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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549-1004
FORM 10-K
(Mark One)
/ / Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
OR
/ X / Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from May 1, 1993 to March 31, 1994 (1)
Commission file number 1-5404
PARAMOUNT COMMUNICATIONS INC.
(Exact name of registrant as specified in its charter)
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Delaware 74-1330475
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
15 Columbus Circle, New York, New York 10023-7780
(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code 212-373-8000
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Securities registered pursuant to Section 12(b) of the Act:
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Name of each exchange
Title of each class on which registered
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Common Stock, $1 par value (2) )
7% Subordinated Debentures, Series A due 2003 )
7% Subordinated Debentures, Series B due 2003 ) New York Stock Exchange
Common Stock Purchase Rights (2) )
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Securities registered pursuant to Section 12(g) of the Act:
None
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, and (2) has been subject to such
filing requirements for the past 90 days. Yes / X /. No / /.
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. / /
The aggregate market value of the registrant's voting stock held
by nonaffiliates of the registrant was approximately $2.8 billion at
June 24, 1994. (3)
At June 24, 1994, 122,792,910 shares of the registrant's Common Stock,
$1 par value, were outstanding.
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(1) Paramount Communications Inc. has changed its fiscal year end from
April 30 to March 31. This transition report is for the eleven months
ended March 31, 1994.
(2) To be delisted following completion of the merger with Viacom Inc.
See "Item 1 - Business."
(3) Calculated by excluding all shares held by executive officers and
directors of registrant without conceding that all such
persons are "affiliates" of registrant for purposes of the Federal
securities laws.
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1
PART I
ITEM 1. BUSINESS.
In March 1994, pursuant to a tender offer by Viacom Inc. ("Viacom
Offer"), Paramount Communications became a majority owned subsidiary of Viacom.
It is expected that in July 1994, Paramount Communications will become a wholly
owned subsidiary of Viacom at the effective time of a merger between Paramount
Communications and a subsidiary of Viacom ("Viacom Merger").* The businesses
of Paramount Communications Inc. are entertainment and publishing.
Entertainment includes the production, financing and distribution of motion
pictures, television programming and prerecorded videocassettes and the
operation of motion picture theaters, independent television stations, regional
theme parks and Madison Square Garden. Publishing includes the publication and
distribution of hardcover and paperback books for the general public, textbooks
for elementary schools, high schools and colleges, and the provision of
information services for business and professions.
PRINCIPAL ACTIVITIES**
ENTERTAINMENT
Theatrical Motion Pictures. Paramount Pictures produces and/or
finances feature motion pictures for exhibition in theaters and on television
and for distribution by videocassettes and video discs. Motion pictures are
produced by Paramount Pictures, produced by independent producers and financed
in whole or in part by Paramount Pictures, or produced by others and acquired
by Paramount Pictures. Each picture is, in effect, a separate and distinct
product with its financial success dependent upon many factors, among which
cost and public response are of fundamental importance. In the eleven-month
period ended March 31, 1994, Paramount Pictures released 14 feature motion
pictures. Paramount Pictures distributes its motion pictures for theatrical
release outside the United States and Canada through United International
Pictures, a company owned by Paramount Pictures, MCA Inc. and MGM.
Most motion pictures are also licensed for exhibition on television,
with fees generally collected in installments. License fees are recorded as
revenue in the year that the films are available for telecast which, among
other reasons, may cause substantial fluctuation in Paramount Pictures'
operating results. At March 31, 1994, the unrecognized revenues attributable
to licensing of completed films from Paramount Pictures' license agreements
were $579 million. Paramount Pictures has an exclusive pay television license
agreement with Home Box Office which includes new Paramount Pictures' motion
pictures released theatrically through December 1997. Paramount Pictures also
licenses its motion pictures to home and hotel/motel pay-per-view, airlines,
schools and universities. Paramount Pictures also distributes its motion
pictures for pay television release outside the United States and Canada
through United International Pictures. In 1993, Paramount acquired a joint
venture interest in HBO Pacific Partners, C.V. and granted to it a license to
carry Paramount Pictures' motion pictures on pay television in Singapore,
Thailand, the Philippines and other territories through 1999. Paramount
Pictures has approximately 900 motion pictures in its library. United
International Pictures and United Cinemas International (as described below)
are the subject of various governmental inquiries by the Commission of the
European Community and the Monopolies and Mergers Commission of the United
Kingdom. Such inquiries are not expected to have a material effect on the
business of Paramount.
