,150
Net assets of discontinued operations................................................. -- 10,972
Property, plant and equipment, net of accumulated depreciation........................ 74,444 71,089
Intangible assets, less accumulated amortization...................................... 214,477 149,261
Other assets.......................................................................... 11,959 9,548
----------- ------------
Total assets.................................................................... $ 539,133 $ 526,131
----------- ------------
----------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable.................................................................... $ 29,213 $ 23,810
Accrued expenses.................................................................... 82,345 80,286
Current portion of long-term debt................................................... 11,880 19,515
----------- ------------
Total current liabilities........................................................ 123,438 123,611
Net liabilities of discontinued operations............................................ 26,064 --
Long-term debt........................................................................ 188,453 178,717
Other long-term liabilities........................................................... 3,489 3,590
----------- ------------
Total liabilities................................................................ 341,444 305,918
----------- ------------
Minority interest..................................................................... 38,864 531
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
66,254,045 and 66,153,439 shares at June 30, 1997 and December 31, 1996,
respectively........................................................................ 66,254 66,153
Paid-in surplus..................................................................... 996,546 959,558
Other............................................................................... (5,402) (2,680)
Accumulated deficit................................................................. (898,573) (803,349)
----------- ------------
Total stockholders' equity........................................................ 158,825 219,682
----------- ------------
Total liabilities and stockholders' equity........................................ $ 539,133 $ 526,131
----------- ------------
----------- ------------
</TABLE>
See accompanying notes to consolidated condensed financial statements.
3
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
Consolidated Condensed Statements of Cash Flows
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
----------------------
<S> <C> <C>
JUNE 30, JUNE 30,
1997 1996
---------- ----------
Operating activities:
Net loss................................................................................ $ (95,224) $ (37,991)
Adjustments to reconcile net loss to net cash used in operating activities:
Operating loss of discontinued operations............................................... 35,366 8,740
Equity in loss on early extinguishment of debt of RDM Sports Group, Inc................. 1,094 --
Equity in losses of Joint Ventures...................................................... 2,185 3,768
Equity in losses of and writedown of investment RDM Sports Group, Inc................... 25,122 --
Amortization of debt discounts.......................................................... 1,356 1,304
Depreciation and amortization........................................................... 10,463 3,094
Minority interest....................................................................... (2,627) (21)
Other................................................................................... 1,688 274
Changes in assets and liabilities net of effect of acquisitions:
(Increase) decrease in accounts receivable.............................................. 3,303 (801)
Increase in inventories................................................................. (27,003) (471)
(Increase) decrease in other assets..................................................... 1,101 (2,385)
Increase in accounts payable and accrued expenses....................................... 5,236 4,212
Other operating activities, net......................................................... (201) 184
---------- ----------
Cash used in operations................................................................... (38,141) (20,093)
---------- ----------
Investing activities:
Investments in and advances to Joint Ventures........................................... (20,634) (12,053)
Distributions from Joint Ventures....................................................... 2,994 --
Proceeds from sale of short-term investments............................................ -- 5,366
Purchase of additional equity in subsidiaries........................................... (3,320) --
Purchase of AAT......................................................................... (4,750) --
Additions to property, plant and equipment.............................................. (9,554) (1,745)
Other investing activities, net......................................................... (8,945) 5,400
---------- ----------
Cash used in investing activities......................................................... (44,209) (3,032)
---------- ----------
Financing activities:
Proceeds from issuance of long-term debt................................................ 19,564 7,925
Proceeds from issuance of common stock.................................................. 797 238
Payments on notes and subordinated debt................................................. (18,819) (3,376)
Due from discontinued operations........................................................ 1,670 222
---------- ----------
Cash provided by financing activities................................................. 3,212 5,009
---------- ----------
Net decrease in cash and cash equivalents............................................... (79,138) (18,116)
Cash and cash equivalents at beginning of period........................................ 89,400 20,605
---------- ----------
Cash and cash equivalents at end of period.............................................. $ 10,262 $ 2,489
---------- ----------
---------- ----------
</TABLE>
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>
COMMON STOCK
-------------------------
NUMBER OF PAID-IN ACCUMULATED
SHARES AMOUNT SURPLUS OTHER DEFICIT TOTAL
-------------- --------- ---------- --------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1996.................... 66,153,439 $ 66,153 $ 959,558 $ (2,680) $ (803,349) $ 219,682
Issuance of stock related to incentive plans... 100,606 101 1,031 -- -- 1,132
Foreign currency translation adjustment........ -- -- -- (3,251) -- (3,251)
Amortization of restricted stock............... -- -- -- 529 -- 529
Increase in equity resulting from issuance of
stock by subsidiary.......................... -- -- 35,957 -- -- 35,957
Net loss....................................... -- -- -- -- (95,224) (95,224)
-------------- --------- ---------- --------- ------------ ----------
Balances, June 30, 1997........................ 66,254,045 $ 66,254 $ 996,546 $ (5,402) $ (898,573) $ 158,825
-------------- --------- ---------- --------- ------------ ----------
-------------- --------- ---------- --------- ------------ ----------
</TABLE>
See accompanying notes to consolidated condensed financial statements.
5
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying interim consolidated condensed financial statements include
the accounts of Metromedia International Group, Inc. ("MMG" or the "Company")
and its wholly-owned subsidiaries, Metromedia International Telecommunications,
Inc. ("MITI" or the "Communications Group"), Landmark Theatre Group ("Landmark")
as of July 2, 1996, and Snapper Inc. ("Snapper") as of November 1, 1996. All
significant intercompany transactions and accounts have been eliminated.
In addition, although the Company intends to continue to pursue its
previously adopted plan to dispose of its investment in RDM Sports Group,
Inc. ("RDM") for financial statement reporting the Company no longer
qualifies to treat its investment in RDM as a discontinued operation and, as
of April 1, 1997, as required under the equity method of accounting MMG will
include in its results of operations, the Company's share of the earnings or
losses of RDM (see note 5).
On July 10, 1997 the Company completed the sale of substantially all of
its entertainment assets (the "Entertainment Group Sale") (see note 2). The
transaction has been recorded as a discontinuance of a business segment and,
accordingly the consolidated condensed balance sheets at June 30, 1997 and
December 31, 1996 reflect the net assets (liabilities) of the discontinued
segment. The consolidated condensed statements of operations reflects the
results of operations through the May 2, 1997, the date of the execution of
the definitive agreement relating to the Entertainment Group Sale, of the
discontinued segment. The Company will record a gain on the sale of the
discontinued segment on July 10, 1997 (see note 2).
Investments in other companies, including the Communications Group's
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 June 30, 1997 presentation.
The total allowance for doubtful accounts at June 30, 1997 and December
31, 1996 was $1.9 million and $1.7 million, respectively. Interest expense
includes amortization of debt discount of $697,000 and $652,000 for the three
months ended June 30, 1997 and 1996, respectively, and $1.4 million and $1.3
million for the six months ended June 30, 1997 and 1996, respectively.
The accompanying interim consolidated condensed financial statements have
been prepared without audit pursuant to the rules and regulations of the
Securities and Exchange Commission (the "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/A Amendment No. 1
(the "1996 Form 10-K"). In the opinion of management, all adjustments,
consisting only of normal recurring adjustments and adjustments to reflect
the Entertainment Group Sale as defined in note 2, necessary to present
fairly the financial position of the Company as of June 30, 1997, the results
of its operations and its cash flows for the three month and six month
periods ended June 30, 1997 and 1996 have been included. The results of
operations for the interim period are not necessarily indicative of the
results which may be realized for the full year.
6
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS (Continued)
2. THE ENTERTAINMENT GROUP SALE
On July 10, 1997, the Company sold the stock of Orion Pictures Corporation
("Orion") and thereby substantially all of the assets of its entertainment group
(the "Entertainment Group"), consisting of Orion, Goldwyn Entertainment Company
("Goldwyn") and Motion Picture Corporation of America ("MPCA") (and their
respective subsidiaries) which owned a feature film and television library of
over 2,200 titles to P&F Acquisition Corp. ("P&F"), the parent company of
Metro-Goldwyn-Meyer Inc. ("MGM") for a gross consideration of $573.0 million.
The Company used $296.4 million of the proceeds from the Entertainment Group
Sale to repay amounts outstanding under the Entertainment Group's credit
facilities and certain other indebtedness of the Entertainment Group and intends
to use $140.0 million of such proceeds to repay all of its outstanding
debentures (see note 3). As a result of the Entertainment Group Sale, the
Company has narrowed its strategic focus to the global communications and media
businesses of the Communications Group. The Entertainment Group's Landmark
Theatre Group, which the Company believes is the largest exhibitor of
specialized motion pictures and art-house films in the United States with, at
June 30, 1997, 49 theaters and 139 screens, was not included in the
Entertainment Group Sale and the Company continues to own and operate Landmark
to maximize its value.
The net gain will be reflected in the consolidated condensed statement of
operations for the nine months ended September 30, 1997.
The Entertainment Group's revenues for the three months ended June 30, 1997
and 1996 were $34.7 million and $35.2 million, respectively, and for the six
months ended June 30, 1997 and 1996 were $62.3 million and $62.9 million,
respectively.
Net assets (liabilities) of the Entertainment Group at June 30, 1997, May 2,
1997 and December 31, 1996 were as follows (in thousands):
<TABLE>
<CAPTION>
JUNE 30, MAY 2, DECEMBER 31,
1997 1997 1996
---------- ---------- ------------
<S> <C> <C> <C>
Current assets............................................................. $ 99,217 $ 102,918 $ 101,883
Non-current assets......................................................... 306,637 313,260 327,698
Current liabilities........................................................ (145,247) (152,542) (119,314)
Non-current liabilities.................................................... (296,214) (289,700) (299,295)
---------- ---------- ----------
Net assets (liabilities)................................................. $ (35,607) $ (26,064) $ 10,972
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
7
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS (Continued)
2. THE ENTERTAINMENT GROUP SALE (CONTINUED)
The following unaudited pro forma information illustrates the effect of
(1) the Entertainment Group Sale and (2) the repayment of MMG's outstanding
subordinated debentures (see note 3) on revenues, loss from continuing
operations and loss from continuing operations per share for the six months
ended June 30, 1997 and 1996. The Pro Forma information assumes (1) the
Entertainment Group Sale, (2) the repayment of MMG's outstanding subordinated
debentures and (3) the acquisition of Asian American Telecommunications
Corporation, ("AAT") (see note 6) occurred at the beginning of each period.