Television Programs. Paramount Pictures is engaged in the
production and distribution of series, mini-series, specials and
made-for-television movies for network television, first-run syndication, pay
and basic cable, videocassettes and video discs, and live television
programming. The receipt and recognition of revenues for license fees for
completed television programming in syndication is similar to that of feature
films exhibited on television and, consequently, operating results are subject
to substantial fluctuation. At March 31, 1994, the unrecognized revenues from
such television license agreements were $188 million. Certain programs are
licensed in exchange for cash and /or advertising time which Paramount Pictures
retains and sells through its wholly-owned affiliate Premier Advertiser Sales.
Premier Advertiser Sales also sells advertising time in programming distributed
by third parties. Paramount Pictures' foreign television revenues include the
licensing of series, mini-series and specials made for U.S. television and
theatrical and made-for-television movies that are part of its television
library. In addition, foreign television revenues also include revenues
derived from distribution of television product acquired from independent
producers.
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* For a further description see "Note B - Viacom Inc. Merger" on page
F-21. Paramount Communications presently anticipates that following
completion of the merger it no longer will be subject to the
requirements to file periodic reports pursuant to the Securities
Exchange Act of 1934, as amended ("Exchange Act"). In lieu of such
reports,a summary of the financial results of Paramount Communications
would be included as a note to the periodic reports of Viacom filed
pursuant to the Exchange Act.
** For a discussion of the Company's business segments and operating
results see "Financial Reporting by Business Segments" and
"Management's Discussion and Analysis" on pages F-6 through F-15 and
F-31.
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Home Video. Paramount Pictures sells videocassettes for the home
video market, featuring its motion picture and television program library,
acquisitions from third parties and programs made originally for the home video
market. It also licenses this product for distribution on video disc.
Paramount Pictures distributes its home video products outside the United
States and Canada through Cinema International B.V., a joint venture with MCA.
Theatrical Exhibition. Famous Players operates 461 screens in 113
theaters throughout Canada. Cinamerica, a joint venture with Time Warner Inc.,
includes Mann and Festival Theaters and operates 341 screens in 66 theaters in
California, Colorado, Arizona and Alaska. United Cinemas International, a
joint venture with MCA, operates 247 screens in 26 theaters in the United
Kingdom and Ireland, 42 screens in 3 theaters in Germany and 78 screens in 24
theaters in Spain. United Cinemas International plans to construct and operate
additional theaters in the United Kingdom, Germany, Austria and Spain. It also
manages in six countries, 31 screens in 17 theaters which are owned by Cinema
International Corporation, a joint venture with MCA.
Television Broadcasting and Cable Television Networks. Paramount
Stations Group owns and operates seven television stations: WTXF-TV,
Philadelphia; KRRT(TV), San Antonio; WLFL-TV, Raleigh/Durham; WDCA-TV,
Washington, D.C.; KTXA(TV), Dallas; KTXH(TV), Houston; and WKBD-TV, Detroit.
An option which expires July 25, 1994 to purchase KRRT (TV), San Antonio has
been granted to a third party.
Paramount Communications and MCA jointly own USA Networks, which
operates two national advertiser-supported basic cable television networks, USA
Network and the Sci-Fi Channel. USA Network is one of the largest of its kind
in the United States, reaching 62.2 million households. The Sci-Fi Channel
reaches 15.8 million households. Under the joint venture agreement for USA
Networks between subsidiaries of Paramount and MCA, such subsidiaries and
certain of their affiliates are restricted, subject to certain exceptions and
unless the other party consents, from engaging outside of USA Networks in the
business of providing to cable television systems national, video, advertiser-
supported, basic cable entertainment networks or providing national video
entertainment programming services to cable television systems and/or other
entities on a pay-per-view basis. Although Paramount does not believe that
these restrictions were violated by the consummation of the Viacom Offer, there
can be no assurance that MCA might not seek damages or other relief in
connection with the consummation of the Viacom Offer or the Viacom Merger or
the business activities that may be engaged in thereafter.
Paramount and BHC Communications, Inc., which is majority-owned by
Chris-Craft Industries, Inc., are forming the Paramount Television Network
which will provide prime-time television programming primarily to broadcast
affiliates nationwide in competition with the three major networks and the Fox
Broadcasting Network. The network is expected to begin operations in January
1995.
Theme Parks. Paramount Parks owns and operates five regional theme
parks: Paramount's Carowinds, in Charlotte, North Carolina; Paramount's Great
America, in Santa Clara, California; Paramount's Kings Dominion located near
Richmond, Virginia; Paramount's Kings Island located near Cincinnati, Ohio and
Paramount Canada's Wonderland located near Toronto, Ontario. In May 1993,
Paramount Parks acquired the 80% interest in Paramount Canada's Wonderland
which it did not previously own. The majority of the theme parks' operating
income is generated from May through September.
Madison Square Garden. Madison Square Garden's activities include
the operation of the Madison Square Garden Arena, which seats approximately
20,000 people, The Paramount, a theater which seats approximately 5,600 people,
the New York Knickerbockers Basketball Club of the National Basketball
Association and the New York Rangers Hockey Club of the National Hockey League.
It also supplies and distributes television programming for cable systems
principally in New York, New Jersey and Connecticut through the Madison Square
Garden Network. Its programming includes its own sporting events and rights to
the New York Yankees baseball games through the year 2000. In addition,
Madison Square Garden produces, promotes and/or presents live entertainment,
which includes television event production of the Miss Universe, Miss USA and
Miss Teen USA pageants and auto thrill shows through SRO Motorsports. The sale
of the operations of Madison Square Garden is currently being explored.
Competition and Regulation. Paramount Pictures competes intensely
with other major studios and independent film producers in the production and
distribution of motion pictures and videocassettes. Similarly, as a producer
and distributor of television programs, it competes with other studios and
independent producers in the licensing of television programs to both networks
and independent television stations. Paramount Pictures' competitive position
primarily depends on the quality of the product produced, public response and
cost. Theatrical exhibitors compete for access to films and audiences.
Paramount's television stations
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compete in their respective markets for viewers and advertisers with other
independent and network affiliated broadcast stations and with cable channels.
USA Networks vies with other cable networks and with independent television
stations and network affiliated broadcast stations to attract viewers and
advertisers. Madison Square Garden's sports and entertainment operations
compete against other sporting and entertainment events in their respective
areas. Paramount's theme parks compete with other theme parks in their
respective geographic regions as well as with other forms of leisure
entertainment.
Paramount Pictures is subject to a consent decree, entered in 1948,
which contains restrictions on certain motion picture trade practices in the
United States. Television broadcasting is subject to extensive regulation by
the Federal Communications Commission, which governs, among other things, the
issuance, transfer, term and renewal of broadcast licenses. Network and
syndication television revenues could be adversely affected by changes in the
regulatory restrictions imposed on the networks by the FCC and certain consent
decrees entered into by the networks. Provisions in the consent decrees
entered into by the television networks which prohibited the networks from
acquiring financial interests and syndication rights in television programming
by nonnetwork suppliers such as Paramount Pictures were recently vacated by a
federal district court. Accordingly, subject to certain restrictions imposed
by the FCC, the networks will be able to negotiate with program suppliers to
acquire financial interests and syndication rights in television programs that
air on the networks.
Properties and Employees. Paramount Pictures' studio in Los
Angeles, California, is used for production of most of its television series
and for production of some of its motion pictures. In addition, facilities at
the studio are rented to outside motion picture and television producers. The
63-acre studio contains 32 production sound stages. The theater operations,
either directly or through joint ventures, own or operate under lease the
theaters described above under "Theatrical Exhibition." Paramount Stations
Group leases approximately 240,000 square feet of office and studio space. The
theme park operations in the United States include 1,627 acres owned and 294
acres leased and in Canada include 200 acres owned and 97 acres leased.
Madison Square Garden owns the Madison Square Garden facility. The
Entertainment operations (exclusive of joint ventures) employ approximately
3,400 persons on a full-time basis.