It also assumes Snapper and Landmark were included in the consolidated
results of operations at the beginning of 1996 (in thousands, except per
share amounts).
<TABLE>
<CAPTION>
1997 1996
(unaudited) (unaudited)
----------- -----------
<S> <C> <C>
Revenues............................................ $139,768 $ 130,955
-------- ---------
-------- ---------
Loss from continuing operations..................... (52,269) (31,823)
-------- ---------
-------- ---------
Loss from continuing operations per share $(.79) $(0.75)
--------- ---------
--------- ---------
</TABLE>
3. FUTURE FINANCING NEEDS
MMG is a holding company, and accordingly, does not generate cash flows. The
Communications Group is dependent on MMG for significant capital infusions to
fund its operations, its commitments to make capital contributions and loans to
its Joint Ventures and any acquisitions. Such funding requirements are based on
the anticipated funding needs of its Joint Ventures and certain acquisitions
committed to by the Company. Future capital requirements of the Communications
Group, including future acquisitions, will depend on available funding from the
Company and on the ability of the Communications Group's Joint Ventures to
generate positive cash flows. In addition, Snapper is restricted under covenants
contained in its credit agreement from making dividend payments or advances to
MMG.
8
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS (Continued)
In the short term, MMG intends to satisfy its current obligations and
commitments with available cash on hand (at July 31, 1997 cash on hand which
includes the funds from the Entertainment Group Sale was of $261.0 million).
In August 1997, MMG will use approximately $140.0 million to repay all of
its outstanding subordinated debentures and as a result, MMG will have no
significant long-term debt. The Company's remaining strategic business will
be the business conducted by the Communications Group, which requires the
investment of significant amounts of capital in order to construct and
develop operational systems and market services. Therefore, MMG will require
additional financing in order to satisfy the Communications Group's on-going
capital requirements and to achieve the Communications Group's long-term
business strategies. Such additional capital may be provided through the
public or private sale of debt or equity securities. On August 6, 1997, MMG
filed a Registration Statement with the Commission for convertible preferred
stock. No assurance can be given that the Company will consummate this
financing or that any additional financing will be available to MMG on
acceptable terms. If adequate additional funds are not available, there can
be no assurance that the Company will have the funds necessary to support the
current needs of the Communications Group's current investments or any of the
Communications Group's additional opportunities or that the Communications
Group will be able to obtain financing from third parties. If such financing
is unavailable, the Communications Group may not be able to further develop
existing ventures and the number of additional ventures in which it invests
may be significantly curtailed.
Management believes that its long term liquidity needs will be satisfied
through a combination of the Company's successful implementation and execution
of its growth strategy to become a global communications and media company and
the Communications Group's Joint Ventures achieving positive operating results
and cash flows through revenue and subscriber growth and control of operating
expenses.
4. 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 Company's 6 1/2% Convertible Subordinated Debentures
(the "6 1/2% Debentures"). Net income (loss) is adjusted by interest (net of
income taxes) on the 6 1/2% 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.
9
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS (Continued)
The primary loss per share amounts for the three and six month periods ended
June 30, 1996 have been restated to reflect the Entertainment Group as a
discontinued operation.
5. INVESTMENT IN RDM
In connection with the acquisition of The Actava Group on November 1,
1995, RDM was classified as an asset held for sale and the Company excluded
its equity in earnings and losses of RDM from its results of operations. At
November 1, 1995 the Company recorded its investment in RDM to the
anticipated proceeds from its sale. During 1996, the Company reduced the
carrying value of its investment in RDM to its then estimated net realizable
value of $31.2 million. Although the Company intends to pursue its previously
adopted plan to dispose of its investment in RDM, as of April 1, 1997 for
financial statement reporting the Company no longer qualifies to treat its
investment in RDM as a discontinued operation. The Company has recorded in
its results of operations a reduction in the carrying value of its investment
in RDM of $18.0 million and has recorded its share of the expected net loss
of RDM for the three months ended June 30, 1997 of $7.2 million in the
current period.
As of June 30, 1997, the Company owned approximately 39% of the issued and
outstanding shares of common stock of RDM (the "RDM Common Stock") based on
approximately 49,507,000 shares of RDM Common Stock outstanding at June 20,
1997.
Summarized published unaudited condensed statements of operations
information for the three months ended March 29, 1997 and balance sheet
information as of March 29, 1997 for RDM is shown below (in thousands):
<TABLE>
<S> <C>
Net sales......................................................................... $ 55,518
Gross profit...................................................................... 3,547
Interest expense.................................................................. 3,568
Net loss.......................................................................... (9,240)
Current assets.................................................................... $ 154,086
Non-current assets................................................................ 112,708
Current liabilities............................................................... 146,123
Non-current liabilities........................................................... 76,564
Total shareholders' equity........................................................ 41,107
</TABLE>
On June 20, 1997 RDM entered into a $100.0 million revolving and term
credit facility (the "RDM Facility"). The RDM Facility is guaranteed by a
letter of credit in the amount of $15.0 million in favor of the lenders
thereunder ( the "Lenders"), which was obtained by Metromedia Company, an
affiliate of the Company ("Metromedia"), cannot be drawn until five days
after a payment default and fifteen days after Non-Payment Default (as
defined under the RDM Facility). In consideration of providing the letters of
credit, Metromedia was granted warrants to purchase 3 million shares of RDM
Common Stock (approximately 5% of RDM) ("RDM Warrants") at an exercise price
of $.50 per share. The RDM Warrants have a ten year term and are exercisable
beginning September 19, 1997. On July 10, 1997, the Company's Board of
Directors elected to substitute its letter of credit for Metromedia's letter
of credit and the RDM Warrants were assigned to the Company.
10
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS (Continued)
6. INVESTMENTS IN AND ADVANCES TO JOINT VENTURES
The Communications Group has recorded its investments in less than
majority-owned Joint Ventures at cost, net of its equity in earnings or losses.
Advances to the Joint Ventures under the line of credit agreements are reflected
based on amounts recoverable 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. Interest rates charged to
the Joint Ventures 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, prior to any substantial
distributions of dividends to the Joint Venture partners. The Communications
Group has entered into credit agreements with its Joint Ventures to provide up
to $92.3 million in funding of which $15.2 million remains available at June 30,
1997. The Communications Group funding commitments are contingent on its
approval of the Joint Ventures' business plans.
11
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS (Continued)
At June 30, 1997 and December 31, 1996 the Communications Group's cumulative
investments in the Joint Ventures, at cost, net of adjustments for its equity
in earnings or losses, and distributions since inception, were as follows (in
thousands):
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31, OWNERSHIP YEAR VENTURE DATE OPERATIONS
NAME 1997 1996 % FORMED COMMENCED
- ---- --------- ------------ --------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Wireless Cable TV
- -----------------
Kosmos TV, Moscow, Russia........................ $ 1,121 $ 759 50% 1991 1992
Baltcom TV, Riga Latvia.......................... 8,523 8,513 50% 1991 1992
Ayety TV, Tbilisi, Georgia....................... 4,840 4,691 49% 1991 1993
Kamalak, Tashkent, Uzbekistan(1)................. 6,116 6,031 50% 1992 1993
Sun TV, Kishinev, Moldova........................ 4,707 3,590 50% 1993 1994
Minsk Cable, Minsk, Belarus...................... 1,436 1,980 50% 1993 1996
Alma-TV, Almaty, Kazakhstan(1)................... 4,995 2,840 50% 1994 1995
-----
31,738 28,404
------
Paging
- ------
Baltcom Paging, Tallinn, Estonia................. 3,109 3,154 39% 1992 1993
Baltcom Plus, Riga, Latvia....................... 1,404 1,711 50% 1994 1995
Tbilisi Paging, Tbilisi, Georgia................. 949 829 45% 1993 1994
Raduga Paging, Nizhny, Novgorod.................. 476 450 45% 1993 1994
St. Petersburg Paging, St. Petersburg, Russia.... 1,006 963 40% 1994 1995
----- ---
6,944 7,107
----- -----
Radio Broadcasting
- ------------------
Eldoradio (formerly Radio Katusha),
St. Petersburg, Russia......................... 610 435 50% 1993 1995
Radio Socci, Socci, Russia...................... 255 361 51% 1995 1995
--- ---
865 796
--- ---
Telephony
- ---------
Telecom Georgia, Tbilisi, Georgia............... 5,836 2,704 30% 1994 1994
Baltcom GSM, Latvia (Cellular).................. 12,748 7,874 21% 1996 1997
Trunked mobile radio ventures................... 2,905 2,049 21%
----- -----
21,489 12,627
------ ------
Pre-Operational
- ---------------
St. Petersburg Cable, St. Petersburg, Russia.... 877 554 45% 1996 Pre-Operational
Kazpage, Kazakhstan............................. 521 350 51% 1996 Pre-Operational
Magticom, (GSM Cellular), Tbilisi, Georgia...... 3,307 2,450 34% 1996 Pre-Operational
Batumi Paging, Batumi, Georgia.................. 269 256 35% 1996 Pre-Operational
PRC telephony related ventures and
equipment..................................... 5,884 9,712 Pre-Operational
Tai Li-Feng Telecom. Co., Ltd., PRC............. 11,040 -- 52% 1996 Pre-Operational
Ningbo Ya Mei Communications, (GSM Cellular),
PRC........................................... 9,468 -- 39% 1996 Pre-Operational
Other........................................... 7,450 3,191
----- -----
38,816 16,513
------ ------
Total........................................... $99,852 $65,447
------- -------
------- -------
</TABLE>
- ------------------------
(1) includes Paging Operations
12
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS (Continued)
The ability of the Communications Group and its Joint Ventures to establish
profitable operations is subject to among other things, significant
political, economic and social risks inherent in doing business in Eastern
Europe, the republics of the former Soviet Union, and the People's Republic
of China ("PRC") . These include potential risks 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.