PUBLISHING
Paramount Publishing, which was renamed Simon & Schuster in May 1994,
includes well-known imprints such as Simon & Schuster, Pocket Books, Prentice
Hall, Silver Burdett Ginn and Computer Curriculum Corporation, among others.
In February 1994, Paramount completed the acquisition of Macmillan Publishing
Company and certain other publishing assets of Macmillan, Inc. for
approximately $553 million. Macmillan Publishing, which includes such imprints
as "Macmillan" and "Scribner's," published books and materials through five
divisions -- College, Children's Books, Adult Trade, Reference and The Free
Press, a publisher of scholarly social, political, behavioral and management
science books -- as well as Jossey-Bass, a publisher of books and periodicals
for select professionals.
Educational Publishing. The Elementary, Secondary, Higher Education
and Educational Technology groups publish elementary, secondary and college
textbooks and related materials, computer-based educational products,
audiovisual products and vocational and technical materials under such imprints
as "Prentice Hall," "Silver Burdett Ginn," "Silver Burdett Press," "Dillon
Press," "New Discovery," "Crestwood House," "Julian Messner," "Allyn & Bacon,"
"Globe Fearon," "Modern Curriculum Press," "Coronet/MTI Film & Video,"
"Computer Curriculum Corporation," "Simon & Schuster Workplace Resources,"
"Academic Reference," "Prentice Hall Regents," "Prentice Hall PTR," "American
Teaching Aids," "Judy/Instructo," "Good Apple," "Ginn Press," "Alemany" and
"Cambridge."
Consumer Publishing. The Consumer group publishes and distributes
hardcover, trade paperback and mass market books and audio tapes and electronic
products such as CD-Roms. It publishes its hardcover trade books principally
under the "Simon & Schuster," "Pocket Books," "Poseidon Press," "Little
Simon," "Simon & Schuster Books for Young Readers," "Green Tiger," "Picture
Book Studios," and "Rabbit Ears," imprints; its trade paperback books under
the "Fireside" and "Touchstone" imprints; and its mass market paperbacks under
the "Pocket Books," "Pocket Star," "Archway," "Washington Square Press" and
"Minstrel" imprints. Audio cassettes are sold under the imprints "AudioWorks"
and "Sound Ideas." Books of other publishing companies, including "Harlequin"
and "Silhouette" romance novels, books published under the imprints of "Baen,"
"Meadowbrook," and audio cassettes under the "Nightingale Conant Audio"
imprint are also distributed.
The Consumer group also publishes or distributes consumer information
and special-interest books, including "Prentice Hall" reference books; "Arco"
college entrance and civil service test preparation material; "J.K. Lasser" tax
guides; "Webster's New World," "Cassell's" and "Harrap's" bilingual
dictionaries; travel books under the "Frommer's," "American Express,"
"Baedeker,"
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and "Mobil" names; cookbooks under the "Betty Crocker" name; gardening
books under the "Burpee" and "Horticulture" names; maps under the "Gousha"
imprint; and "Monarch Notes" study guides.
Business, Technical and Professional. The Business, Technical and
Professional group publishes books, newsletters, looseleaf services and
software for a variety of professional groups, including lawyers, accountants,
tax professionals, business executives and the medical community. These
materials are published under the "Prentice Hall," "Bureau of Business
Practice," "Parker," "Prentice Hall Law & Business," "Appleton & Lange" and
"New York Institute of Finance" imprints. It publishes Prentice Hall Computer
Publishing computer reference books under the "Que," "Brady," "Sams," "New
Riders," "Alpha Books" and "Hayden" imprints. In May 1994, Prentice Hall
Computer Publishing was renamed Macmillan Computer Publishing. It also
provides information and services to corporate attorneys and lending
institutions, provides professional tax preparation and practice management
software to accounting firms and law firms, licenses software designed to
manage and maintain trademark and patent registrations to law firms and large
corporations and provides business training programs to corporations. In
May 1994, Simon & Schuster announced plans to divest certain units within this
group.
International. The international operations include publishing in
Canada, the United Kingdom, Australia, Brazil, Mexico, Singapore, Japan and
India primarily under the "Prentice Hall" and "Simon & Schuster" names as well
as distribution of Publishing's products worldwide. Paramount also publishes
German language computer books and software in Germany under the Markt &
Technik name.
Marketing and Competition. Publishing rights derive from authors
and other publishers and are essential because they are the principal source of
Publishing's products. Business reputation, financial resources, editorial and
marketing skills and distribution capabilities are the principal factors
involved in the competition for purchasing these rights. Sales are affected
principally by the public's reception and the publisher's marketing capability.
Publishing distributes through its own sales forces (including employees and
independent contractors), through wholesalers and retailers and by direct mail.
Competition in the elementary, secondary and higher education textbook
and the trade and paperback book fields is intense, with a number of strong
competitors. In the field of elementary and secondary school textbooks, 22
states and some local jurisdictions limit the textbooks that may be bought by
school systems to those books that have been approved by adoption or listing.
In the higher education textbook field, new books compete with used books. In
addition, book piracy affects sales in certain foreign markets. A large
portion of annual sales of educational textbooks is made during the June to
September period. In certain areas of publishing, books are usually sold on a
fully-returnable basis resulting in significant product returns to publishers.
In the field of information services to businesses and professionals, there are
numerous organizations that provide competitive materials and services.
Properties and Employees. Publishing's facilities comprise
approximately 7,890,000 square feet of space, of which about 5,070,000 square
feet are leased. These facilities are used for warehouse, distribution and
administrative functions. Publishing employs approximately 9,800 persons.
ITEM 2. PROPERTIES.
Paramount Communications and its subsidiaries lease approximately
439,000 square feet at 15 Columbus Circle, New York, New York, under a lease
expiring in 1995. The remainder of the response to this item is incorporated
in the response to Item 1.
ITEM 3. LEGAL PROCEEDINGS.
Paramount Communications from time to time receives claims from
Federal and state environmental regulatory agencies and other entities
asserting that it is or may be liable for environmental cleanup costs and
related damages arising out of certain operations conducted by its former
mining and manufacturing businesses. On the basis of its experience and the
information currently available to it, Paramount Communications does not
believe that the claims it has received will have a material adverse effect on
its financial condition. Paramount Communications and various of its
subsidiaries are parties to certain other legal proceedings. However, in the
opinion of counsel, these proceedings are not likely to result in judgments
that would have a material adverse effect on its financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Common Stock is traded on the New York Stock Exchange. The
following table summarizes the high and low market prices as reported on the
New York Stock Exchange Composite Tape and the cash dividends declared and paid
during the year ended October 31, 1992, the six months ended April 30, 1993
and the eleven months ended March 31, 1994:
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MARKET PRICE OF
COMMON STOCK (1)
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CASH
QUARTER ENDED HIGH LOW DIVIDENDS
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FISCAL YEAR ENDED OCTOBER 31, 1992
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January 31, 1992. . . . . . . . . . . . . . . $43 3/8 $36 1/2 $.175
April 30, 1992. . . . . . . . . . . . . . . . 48 3/4 42 1/2 .20
July 31, 1992 . . . . . . . . . . . . . . . . 48 43 1/4 .20
October 31, 1992. . . . . . . . . . . . . . . 46 3/8 41 1/4 .20
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Year. . . . . . . . . . . . . . . . . . . . . 48 3/4 36 1/2 .775
TRANSITION PERIOD FROM NOVEMBER 1, 1992
TO APRIL 30, 1993
January 31, 1993. . . . . . . . . . . . . . . $47 3/8 $41 7/8 $.20
April 30, 1993. . . . . . . . . . . . . . . . 52 5/8 45 5/8 .20
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Six Months. . . . . . . . . . . . . . . . . . 52 5/8 41 7/8 .40
TRANSITION PERIOD FROM MAY 1, 1993 TO
MARCH 31, 1994
July 31, 1993 . . . . . . . . . . . . . . . . $56 5/8 $49 1/2 $.20
October 31, 1993. . . . . . . . . . . . . . . 81 51 .20
January 31, 1994. . . . . . . . . . . . . . . 83 1/2 73 1/2 .20
Two Months Ended March 31, 1994 . . . . . . . 80 1/4 40 5/8 -
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Eleven Months . . . . . . . . . . . . . . . . 83 1/2 40 5/8 .60
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(1) Paramount Communications purchased 1,119,500 shares of its Common
Stock in the open market between August 13 and October 30, 1992, and it also
purchased 479,600 shares of its Common Stock in the open market between
November 2, 1992 and January 21, 1993.