Summarized combined financial information of Joint Ventures accounted for on
a three-month lag under the equity method that have commenced operations are as
follows (in thousands):
<TABLE>
<CAPTION>
COMBINED BALANCE SHEETS JUNE 30, 1997 DECEMBER 31, 1996
- -------------------------------------------------------------------------------- ------------- -----------------
<S> <C> <C>
Assets
Current assets.................................................................. $ 26,583 $ 16,073
Investments in wireless systems and equipment................................... 61,364 38,447
Other assets.................................................................... 4,281 3,100
------------- -------
Total Assets.................................................................. $ 92,228 $ 57,620
------------- -------
------------- -------
Liabilities and Joint Ventures' Equity (Deficit)
Current liabilities............................................................. $ 38,272 $ 18,544
Amount payable under MITI credit facility....................................... 49,472 41,055
Other long-term liabilities..................................................... 9,648 6,043
------------- -------
97,392 65,642
Joint Ventures' Capital (Deficit)............................................... (5,164) (8,022)
------------- -------
Total Liabilities and Joint Ventures' Capital................................... $ 92,228 $ 57,620
------------- -------
------------- -------
</TABLE>
13
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS (Continued)
COMBINED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
------------------------------
<S> <C> <C>
JUNE 30, 1997 JUNE 30, 1996
------------- -------------
Revenue............................................... $ 31,847 $ 14,690
Expenses:
Cost of service..................................... 5,916 5,653
Selling, general and administrative................. 14,367 8,871
Depreciation and amortization....................... 5,432 2,908
--------- ---------
Total expenses................................... 25,715 17,432
--------- ---------
Operating income (loss)........................... 6,132 (2,742)
Interest expense...................................... (2,470) (1,563)
Other income (loss)................................... (1,282) (26)
Foreign currency translation.......................... 1,061 1,604
--------- ---------
Net income (loss)................................ $ 3,441 $ (2,727)
--------- ---------
--------- ---------
</TABLE>
Financial information for Joint Ventures which are not yet operational is
not included in the above summary. The Communications Group's investment in and
advances to those Joint Ventures and for those entities whose venture agreements
are not yet finalized amounted to approximately $38.8 million and $8.7 million
at June 30, 1997 and 1996, respectively.
14
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS (Continued)
The following tables represent summary financial information for all
operating entities being grouped as indicated as of and for the six months ended
June 30, 1997 (in thousands, except subscribers):
<TABLE>
<CAPTION>
JUNE 30
------------------------
<S> <C> <C> <C> <C> <C> <C>
WIRELESS RADIO 1997 1996
CABLE TV PAGING BROADCASTING TELEPHONY TOTAL TOTAL
--------- --------- ------------- ----------- ---------- ----------
Consolidated Subsidiaries and Joint
Ventures
Revenues........................................... 1,079 1,459 5,830 -- $ 8,368 (1) $ 5,096 (1)
Depreciation and amortization...................... 263 346 123 -- 732 375
Operating income (loss) before taxes............... (687) (2,072) 1,300 -- (1,459)(1) (484)(1)
Assets............................................. 6,616 5,073 4,591 -- 16,280 6,474
Capital expenditures............................... 1,097 658 163 -- 1,918 1,345
Unconsolidated Equity Joint Ventures
Revenues........................................... 11,266 2,896 797 16,888 31,847 14,690
Depreciation and amortization...................... 3,980 301 24 1,127 5,432 2,908
Operating income (loss) before taxes............... 96 (479) 78 6,437 6,132 (2,742)
Assets............................................. 34,212 5,570 876 51,570 92,228 53,088
Capital expenditures............................... 4,355 331 127 5,696 10,509 5,724
Net investment in Joint Ventures................... 31,738 6,944 865 21,489 61,036 35,924
MITI equity in income (losses) of
unconsolidated investees........................... (3,293) (994) 80 2,022 (2,185) (3,768)
Combined
Revenues........................................... 12,345 4,355 6,627 16,888 40,215 19,786
Depreciation and amortization...................... 4,243 647 147 1,127 6,164 3,283
Operating income (loss) before taxes............... (591) (2,551) 1,378 6,437 4,673 (3,226)
Assets............................................. 40,828 10,643 5,467 51,570 108,508 59,562
Capital expenditures............................... 5,452 989 290 5,696 12,427 7,069
Subscribers (unaudited)............................ 147,671 53,416 n/a 12,809 213,896 82,89
</TABLE>
- ------------------------
(1) Does not reflect the Communications Group's headquarter's revenue and
selling, general and administrative expenses for the six months ended June
30, 1997 and 1996, respectively.
15
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS (Continued)
Information about the Company's operations in different geographic locations
is shown below:
<TABLE>
<CAPTION>
REPUBLICS OF
FORMER SOVIET
UNION AND
JUNE 30, 1997 UNITED STATES EASTERN EUROPE PRC OTHER FOREIGN CONSOLIDATED
- ------------- ------------- --------------- --------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Revenues $ 525 8,443 -- 183 $ 9,151
Assets $ 80,082 79,897 39,719 6,703 $ 206,401
</TABLE>
In February, 1997, Metromedia Asia Corporation ("MAC") a subsidiary of the
Company with telephony interests in the PRC, acquired AAT pursuant to a
Business Combination Agreement (the "BCA") in which MAC and AAT agreed to
combine their businesses and operations. Pursuant to the BCA, each AAT
shareholder and warrant holder exchanged (i) one share of AAT common stock
(the "AAT Common Stock") for one share of MAC Common stock, par value $.01
per share ("MAC Common Stock"), (ii) one warrant to acquire one share of AAT
Common Stock at an exercise price of $4.00 per share for one warrant to
acquire one share of MAC Common Stock at an exercise price of $4.00 per share
and (iii) one warrant to acquire one share of AAT Common Stock at an exercise
price of $6.00 per share for one warrant to acquire one share of MAC Common
Stock at an exercise price of $6.00 per share. AAT is engaged in the
development and construction of communication services in the PRC. AAT,
through a joint venture, has a contract with one of the PRC's two major
providers of telephony services to provide telecommunications services in the
Sichuan Province of the PRC. The transaction was accounted for as a purchase,
with MAC as the acquiring entity.
As a condition to the closing of the BCA, the Communications Group purchased
from MAC, for an aggregate purchase price of $10.0 million, 3,000,000 share
of MAC Class A Common Stock, par value $.01 per share ( the "MAC Class A
Common Stock") and warrants to purchase an additional 1,250,000 shares of MAC
Class A Common Stock, at an exercise price of $6.00 per share. Shares of MAC
Class A Common Stock are identical to share of MAC Common Stock except that
they are entitled, when owned by the Communications Group, to three votes per
share on all matters voted upon by MAC's stockholders and to vote as a
separate class to elect six of the ten members to MAC's Board of Directors.
The securities received by the Communications Group are not registered under
the Securities Act, but have certain demand and piggyback registration rights
as provided in the stock purchase agreement. As a result of the transaction
the Communications Group owns 56.52% of MAC's outstanding common stock with
79% voting rights.
The purchase price of the AAT transaction was determined to be $86.0 million.
The excess of the purchase price over the fair value of the net tangible
assets acquired was $69.0 million. This has been recorded as goodwill and is
being amortized on a straight-line basis over 25 years. The amortization of
such goodwill for the six months ended June 30, 1997 was approximately $1.0
million.
16
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS (Continued)
The purchase price was allocated as follows (in thousands)
Current assets..................................................... $ 46
Property, plant and equipment...................................... 279
Investments in Joint Ventures...................................... 18,950
Goodwill........................................................... 68,975
Current liabilities................................................ (2,202)
Other liabilities.................................................. (5)
---------
Purchase price................................................. $ 86,043
---------
---------
The difference between the Company's investment balance of $18.6 million in
MAC prior to the acquisition of AAT and 56.52% of the net equity of MAC
subsequent to the acquisition of AAT of $54.5 million was recorded as an
increase to paid-in surplus of $36.0 million in the consolidated condensed
statement of stockholders' equity.
In December 1996, the Communications Group, through its 50% owned Moldovan
Joint Venture, Sun-TV, acquired the assets of Eurocable Moldova, Ltd., a
wired cable television company with approximately 30,000 subscribers, for
approximately $1.5 million.
In January 1997, the Communications Group's 99% owned joint venture, Romsat
Cable TV and Radio, S.A., acquired the cable television assets of Standard
Ideal Consulting, S.A., a wired cable television company with approximately
37,000 subscribers, for approximately $2.8 million.
In May 1997, the Communications Group acquired 49% of the shares of A.S.
Trio, LSL, an Estonian Public Limited Company which owns seven FM radio
stations in Estonia.
Also, the Communications Group has recently signed definitive agreements to
purchase 70% and 85%, respectively, of joint ventures operating radio
stations in Berlin, Germany and Prague, Czech Republic.
7. INVENTORIES
Lawn and garden equipment inventories and pager inventories are stated at the
lower of cost or market. Lawn and garden equipment inventories are valued
utilizing the last-in, first-out (LIFO) method. Pager inventories are
calculated on the weighted-average method.
17
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS (Continued)
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
-------- ------------
<S> <C> <C>
Lawn and garden equipment:
Raw materials........................................ $ 7,148 $ 18,733
Finished goods....................................... 74,548 34,822
-------- --------
81,696 53,555
Less LIFO reserve.................................... 990 --
-------- --------
80,706 53,555
-------- --------
Telecommunications:
Pagers............................................... 448 635
Cable................................................ 253 214
-------- --------
701 849
-------- --------
$ 81,407 $ 54,404
-------- --------
-------- --------
</TABLE>
8. Snapper
In connection with the acquisition of The Actava Group on November 1, 1995,
Snapper was classified as an asset held for sale. Subsequently, the Company
announced its intention not to continue to pursue its previously adopted plan to
dispose of Snapper and to actively manage Snapper. As of November 1, 1996, the
Company has consolidated Snapper into its results of operations.
The results of Snapper for the period of January 1, 1996 through June 30,
1996, which were excluded from the accompanying consolidated condensed
statements of operations, are as follows (in thousands):
Net sales............................. $ 98,096
Operating expense..................... 101,311
---------
Operating loss........................ (3,215)
Interest expense...................... (4,325)
Other income.......................... 1,013
---------
Loss before taxes..................... $(6,527)
---------
---------
On April 30, 1997, Snapper closed a $10.0 million working capital facility
("Working Capital Facility") with AmSouth Bank of Alabama ("AmSouth") which
amended Snapper's existing $55.0 million facility. The Working Capital Facility
(i) gives AmSouth a PARI PASSU collateral interest in all of Snappers' assets
(including rights under a Make-Whole and Pledge Agreement made by Metromedia in
favor of AmSouth in connection with Snapper's revolver credit facility (the
"Snapper Revolver")), (ii) accrues interest on borrowings at AmSouth's floating
prime rate (same borrowing rate as the Snapper Revolver), and (iii) becomes due
and payable on October 1, 1997. As additional consideration for AmSouth making
this new facility available, Snapper provided to AmSouth the joint and several
guarantees of Messrs. Kluge and Subotnick, Chairman of the Board of MMG and Vice
Chairman, President and Chief Executive Officer of MMG, respectively, on the
Working Capital Facility.
As of June 30, 1997, Snapper was in default of certain financial covenants
under the Snapper Revolver and Working Capital Facility, which default has been
waived by AmSouth.
9. STOCK OPTION PLANS
On March 26, 1997 the Board of Directors approved the cancellation and
reissuance of all stock options previously granted pursuant to the 1996
Metromedia International Group, Inc. Incentive Stock Plan (the "MMG Plan") at an
exercise price of $9.31, the fair market value of MMG common stock (the
"Common Stock") at such date.
18
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS (Continued)
In addition, on March 26, 1997, the Board of Directors authorized the grant
of approximately 1,700,000 stock options at an exercise price of $9.31 under the
MMG Plan.
On April 18, 1997, two officers of the Company were granted stock options,
not pursuant to any plan, to purchase 1,000,000 shares each of Common Stock at a
purchase price of $7.44 per share, the fair market value of the Common Stock at
such date. The stock options vest and become fully exercisable after four years
from the date of grant.
The MMG Plan provides that upon a sale of "substantially all" of the
Company's assets, all unvested outstanding options to acquire the Common Stock
under such plan would vest and become immediately exerciseable. In connection
with the Entertainment Group Sale, the Company's Compensation Committee
determined that the Entertainment Group Sale constituted a sale of
"substantially all" of the Company's assets for purposes of the MMG Plan,
thereby accelerating the vesting of all options outstanding under such plan. As
of June 30, 1997, 4,631,215 options had been issued to the directors, officers
and certain employees of the Company, the Entertainment Group, and the
Communications Group, and remain outstanding under the MMG Plan and 3,203,626 of
such options had not vested. All such options are exercisable at a price equal
to $9.31 per share. All of the directors of the Company have agreed to waive the
accelerated vesting of their options and the Company is in the process of
obtaining waivers from the remaining officers and employees of the Company and
Communications Group.
10. ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS 128")
which supersedes APB Opinion 15, "Earnings per Share". SFAS 128 specifies the
computation, presentation and disclosure requirements for earnings per share
("EPS") for entities with publicly held common stock. SFAS 128 replaces primary
EPS and fully diluted EPS with basic EPS and diluted EPS, respectively. SFAS
128, effective December 31, 1997, is not expected to have a material impact on
the Company's reporting of earnings per share. Earlier adoption of SFAS 128 is
not permitted. After the effective date, the Company's prior-period EPS data
will be restated to conform with the provisions of SFAS 128.
11. CONTINGENT LIABILITIES
Updated information on litigation and environmental matters subsequent to
December 31, 1996 is as follows:
19
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS (Continued)
Michael Shores V. Samuel Goldwyn Company
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 in Michael Shores v. Samuel Goldwyn Company. et at.,
case no. BC 150360. In the complaint, plaintiff alleged that Goldwyn's Board
of Directors breached its fiduciary duties to the stockholders of Goldwyn by
agreeing to sell Goldwyn to the Company at a premium, yet providing Mr.
Samuel Goldwyn, Jr., the Samuel Goldwyn Family Trust (the "Goldwyn Family
Trust") and Mr. Meyer Gottlieb with additional consideration and other
benefits not received by the other Goldwyn shareholders, and sought to enjoin
consummation of the Goldwyn Merger. On May 8, 1997, the plaintiff was granted
leave to file a First Amended Complaint ( the "Amended Complaint") adding the
Company and the Goldwyn Family Trust as defendants. In addition to the
original allegations, the Amended Complaint also alleges that Goldwyn's Board
of Directors and the Goldwyn Family Trust breached their fiduciary duties to
Goldwyn's stockholders in agreeing to and approving the structure and timing
of the sale of Goldwyn to the Company through a stock swap merger, and, in
particular, by allowing the pricing period for Goldwyn stock to take place
prior to a secondary offering of stock by the Company, with the alleged
result being that the value of Common Stock received by Goldwyn's
stockholders when the sale was consummated was less than it otherwise would
have been. The Amended Complaint alleges that the Company aided and abetted
the fiduciary breaches of the other defendants. The Company believes that the
suit is without merit and intends to defend vigorously such action.
On June 30, 1997, the plaintiffs in Sydney H. Sapsowitz and Sid Sapsowitz &
Associates, Inc. v. John W Kluge, Stuart Subotnick, Metromedia International
Group, Inc., Orion Pictures Corporation, Leonard White, et al. filed a lawsuit
in Superior Court of the State of California alleging $28.0 million in damages
from the breach of an agreement to pay a finder's fee in connection with the
Entertainment Group Sale. The Company believes that the suit is without merit
and it intends to vigorously defend such action.
20
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS (Continued)
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., predecessor to Triton Group Ltd.
("Intermark"), 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 and on behalf of the
Company and was purportedly 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 29, 1995, the 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. On May 13, 1997, the Court issued a decision on defendants'
motion to dismiss. The Court dismissed all of the plaintiff's class claims and
dismissed all of the plaintiffs' derivative claims except for two specific
claims alleging that the Fuqua board members acted in furtherance of an
entrenchment plan.
21
<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
On July 10, 1997, the Company completed the Entertainment Group Sale (see
note 2 of the notes to consolidated condensed financial statements). The
transaction has been recorded as a sale of a business segment and, accordingly
the consolidated balance sheets reflect the net assets of the discontinued
segment. In addition, the consolidated statements of operations reflect the
results of operations as a discontinued segment.
The continuing business activities of the Company consist of three business
segments: (i) the development and operation of communications businesses, which
include wireless cable television, paging services, radio broadcasting and
various types of telephony services; (ii) the exhibition of filmed entertainment
product through Landmark; and (iii) the manufacture of lawn and garden products
through Snapper.
On November 1, 1995, Orion, MITI, the Company and MCEG Sterling Incorporated
("Sterling") consummated the November 1 Merger. In connection with the November
1 Merger, the Company changed its name from "The Actava Group Inc." to
"Metromedia International Group, Inc."
For accounting purposes only, Orion and MITI have been deemed to be the
joint acquirers of Actava and Sterling. The acquisition of Actava and Sterling
has been accounted for as a reverse acquisition. As a result of the reverse
acquisition, the historical financial statements of the Company for periods
prior to the November 1 Merger 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 condensed financial statements from November 1,
1995, the date of acquisition. During 1995, the Company had adopted a formal
plan to dispose of Snapper and as a result, Snapper was classified as an
asset held for sale and the results of its operations were not included in
the consolidated results of operations of the Company from November 1, 1995
to October 31, 1996. Subsequently, the Company announced its intention not to
continue to pursue its previously adopted plan to dispose of Snapper and to
actively manage Snapper to maximize its long term value to the Company. The
operations of Snapper are included in the accompanying consolidated condensed
financial statements as of November 1, 1996. In addition, although the
Company intends to continue to pursue its previously adopted plan to dispose
of its investment in RDM for financial statement reporting the Company no
longer qualifies to treat its investment in RDM as a discontinued operation
and, as of April 1, 1997, MMG will include in its results of operations, the
Company's share of the earnings or losses of RDM.
COMMUNICATIONS GROUP
The Company, through the Communications Group, is the owner of various
interests in Joint Ventures that are currently in operation or planning to
commence operations in Eastern Europe, certain republics of the former Soviet
Union, the PRC and other selected emerging markets.
22
<PAGE>
The Communications Group's Joint Ventures currently offer wireless cable
television, AM/FM radio, paging, cellular telecommunications, international toll
calling and trunked mobile radio. Joint ventures are principally entered into
with governmental agencies or ministries under the existing laws of the
respective countries.
The Company's financial statements only consolidate the accounts and
results of operations of 7 the Communications Group's 35 operating companies
and Joint Ventures at June 30, 1997. Investments in other companies and joint
ventures which are not majority owned, or in which the Communications Group
does not have control, but exercises significant influence, have been
accounted for using the equity method. Investments of the Communications
Group or its consolidated subsidiaries over which significant influence is
not exercised are carried under the cost method. See note 6 to the
consolidated condensed financial statements, "Investments in and Advances to
Joint Ventures", for these Joint Ventures and their summary financial
information.