In connection with the Viacom Inc. merger described in Note B to the
consolidated financial statements, subsequent to its January 1994 dividend, the
registrant has discontinued its regular quarterly dividend payment.
As of June 24, 1994, there were approximately 20,000 record holders of
Common Stock.
ITEM 6. SELECTED FINANCIAL DATA.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
The information required by Item 6 is found on page F-4; Item 7 is
found on pages F-7 through F-15; Item 8 is found on pages F-5 through F-32,
exclusive of pages F-7 through F-15, and Item 9 is found in the previously
filed Current Report on Form 8-K of Paramount Communications, dated March 18,
1994.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
ITEM 11. EXECUTIVE COMPENSATION.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Paramount Communications presently anticipates that, following
completion of the merger of Paramount Communications and a subsidiary of Viacom
Inc., as described in Note B on page F-21, it no longer will be subject to
the requirements to file periodic reports. In the event such reports are
required, the information required by Items 10 through 13 will be included in
the appropriate report, which will be filed within 120 days after the close of
Paramount Communications' fiscal year ended March 31, 1994, and is hereby
incorporated by reference.
PART IV
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ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
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(a) 1. Financial Statements--See index to financial statements on Page F-1.
2. In accordance with the general instructions to this Form, the schedules required by Regulation S-X will be
filed by amendment on Form 10-K/A on or before July 29, 1994.
3. Exhibits--
(3)(a) --Restated Certificate of Incorporation and Amendments thereto (Incorporated by
reference to Exhibit (4)(i)(A) of Paramount Communications' post-effective
amendment No. 3 to the registration statement on Form S-3 No. 2-83427).
*(3)(b) --Amended and restated By-laws.
(4)(a) --Instruments with respect to issues of long-term debt have not been filed as
exhibits to this Annual Report on Form 10-K as the authorized principal amount on
any one of such issues does not exceed 10% of the total assets of Paramount
Communications and its subsidiaries on a consolidated basis. Paramount
Communications agrees to furnish a copy of each such instrument to the Commission
upon request.
(4)(b) --Shareholder rights agreement dated as of September 7, 1988, as amended, between
Paramount Communications Inc. and Chemical Bank, as Rights Agent (Incorporated by
reference to Paramount Communications' registration statement on Form 8-A dated
September 14, 1988 and to Amendment No. 1 to Form 8-A on Form 8 dated June 8,
1989, Amendment No. 2 to Form 8-A on Form 8-A/A dated September 22, 1993,
Amendment No. 3 to Form 8-A on Form 8-A/A dated November 5, 1993, Amendment No. 4
to Form 8-A on Form 8-A/A dated November 15, 1993, Amendment No. 5 to Form 8-A
on Form 8-A/A dated January 5, 1994, Amendment No. 6 to Form 8-A on Form 8-A/A
dated January 31, 1994 and Amendment No. 7 to Form 8-A on Form 8-A/A dated March
2, 1994).
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(10)(i)(a) --Amended and Restated Agreement and Plan of Merger, dated as of February 4, 1994, as
further amended as of May 26, 1994, among Paramount Communications Inc., Viacom
Inc. and Viacom Sub Inc., a wholly owned subsidiary of Viacom (Incorporated by
reference to Annex I of the Registration Statement on Form S-4 of Viacom Inc.
which is attached as Exhibit (d)(1) to Amendment No. 2 to Schedule 13E-3 filed by
Paramount Communications Inc. with respect to the merger with Viacom).
(10)(i)(b) --Voting Agreement dated as of January 21, 1994, between National Amusements, Inc.
and Paramount Communications Inc. (Incorporated by reference to Exhibit 81 of
Amendment No. 28, dated January 24, 1994, to the Schedule 14D-9 filed by
Paramount Communications Inc. with respect to the tender offer by Viacom Inc.).