23
<PAGE>
The following table summarizes the Communications Group's Joint Ventures at
June 30, 1997, as well as the amounts contributed, amounts loaned and total
amounts invested in such Joint Ventures at June 30, 1997 (in thousands):
COMMUNICATIONS GROUP JOINT VENTURES OWNERSHIP AT JUNE 30, 1997
<TABLE>
<CAPTION>
OWNERSHIP AMOUNT AMOUNT TOTAL
VENTURE (1) PERCENTAGE CONTRIBUTED LOANED INVESTMENTS(11)
- -------------------------------------------------------------- ------------- ----------- --------- ---------------
<S> <C> <C> <C> <C>
CABLE
Kosmos TV (Moscow, Russia).................................... 50% 1,093 9,043 10,136
Baltcom TV (Riga, Lativa)..................................... 50% 819 11,372 12,191
Ayety TV (Tbilisi, Georgia)................................... 49% 779 6,689 7,468
Romsat Cable TV (Bucharest, Romania).......................... 97% 682 5,271 5,953
Sun TV(Chisinau, Moldova)..................................... 50% 400 4,841 5,241
Alma TV (Almaty, Kazakastan).................................. 50% 222 4,745 4,967
Cosmos TV (Minsk, Belarus).................................... 50% 400 1,848 2,248
Viginta (Vilnius, Lithuania).................................. 55% 434 1,679 2,113
Kamalak TV (Tashkent, Uzbekistan)............................. 50% 794 5,084 5,878
PAGING
Baltcom Estonia (Estonia)..................................... 39% 396 4,348 4,744
CNM (Romania)................................................. 54% 490 4,020 4,510
Kamalak Paing (Tashkent, Samarkand, Bukhara and Andijan,
Uzbekistan (2).............................................. 50%
Paging One (Tbilisi, Georgia)................................. 45% 250 1,035 1,285
Paging Ajara (Ajara, Georgia)................................. 35% 43 166 209
Raduga Poisk (Nizhny Novgorod,, Russia)....................... 45% 330 73 403
Alma Page (Almaty and Ust-Kamenogorsk, Kazasktan) (3)......... 50%
Baltcom Plus (Latvia)......................................... 50% 250 2,463 2,713
PT-Page (St. Petersburg, Russia).............................. 40% 1,102 -- 1,102
Paging One Services (Austria) (8)............................. 100% 1,007 2,906 3,913
Kazpage....................................................... 51% 521 -- 521
RADIO
Radio Juventus (Budapest, Siofok and Khebegy, Hungry)......... 100% 8,107 218 8,325
SAC (Moscow, Russia).......................................... 83% 631 2,967 3,598
Radio Katusha (St. Petersburg, Russia)........................ 50% 133 842 975
Radio Nika (Socci, Russia).................................... 51% 244 14 258
Radio Skonto (Riga, Latvia)................................... 55% 302 283 585
Radio One (Prague, Czech Republic)............................ 80% 265 63 328
TELEPHONY
Telcom Georgia (Georgia) (International Toll)................. 30% 2,554 -- 2,554
Baltcom GSM (Latvia)(Cellular)................................ 21% 13,270 -- 13,270
Ningbo Ya Mei Communications (PRC) (Cellular) (12)............ 39% 9,468 -- 9,468
TRUNKED MOBILE RADIO (4)
Belgium Trunking (Brussels and Flanders, Belgium)............. 24%
Radiomovel Telecommunicacoes (Portugal)....................... 14%
Teletrunk Spain (Madrid, Valencia, Aragon and Catalonia,
Spain)(5)................................................... 6-16%
National Business Communications (Bucharest, Cluj, Brasov,
Constanta and Timisoira, Romania) (6)....................... 58% 30 215 245
Spectrum (Kazakstan) (9)...................................... 31% 174 -- 174
PRE-OPERATIONAL
Teleplus (St. Petersburg, Russia)(Cable) (7).................. 45% 723 -- 723
Magticom (Georgia)(Cellular) (10)............................. 34% 3,308 -- 3,308
Metromedia-Jinfeng (Wireless Local Loop) (12)................. 60% 3,286 -- 3,286
Tai Li-Feng Telecom (PRC) (Wireless Local Loop) (12).......... 52% 11,040 -- 11,040
</TABLE>
24
<PAGE>
1. The parenthetical notes the area of operations for the operational Joint
Ventures and the area for which the Joint Venture is licensed for the
pre-operational joint ventures.
2. The Communications Group's cable and paging services in Uzbekistan are
provided by the same company, Kamalak TV. All amounts contributed and loaned
to Kamalak TV are listed under that Joint Venture's entry for cable.
3. The Communication Group's cable and paging services in Kazakstan are
provided by or through the same company, Alma TV. All amounts contributed
and loaned to Alma TV are listed under that Joint Venture's entry for cable.
4. Most of the Company's ownership of the trunked mobile radio ventures is
through Protocall Ventures, Ltd., a United Kingdom company in which the
Communications Group has 56% ownership. The Communications Group's interest
in Protocall Ventures, Ltd. was purchased for $2.5 million. As of June 30,
1997, the Communications Group had provided Protocall Ventures Ltd. $4.8
million in credit to fund its operations. This chart does not separately
list amounts contributed or loaned to the trunked mobile radio Joint
Ventures by Protocall Ventures, Ltd.
5. The Communications Group's trunk mobile radio operations in Spain are
provided through 4 Joint Ventures of Protocall Ventures, Ltd. The Company's
ownership of these Joint Ventures ranges from 6 to 16%.
6. Amounts contributed and loaned are amounts contributed and loaned to
National Business Communications directly by the Communications Group.
7. Teleplus was created in November 1996.
8. Paging One Services launched commercial paging service in Vienna, Austria in
February 1997.
9. Spectrum launched commercial trunked mobile radio service in Almaty and
Aryrau, Kazakstan in March 1997.
10. The Communications Group's interest in Magticom was registered in October
1996
11. The total investment does not include any incurred losses.
12. These are pre-operational Joint Ventures that plan to provide
telecommunications equipment, financing network planning, installation and
maintenance services to telecommunications operations in China.
LANDMARK THEATRE GROUP
Landmark operates 49 theaters with 139 screens and is the largest exhibitor
of specialized motion pictures and art films in the United States.
SNAPPER
Snapper manufacturers Snapper-Registered Trademark- brand premium-priced
power lawnmowers, lawn tractors, garden tillers, snowthrowers and related
parts and accessories. The lawnmowers include rear-engine riding mowers,
front-engine riding mowers or lawn tractors, and self-propelled and push-type
walk-behind mowers. Snapper also manufactures a line of commercial lawn and
turf equipment under the Snapper brand. Snapper provides lawn and garden
products through distribution channels to domestic and foreign retail markets.
25
<PAGE>
The following table sets forth the operating results of the Company's
Communications Group, movie theater and lawn and garden segments for the three
months and six months ended June 30, 1997 and 1996. Financial information
summarizing the results of operations of Snapper, which was classified as an
asset held for sale until November 1, 1996 is presented in Note 8 to the notes
to the consolidated condensed financial statements.
SEGMENT INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS TABLE
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS SIX MONTHS SIX MONTHS
ENDED ENDED ENDED ENDED
JUNE 30, 1997 JUNE 30, 1996 JUNE 30, 1997 JUNE 30, 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Communications Group:
Revenues............................................ $ 3,977 $ 2,775 $ 9,152 $ 5,939
Cost of sales and rentals and operating expenses.... (797) -- (1,346) --
Selling, general and administrative................. (15,670) (8,990) (26,779) (16,515)
Depreciation and amortization....................... (2,338) (1,634) (4,287) (3,083)
------------- ------------- ------------- -------------
Operating loss.................................... (14,828) (7,849) (23,260) (13,659)
Equity in losses of Joint Ventures.................. (587) (1,985) (2,185) (3,768)
Minority interest................................... 1,387 8 2,627 21
------------- ------------- ------------- -------------
(14,028) (9,826) (22,818) (17,046)
Landmark Theatre Group:
Revenues............................................ 11,770 -- 28,793 --
Cost of sales and rentals and operating expenses.... (9,734) -- (22,804) --
Selling, general and administrative................. (1,292) -- (2,504) --
Depreciation and amortization....................... (1,189) -- (2,366) --
------------- ------------- ------------- -------------
Operating income (loss)............................. (445) -- 1,119 --
Snapper:
Revenues............................................ 48,023 -- 101,823 --
Cost of sales and rentals and operating expenses.... (30,690) -- (68,136) --
Selling, general and administrative................. (16,388) -- (31,343) --
Depreciation and amortization....................... (1,897) -- (3,804) --
------------- ------------- ------------- -------------
Operating loss.................................. (952) -- (1,460) --
Corporate Headquarters and Eliminations:
Revenues............................................ -- -- -- --
Cost of sales and rentals and operating expenses.... -- -- -- --
Selling, general and administrative................. (1,276) (2,792) (2,497) (4,418)
Depreciation and amortization....................... (3) (4) (6) (11)
------------- ------------- ------------- -------------
Operating loss.................................. (1,279) (2,796) (2,503) (4,429)
Consolidated:
Revenues............................................ 63,770 2,775 139,768 5,939
Cost of sales and rentals and operating expenses.... (41,221) -- (92,286) --
Selling, general and administrative................. (34,626) (11,782) (63,123) (20,933)
Depreciation and amortization....................... (5,427) (1,638) (10,463) (3,094)
------------- ------------- ------------- -------------
Operating loss.................................. (17,504) (10,645) (26,104) (18,088)
Interest expense...................................... (6,652) (4,785) (12,458) (9,609)
Interest income....................................... 2,094 979 4,801 2,193
Provision for income taxes............................ (225) -- (323) --
Equity in losses of Joint Ventures.................... (587) (1,985) (2,185) (3,768)
Equity in losses of and writedown of investment in
RDM Sports Group, Inc................................ (25,122) -- (25,122) --
Minority interest..................................... 1,387 8 2,627 21
Discontinued operations............................... (25,263) (2,422) (35,366) (8,740)
Extraordinary item.................................... (1,094) -- (1,094) --
------------- ------------- ------------- -------------
Net loss........................................ $ (72,966) $ (18,850) $ (95,224) $ (37,991)
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>
26
<PAGE>
MMG CONSOLIDATED--RESULTS OF OPERATIONS
Three Months Ended June 30, 1997 Compared to Three Months Ended June 30,
1996.
Net loss increased to $73.0 million for the three months ended June 30, 1997
from $18.9 million for the three months ended June 30, 1996.
Net loss for the three months ended June 30, 1997 includes losses from
discontinued operations relating to the Entertainment Group of $25.3 million,
a writedown of $18.0 million of the Company's investment in RDM, equity in
losses of RDM of $7.2 million and an extraordinary loss relating to the early
extinguishment of debt by RDM of $1.1 million.
Operating loss increased to $17.5 million for the three months ended June
30, 1997 from $10.6 million for the three months ended June 30, 1996. The
increase in operating loss reflects the inclusion of Snapper's and Landmark's
operating loss in 1997 and increases in selling, general and administrative
costs experinced by the Communications Group.
Interest expense increased $1.9 million to $6.7 million for the three
months ended June 30, 1997, primarily due to the inclusion of interest
associated with Landmark and the Snapper credit facility in 1997 partially
offset by a reduction in the outstanding debt balance at corporate
headquarters.
Interest income increased $1.1 million to $2.1 million in 1997 principally
from funds invested at corporate headquarters and increased interest resulting
from increased borrowings under the Communications Group's credit facilities
with its Joint Ventures for their operating and investing cash requirements.