+ (10)(iii)(A)(1) --Amended and restated agreement, dated as of October 1, 1985 and restated as of June
23, 1989, between Paramount Communications and Martin S. Davis (Incorporated by
reference to Exhibit (10)(ii)(A)(1) of Paramount Communications' Annual Report on
Form 10-K for the fiscal year ended October 31, 1989).
+ (10)(iii)(A)(2) --Amendment dated as of February 11, 1994, to the Amended and Restated Agreement
dated as of October 1, 1985 and restated as of June 23, 1989 between Paramount
Communications and Martin S. Davis (Incorporated by reference to Exhibit
(10)(iii)(A)(1) of Paramount Communications' Quarterly Report on Form 10-Q for
the quarter ended January 31, 1994).
+ (10)(iii)(A)(3) --Amended and restated agreement, dated as of November 17, 1987 and restated as of
June 23, 1989, between Paramount Communications and Ronald L. Nelson
(Incorporated by reference to Exhibit (10)(ii)(A)(2) of Paramount Communications'
Quarterly Report on Form 10-Q for the quarter ended January 31, 1990).
+ (10)(iii)(A)(4) --Amendment, dated as of December 21, 1992, to the amended and restated agreement,
dated as of November 17, 1987 and restated as of June 23, 1989, between Paramount
Communications and Ronald L. Nelson (Incorporated by reference to Exhibit
(10)(iii)(A)(5) of Paramount Communications' Annual Report on Form 10-K for the
fiscal year ended October 31, 1992).
+ (10)(iii)(A)(5) --Agreement, dated as of January 12, 1993, between Paramount Communications and
Ronald L. Nelson (Incorporated by reference to Exhibit (10)(iii)(A)(1) of
Paramount Communications' Quarterly Report on Form 10-Q for the quarter ended
January 31, 1993).
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+ (10)(iii)(A)(6) --Amendment dated as of February 11, 1994, to the Agreement dated as of January 12,
1993 between Paramount Communications and Ronald L. Nelson (Incorporated by
reference to Exhibit (10)(iii)(A)(2) of Paramount Communications' Quarterly
Report on Form 10-Q for the quarter ended January 31, 1994).
+ (10)(iii)(A)(7) --Amended and restated agreement, dated as of October 1, 1985 and restated as of June
23, 1989, between Paramount Communications and Donald Oresman (Incorporated by
reference to Exhibit (10)(ii)(A)(1) of Paramount Communications' Quarterly Report
on Form 10-Q for the quarter ended January 31, 1990).
+ (10)(iii)(A)(8) --Amendment dated as of February 11, 1994, to the Amended and Restated Agreement
dated as of October 1, 1985 and restated as of June 23, 1989 between Paramount
Communications and Donald Oresman (Incorporated by reference to Exhibit
(10)(iii)(A)(3) of Paramount Communications' Quarterly Report on Form 10-Q for
the quarter ended January 31, 1994).
+ (10)(iii)(A)(9) --Agreement, dated as of September 10, 1992, between Paramount Communications and
Rudolph L. Hertlein (Incorporated by reference to Exhibit (10)(iii)(A)(8) of
Paramount Communications' Annual Report on Form 10-K for the fiscal year ended
October 31, 1992).
+ (10)(iii)(A)(10) --Agreement, dated as of June 2, 1989, between Paramount Communications and Lawrence
E. Levinson (Incorporated by reference to Exhibit (10)(ii)(A)(1) of Paramount
Communications' Quarterly Report on Form 10-Q for the quarter ended July 31,
1989).
+ (10)(iii)(A)(11) --Agreement, dated April 5, 1993, between Paramount Communications and Robert
Greenberg (Incorporated by reference to Exhibit (10)(iii)(A)(1) of Paramount
Communications' Quarterly Report on Form 10-Q for the quarter ended April 30,
1993).
+ (10)(iii)(A)(12) --1992 Stock Option Plan (the "1992 Plan") (Incorporated by reference to Exhibit I of
Paramount Communications' Proxy Statement dated January 27, 1992 for the 1992
Annual Meeting of Stockholders).
+ (10)(iii)(A)(13) --1989 Stock Option Plan, as amended (the "1989 Plan") (Incorporated by reference to
Exhibit (10)(iii)(A)(2) of Paramount Communications' Quarterly Report on