Six Months Ended June 30, 1997 Compared to Six Months Ended June 30, 1996.
Net loss increased to $95.2 million for the six months ended June 30, 1997
from $38.0 million for the six months ended June 30, 1996.
Net loss for the six months ended June 30, 1997 includes losses from
discontinued operations relating to the Entertainment Group of $35.4 million,
a writedown of $18.0 million of the Company's investment in RDM, equity in
losses of RDM of $7.2 million and an extraordinary loss relating to the early
extinguishment of debt by RDM of $1.1 million.
Operating loss increased to $26.1 million for the six months ended June 30,
1997 from $18.1 million for the six months ended June 30, 1996. The increase in
operating loss reflects the inclusion of Snapper's operating loss in 1997 and
increases in selling, general and administrative costs experinced by the
Communications Group partially offset by operating income of Landmark and a
reduction of general and administrative expenses at corporate headquarters.
Interest expense increased $2.8 million to $12.5 million for the six
months ended June 30, 1997, due primarily to the inclusion of interest
associated with Landmark and the Snapper credit facility in 1997 partially
offset by a reduction in the outstanding debt balance at corporate
headquarters.
Interest income increased $2.6 million to $4.8 million for the six months
ended June 30, 1997 principally from funds invested at corporate headquarters
and increased interest resulting from increased borrowings under the
Communications Group's credit facilities with its Joint Ventures for their
operating and investing cash requirements.
27
<PAGE>
THE COMMUNICATIONS GROUP--RESULTS OF OPERATIONS
Three Months Ended June 30, 1997 Compared to Three Months Ended June 30,
1996.
REVENUES
Revenues increased to $4.0 million for the three months ended June 30, 1997
from $2.8 million for the three months ended June 30, 1996. The growth in
revenue of the consolidated Joint Ventures has resulted primarily from an
increase in radio operations in Hungary. Revenue from radio operations increased
to $2.6 million for the three months ended June 30, 1997 from $1.4 million for
the three months ended June 30, 1996. Radio paging services generated revenues
of $600,000 for the three months ended June 30, 1997 as compared to $800,000 for
the three months ended June 30, 1996.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased by $6.7 million or
74% for the three months ended June 30, 1997 as compared to the three months
ended June 30, 1996. Approximately thirty percent of the increase relates to
the expansion of operations in the PRC and the acquisition of AAT. The
remaining increase relates to additional expenses associated with the increase
in the number of Joint Ventures, principally the addition of Protocall
Ventures, Ltd. ("Protocall")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 stations and radio paging operations.
DEPRECIATION AND AMORTIZATION EXPENSE
Depreciation and amortization expense increased to $2.3 million for the
three months ended June 30, 1997 from $1.6 million for the three months ended
June 30, 1996. The increase is primarily a result of the amortization of
goodwill in connection with the acquisition of AAT.
EQUITY IN LOSSES OF JOINT VENTURES
The Communications Group accounts for the majority of its Joint Ventures
under the equity method of accounting since it generally does not exercise
control of these ventures. Under the equity method of accounting, the
Communications Group reflects the cost of its investments, adjusted for its
share of the income or losses of the Joint Ventures, on its balance sheet and
reflects generally only its proportionate share of income or losses of the Joint
Ventures in its statement of operations. The Communications Group reports the
operations of its unconsolidated Joint Ventures on a three month lag.
The Communications Group recognized equity in losses of its Joint Ventures
of approximately $600,000 for the three months ended June 30, 1997 as compared
to $2.0 million for the three months ended June 30, 1996.
28
<PAGE>
The losses recorded for the three months ended June 30, 1997 and the three
months ended June 30, 1996 represent the Communications Group's equity in the
losses of the Joint Ventures for the quarters ended March 31, 1997 and 1996,
respectively. Equity in the losses of the Joint Ventures by the Communications
Group are generally reflected according to the level of ownership of the Joint
Venture by the Communications Group until such Joint Venture's contributed
capital has been fully depleted. Subsequently, the Communications Group
recognizes the full amount of losses generated by the Joint Venture since the
Communications Group is generally the sole funding source of the Joint Ventures.
The decrease in losses of the Joint Ventures of $1.4 million from the
three months ended June 30, 1996 to the three months ended June 30, 1997 is
primarily attributable to the increased cable and telephony revenues, which
were partially offset by the acquisition in May 1996 of Protocall, which
includes five new trunked mobile radio ventures and increased the loss by
$400,000.
Revenues generated by unconsolidated Joint Ventures were $17.5 million for
the three months ended June 30, 1997 as compared to $5.7 million for the three
months ended June 30, 1996.
MINORITY INTEREST
Losses allocable to minority interests increased to $1.4 million for the
three months ended June 30, 1997 from $8,000 for the three months ended June 30,
1996. The increase principally represents the inclusion of losses allocable to
the minority shareholders of MAC.
FOREIGN CURRENCY
The Communications Group's strategy is to minimize its foreign currency
exposure risk. To the extent possible, in countries that have experienced high
rates of inflation, the Communications Group bills and collects all revenues in
United States ("U.S.") dollars or an equivalent local currency amount adjusted
on a monthly basis for exchange rate fluctuations. The Communications Group's
Joint Ventures are generally permitted to maintain U.S. dollar accounts to
service their U.S. dollar denominated credit lines, thereby reducing foreign
currency risk. As the Communications Group and its Joint Ventures expand their
operations and become more dependent on local currency based transactions, the
Communications Group expects that its foreign currency exposure will increase.
The Communications Group does not hedge against foreign exchange rate risks at
the current time and therefore could be subject in the future to any declines in
exchange rates between the time a Joint Venture receives its funds in local
currencies and the time it distributes such funds in U.S. dollars to the
Communications Group.
29
<PAGE>
Six Months Ended June 30, 1997 Compared to Six Months Ended June 30, 1996.
REVENUES
Revenues increased to $9.2 million in the six months ended June 30, 1997
from $5.9 million for the six months ended June 30, 1996. Revenues of
unconsolidated Joint Ventures for the six months ended June 30, 1997 and 1996
appear in note 6 to the consolidated condensed financial statements. This growth
in revenue has resulted primarily from an increase in radio operations in
Hungary and paging service operations in Romania. Revenue from radio operations
for the first six months of 1997 was $5.8 million as compared to $3.7 million in
the first six months of 1996. Radio paging services generated revenues of $1.5
million for the first six months of 1997 as compared to $1.3 million in the
first six months of 1996.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
Selling, general and administrative expense increased by $10.3 million or
62% for the six months ended June 30, 1997 as compared to the six months ended
June 30, 1996. Approximately thirty-eight percent of the increase relates to
the expansion of operations in the PRC and the acquisition of AAT. The increase
relates principally to the hiring of additional staff and expenses associated
with the increase in the number Joint Ventures and the need for the
Communications Group to support and assist the operations of the Joint Ventures,
and additional staffing at the radio station and radio paging operations.
DEPRECIATION AND AMORTIZATION EXPENSE
Depreciation and amortization expense increased to $4.3 million for the
six months ended June 30, 1997 from $3.1 million for the six months ended
June 30, 1996. The increase is primarily a result of the amortization of
goodwill in connection with the acquisition of AAT.
EQUITY IN LOSSES OF JOINT VENTURES
The Communications Group recognized equity in losses of its Joint Ventures
of approximately $2.2 million for the six months ended June 30, 1997 as compared
to $3.8 million for the six months ended June 30, 1996.
The decrease in losses of the Joint Ventures of $1.6 million from the six
months ended June 30, 1996 to the six months ended June 30, 1997 is primarily
attributable to the increased cable and telephony revenues, which were partially
offset by the acquisition in May 1996 of Protocall., which includes five new
trunked mobile radio ventures and increased the loss by approximately $800,000.
Revenues generated by unconsolidated Joint Ventures were $31.8 million for
the six months ended June 30, 1997 as compared to $14.7 million for the six
months ended June 30, 1996
MINORITY INTEREST
Losses allocable to minority interests increased to $2.6 million for the six
months ended June 30, 1997 from $21,000 for the six months ended June 30, 1996.
The increase principally represents the inclusion of losses allocable to the
minority shareholders of MAC.
30
<PAGE>
SUBSCRIBER GROWTH
Many of the Joint Ventures are in early stages of development and
consequently ordinarily generate operating losses in the first years of
operation. The Communications Group believes that subscriber growth is an
appropriate indicator to evaluate the progress of the subscriber based
businesses. The following table presents the aggregate cable television, paging
and trunked mobile radio Joint Ventures subscriber growth:
<TABLE>
<CAPTION>
WIRELESS
CABLE TRUNKED
TELEVISION PAGING MOBILE RADIO TOTAL
--------------- --------- ------------- ---------
<S> <C> <C> <C> <C>
December 31, 1995............................................ 37,900 14,460 -- 52,360
March 31, 1996............................................... 44,632 20,683 -- 65,315
June 30, 1996................................................ 53,706 29,107 -- 82,813
September 30, 1996........................................... 62,568 37,636 6,104 106,308
December 31, 1996............................................ 69,118 44,836 6,642 120,596
March 31, 1997............................................... 101,016 51,942 8,711 161,669
June 30, 1997................................................ 147,671 53,416 12,809 213,896
</TABLE>
FOREIGN CURRENCY
The Communications Group's strategy is to minimize its foreign currency
exposure risk. To the extent possible, in countries that have experienced high
rates of inflation, the Communications Group bills and collects all revenues in
U.S. dollars or an equivalent local currency amount adjusted on a monthly basis
for exchange rate fluctuations. The Communications Group's Joint Ventures are
generally permitted to maintain U.S. dollar accounts to service their U.S.
dollar denominated credit lines, thereby reducing foreign currency risk. As the
Communications Group and its Joint Ventures expand their operations and become
more dependent on local currency based transactions, the Communications Group
expects that its foreign currency exposure will increase. The Communications
Group does not hedge against foreign exchange rate risks at the current time and
therefore could be subject in the future to any declines in exchange rates
between the time a Joint Venture receives its funds in local currencies and the
time it distributes such funds in U.S. dollars to the Communications Group.
LANDMARK THEATRE GROUP--RESULTS OF OPERATIONS
Three Months Ended June 30, 1997
REVENUES
Film exhibition revenues for the current quarter were $11.8 million. As the
acquisition of this business occurred on July 2, 1996, there were no film
exhibition revenues generated in the previous year's second quarter.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses were $1.3 million for the
current quarter.
31
<PAGE>
DEPRECIATION AND AMORTIZATION EXPENSE
Depreciation and amortization charges were $1.2 million for the current
quarter. Depreciation and amortization reflected the depreciation of the theater
group property and equipment as well as the amortization of the goodwill
associated with the acquisition of Landmark.
Six Months Ended June 30, 1997
REVENUES
Film exhibition revenues for the six months ended June 30, 1997 were $28.8
million. As the acquisition of this businesses occurred on July 2, 1996, there
were no film exhibition revenues generated in the previous years comparable
period.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses were $2.5 million for the six
months ended December 31, 1996.
DEPRECIATION AND AMORTIZATION EXPENSES
Depreciation and amortization charges were $2.4 million for the six month
period ended June 30, 1997. Depreciation and amortization also reflects the
depreciation of the theater group property and equipment as well as the
amortization of the goodwill associated with the acquisition of Landmark.
SNAPPER--RESULTS OF OPERATIONS
Three Months Ended June 30, 1997
REVENUES
Snapper's 1997 period sales were $48.0 million. Snapper continued to
implement its program to sell products directly to dealers. In implementing
this program to restructure its distribution network, Snapper repurchased
certain distributor inventory which resulted in sales reductions of $6.3
million. Sales of lawn and garden equipment contributed the majority of the
revenues during the period. Sales were much lower than anticipated due to
unseasonably cool weather during April and May.
Gross profit during the period was $15.8 million. These low profit results
were caused by lower than anticipated sales and the repurchase program as noted
above.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses were $16.4 million for the
period. In addition to normal selling, general and administrative expenses,
these expenses reflect additional television commercial expenditures to assist
Snapper dealers during the distribution network restructuring as well as
acquisition expenditures related to two large distributorships purchased during
the period.
32
<PAGE>
OPERATING LOSSES
Snapper experienced an operating loss of $1.0 million during the period.
This loss was the result of unseasonably cool weather during the first two
months of the period and the acquisition of the distributorships during the
period. Management anticipates that Snapper will not be profitable for the full
year of 1997 as it completes the repurchase of certain finished goods from
distributors for resale to dealers in subsequent periods. Management believes
that these actions will benefit Snapper's operating and financial performance in
the future.
Six Months Ended June 30, 1997
REVENUES
Snapper's 1997 period sales were $101.8 million. Snapper continued to
implement its program to sell products directly to dealers. In implementing
this program to restructure its distributor network, Snapper repurchased
certain distributor inventory which resulted in sales reductions of $6.3
million. Sales of lawn and garden equipment contributed the majority of the
revenues during the period. Sales were lower than anticipated due to
unseasonably cool weather during April and May.
Gross profit during the period was $32.1 million. Although higher sales
margins were obtained during the period due to the continuing implementation of
the program to restructure the distribution network, the low profit results were
caused by lower than anticipated sales as noted above.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses were $31.3 million for the
period. In addition to normal selling, general administrative expenses, these
expenses reflect additional television commercial expenditures to assist Snapper
dealers during the distribution network restructuring, as well as acquisition
expenditures related to two large distributorships purchased during the period.
OPERATING LOSSES
Snapper experienced an operating loss of $1.5 million during the period. The
loss was the result of unseasonably cool weather during April and May of the
period and the acquisition of the distributorships during the period. Management
anticipates that Snapper will not be profitable for the full year of 1997 as it
completes the repurchase of certain finished goods from distributors for resale
to dealers in subsequent periods. Management believes that these actions will
benefit Snapper's operating and financial performance in the future.
LIQUIDITY AND CAPITAL RESOURCES
MMG CONSOLIDATED
Six Months Ended June 30, 1997 Compared to Six Months Ended June 30, 1996.
CASH FLOWS FROM OPERATING ACTIVITIES
Cash used in operations for the six months ended June 30, 1997 was $38.1
million, an increase in cash used in operations of $18.0 million from the
same period in the prior year.
Losses from operations include significant non-cash items of
depreciation, amortization, equity in losses of investees, writedown of the
investment in RDM, loss on early extinguishment of debt and losses
allocable to minority interests. Non-cash items increased $30.9 million from
$8.4 million to $39.3 million for the six months ended June 30, 1996 and
1997, respectively. The increase relates principally to the increase in
depreciation and amortization associated with the acquisition of Landmark,
the consolidation of Snapper and the equity losses of and writedown of the
Company's investment in RDM partially offset by the reduction in equity
in losses of the Communication Group's Joint Ventures and by losses allocable
to AAT's minority owners. Changes in assets and liabilities, net of the
effect of acquisitions, decreased cash flows for the six months ended June
30, 1997 by $17.6 million and increased cash flows by $700,000 for the six
months ended June 30, 1996.
The decrease in cash flows for the six months ended June 30, 1997
resulted from the increased losses in the Communications Group's operations
due to the start-up nature of these operations and increases in selling,
general and administrative expenses to support the increase in the number of
joint ventures. The increase in operating assets principally reflects
increases in inventory of Snapper products.
33
<PAGE>
CASH FLOWS FROM INVESTING ACTIVITIES
Cash used in investing activities increased $41.2 million to $44.2
million for the six months ended June 30, 1997. The principal reasons for
the increase are increases in investments in and advances to joint ventures
and additions to property, plant as specified of $20.6 million and $9.6
million, respectively in 1997 as compared to $12.1 million and $1.7 million,
respectively, in 1996 and the Communications Group utilized $8.1 million of
funds in acquisitions in the six months ended June 30, 1997.
CASH FLOWS FROM FINANCING ACTIVITIES
Cash provided by financing activities was $3.2 million for the six
months ended June 30, 1997 a decrease of $1.8 million with the same period in
the prior year. Of the $18.8 million of debt payments, $15.0 million was the
repayment of the 9-7/8% Debentures and $1.2 million of other notes. The
additions to long-term debt of $19.6 million was borrowed under the Snapper
Revolver and Working Capital Facility.
THE COMPANY
MMG is a holding company and, accordingly, does not generate cash flows. The
Communications Group is dependent on MMG for significant capital infusions to
fund its operations and make acquisitions, as well as to fulfill its commitments
to make capital contributions and loans to its Joint Ventures. Such funding
requirements are based on the anticipated funding needs of its Joint Ventures
and certain acquisitions committed to by the Company. Future capital
requirements of the Communications Group, including future acquisitions, will
depend on available funding from the Company and on the ability of the
Communications Group's Joint Ventures to generate positive cash flows. In
addition, Snapper is restricted under covenants contained in its credit
agreement from making dividend payments or advances to MMG.
The Communications Group is engaged in businesses that are capital
intensive and require the investment of significant amounts of capital in
order to construct and develop operational systems and market its services.
Although MMG generated net cash proceeds from the sale of the entertainment
assets and it will have no significant long-term debt, MMG will require
additional financing in order to satisfy the Communications Group's on-going
capital requirements and to achieve the Communications Group's long-term
business strategies. Such additional capital may be provided through the
public or private sale of debt or equity securities. On August 6, 1997, MMG
filed a Registration Statement with the Commission to register $150.0
million. No assurance can be given that the Company will consummate this
financing or that any additional financing will be available to MMG on
acceptable terms. If adequate additional funds are not available, there can
be no assurance that the Company will have the funds necessary to support the
current needs of the Communications Group's current investments or any of the
Communications Group's additional opportunities or that the Communications
Group will be able to obtain financing from third parties. If such financing
is unavailable, the Communications Group may not be able to further develop
existing ventures and the number of additional ventures in which it invests
may be significantly curtailed.
Management believes that its long term liquidity needs will be satisfied
through a combination of the Company's successful implementation and execution
of its growth strategy to become a global communications and media company and
the Communications Group's Joint Ventures achieving positive operating results
and cash flows through revenue and subscriber growth and control of operating
expenses.
As the Communications Group is in the early stages of development, the
Company expects this group 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.
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
34
<PAGE>
all of its Joint Ventures 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,
Global Systems Mobile ("GSM") 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, with the exception of its GSM Joint Ventures. The GSM ventures
have been funded to date on a pro-rata basis by western sponsors, and the
Communications Group has funded its pro rata share of the GSM Joint Venture
obligations. On June 25, 1997 the GSM Joint Venture in Latvia entered into
a loan agreement with the European Bank for Reconstruction and Development to
provide up to $23.0 million in financing. The Communications Group has had
and continues to have discussions with vendors, commercial lenders and
international financial institutions to provide additional funding for the
GSM Joint Ventures. 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 between the Joint Ventures and the Communications Group
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 rates ranging from the prime rate to the prime rate plus 6%
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 Joint Venture 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 June 30, 1997, the
Communications Group was committed to provide funding under the various
credit lines in an aggregate amount of approximately $92.3 million, of which
$15.2 million remained unfunded. The Communications Group's funding
commitments under a credit agreement are contingent upon its approval of the
Joint Venture's business plan. The Communications Group reviews the actual
results compared to the approved business plan 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 their ability
to attract subscribers to their systems, their ability to control operating
expenses and the sale of commercial advertising time in non-subscriber
businesses. Management's current plans with respect to the Joint Ventures are to
increase subscriber and advertiser bases and thereby 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 in developing management
information systems and automated customer care and service systems. No
assurances can be given that such initiatives will be successful.
35
<PAGE>
Additionally, if the Joint Ventures 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 significant political, economic and social risks inherent in doing business
in emerging markets such as Eastern Europe, the former republics of the Soviet
Union, PRC and other selected emerging markets. 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 rate
fluctuations and controls, civil disturbances, deprivation or unenforceablility
of contractual rights, and taking of property without fair compensation.
For the six months ended June 30, 1997, the Communications Group's primary
source of funds was from the Company in the form of non-interest bearing
intercompany loans.
36
<PAGE>
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.
LANDMARK THEATRE GROUP
Landmark's liquidity is generated from operations and on an as needed
basis with short-term working capital funding from the Company.
Landmark's current strategy is to develop and build additional theaters
and screens in target markets that complement the existing position in such
markets or that provide Landmark with a strategic position in a new market.
Prior to commitment, management conducts an exhaustive study of each
potential site. Such a study includes a review of competition currently in
the market and any potential competition as well as market demographics.
For the six months ended June 30, 1997, Landmark has opened one theater
(3 screens) at a total cost of approximately $1.4 million. During the
remainder of 1997, Landmark expects to open an additional theater with four
screens at a cost of $1.0 million. Landmark expects to fund the expansion of
its properties through operating cash flow. Also, the Company has closed two
theaters (2 screens) located in San Diego.
SNAPPER
Snapper's liquidity is generated from operations and borrowings. On
November 26, 1996, Snapper entered into a credit agreement (the "Snapper
Credit Agreement") with AmSouth pursuant to which AmSouth has agreed to make
available to Snapper a revolving line of credit up to $55.0 million, the
Snapper Revolver, through January 1, 1999. The Snapper Revolver is guaranteed
by the Company. The Snapper Revolver contains covenants regarding minimum
quarterly cash flow and equity requirements.
On April 30, 1997, Snapper closed on the Working Capital Facility with
AmSouth. The $10.0 million working capital facility will (i) have a PARI
PASSU collateral interest in all of Snapper's assets (including rights under
the Make-Whole and Pledge Agreement made by Metromedia in favor of AmSouth in
connection with the Snapper Revolver), (ii) accrue interest on borrowings at
AmSouth's floating prime rate (same borrowing rate as the Snapper Revolver),
and (iii) become due and payable on October 1, 1997. As additional
consideration for AmSouth making this new facility available, Snapper
provided to AmSouth the joint and several guarantees of Messrs. Kluge and
Subotnick, Chairman of the Board of MMG and Vice Chairman, President and
Chief Executive Officer of MMG, respectively, on the $10.0 million working
capital facility.
37
<PAGE>
At June 30, 1997, Snapper was in default with certain financial covenants
under the Snapper Revolver and Working Capital Facility, which default has been
waived by AmSouth.
Snapper has entered into various long-term manufacturing and purchase
agreements with certain vendors for the purchase of manufactured products and
raw materials. As of June 30, 1997, noncancelable commitments under these
agreements amounted to approximately $25.0 million.
Snapper has an agreement with a financial institution which makes
available floor plan financing to distributors and dealers of Snapper
products. This agreement provides financing for dealer inventories and
accelerates Snapper's cash flow. Under the terms of the agreement, a default
in payment by a dealer is nonrecourse to both the distributor and to Snapper.
However, the distributor is obligated to repurchase any equipment recovered
from the dealer and Snapper is obligated to repurchase the recovered
equipment if the distributor defaults. At June 30, 1997, there was
approximately $42.4 million outstanding under this floor plan financing
arrangement.
Management believes that available cash on hand, borrowings from the
Snapper Revolver and Working Capital Facility, and the cash flow generated by
operating activities will provide sufficient funds for Snapper to meet its
obligations.
38
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements under the captions "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and elsewhere in
this Form 10-Q 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, 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, competition from other
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, the republics of the former
Soviet Union, the PRC 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;
developing legal structures in Eastern Europe, the republics of the former
Soviet Union, the PRC 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, the republics of the
former Soviet Union and the PRC; exchange rate fluctuations; license renewals
for the Company's communications investments in Eastern Europe, the republics
of the former Soviet Union and the PRC; the loss of any significant customers
(especially clients of the Communications Group); changes in business
strategy or development plans; the significant indebtedness of the Company;
quality of management; availability of qualified personnel; changes in or the
failure to comply with, government regulations; and other factors referenced
in the Form 10-Q.
39
<PAGE>
PART II. Other Information
ITEM 1. LEGAL PROCEEDINGS.
For a description of legal proceedings, reference is made to the Company's
quarterly report of Form 10-Q for the quarter ended June 30, 1997.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OS SECURITY HOLDERS.
At the Company's 1997 Annual Meeting of Stockholders held on July 10, 1997,
the stockholders of the Company were asked to consider and vote on the
following matters: (i) a proposal to consider and approve the Stock Purchase
Agreement, dated as of May 2, 1997, by and among the Company, Orion Pictures
Corporation ("Orion") and P&F Acquisition Corp. ("P&F"), and the consummation
of the transactions contemplated thereby, including the sale of all of the
outstanding capital stock of Orion and all of its subsidiaries (other than
Landmark Theatre Group and its subsidiaries) to P&F, the parent company of
Metro-Goldwyn-Mayer Inc. (the "Entertainment Group Sale"); (ii) the election
of two members to the Company's Board of Directors to serve as Class II
Directors for three year terms ending in the year 2000; (iii) the
ratification of the appointment of KPMG Peat Marwick LLP as the Company's
independent accountants for the year ending December 31, 1997; and (iv) a
proposal submitted by a stockholder of the Company to amend the Company's
certificate of incorporation to allow stockholders of the Company to take
action by written consent and to call special meetings (the "Stockholder
Proposal").
At such meeting, a majority of the Company's stockholders i) voted to approve
the Entertainment Group Sale, ii) elected Mr. Richard J. Sherwin and Mr.
Leonard White as Class II Directors for three year terms ending in the year
2000, iii) ratified the appointment of KPMG Peat Marwick LLP as the Company's
independent accountants for the year ending December 31, 1997 and iv) did not
approve the Stockholder Proposal.
The following is a summary of the voting results with respect to each of the
proposals:
<TABLE>
<CAPTION>
PROPOSAL FOR AGAINST ABSTAIN
---------- ---- -------- -------
<S> <C> <C> <C>
1. The Entertainment Group Sale 44,165,204 775,602 64,775
FOR WITHHELD
--- --------
2. The Election of Class II
Directors
Name
-----
Richard J. Sherwin 56,093,574
Leonard White 56,092,413
FOR AGAINST ABSTAIN
--- ------- -------
3. Ratification of the
Appointment of Independent
Auditors 57,808,879 54,237 45,412
4. The Stockholder Proposal 9,671,945 31,959,185 2,774,437
40
</TABLE>
<PAGE>
No other matters were submitted to a vote of the Company's stockholders,
through the solicitation of proxies or otherwise, during the second quarter
of the year ended December 31, 1997.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
--------
EXHIBIT NUMBER
------
<TABLE>
<CAPTION>
DESCRIPTION
-------------
<S> <C>
11* Computation of Earnings Per Share
27* Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K
-------------------
(i) On May 6, 1997, a Form 8-K was filed to report the execution of a
Stock Purchase Agreement with P&F Acquisition Corp. concerning the sale of
substantially all of the Company's entertainment assets.
- ------------------------
* Filed herewith
41
<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
---------------------------
Silvia Kessel
Executive Vice President, Chief
Financial Officer and Treasurer
Dated: August 14, 1997
42
<PAGE>
EXHIBIT 11
METROMEDIA INTERNATIONAL GROUP, INC.
Computation of Earnings Per Share
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------
JUNE 30, JUNE 30,
1997 1996
--------- -----------
<S> <C> <C>
Loss Per Share--Primary
Loss from continuing operations............................................. $ (46,609) $ (16,428)
Loss from discontinued operations........................................... (25,263) (2,422)
Loss from extraordinary item................................................ (1,094) --
--------- -----------
Net loss available for common
stock and common stock equivalents.......................................... $ (72,966) $ (18,850)
--------- -----------
--------- -----------
Common stock and common stock equivalents (A)
Weighted average common shares outstanding
during the period............................................................ 66,186 42,661
--------- -----------
--------- -----------
Loss Per Share--Primary
Continuing operations........................................................ $ (0.70) $ (0.38)
Discontinued operations...................................................... (0.38) (0.06)
Extraordinary item........................................................... (.02) --
--------- -----------
Net loss..................................................................... $ (1.10) $ (0.44)
--------- -----------
--------- -----------
Loss Per Share--Assuming Full Dilution (B)
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
-----------------------
JUNE 30, JUNE 30,
1997 1996
--------- -----------
<S> <C> <C>
Loss Per Share--Primary
Loss from continuing operations.............................................. $ (58,764) $ (29,251)
Loss from discontinued operations............................................ (35,366) (8,740)
Loss from extraordinary item................................................. (1,094) --
--------- -----------
Net loss available for common
stock and common stock equivalents.......................................... $ (95,224) $ (37,991)
--------- -----------
--------- -----------
Common Stock and Common Stock Equivalents (A)
Weighted average common shares outstanding
during the period........................................................... 66,171 42,638
--------- -----------
--------- -----------
Loss Per Share--Primary
Continuing operations........................................................ $ (0.89) $ (0.69)
Discontinued operations...................................................... (0.53) (0.20)
Extraordinary item........................................................... (.02) --
--------- -----------
Net loss..................................................................... $ (1.44) $ (0.89)
--------- -----------
--------- -----------
Loss Per Share--Assuming Full Dilution (B)
</TABLE>
(A) Common stock equivalents are not included in primary loss per share in
the three and six months ended June 30, 1997 and 1996 because they would be
anti-dilutive.
(B) Fully diluted loss per share is not used in the three and six months
ended June 30, 1997 and 1996 because it is less than primary loss per share.
<TABLE> <S> <C>
<PAGE>
<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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1997
<CASH> 10,262
<SECURITIES> 0
<RECEIVABLES> 39,113
<ALLOWANCES> (1,887)
<INVENTORY> 81,407
<CURRENT-ASSETS> 133,467
<PP&E> 83,769
<DEPRECIATION> (9,325)
<TOTAL-ASSETS> 539,133
<CURRENT-LIABILITIES> 123,438
<BONDS> 188,453
0
0
<COMMON> 66,254
<OTHER-SE> 92,571
<TOTAL-LIABILITY-AND-EQUITY> 539,133
<SALES> 139,768
<TOTAL-REVENUES> 139,768
<CGS> 92,286
<TOTAL-COSTS> 165,872
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,458
<INCOME-PRETAX> (58,441)
<INCOME-TAX> 323
<INCOME-CONTINUING> (58,764)
<DISCONTINUED> (35,366)
<EXTRAORDINARY> 1,094
<CHANGES> 0
<NET-INCOME> (95,224)
<EPS-PRIMARY> (1.44)
<EPS-DILUTED> (1.44)
</TABLE>
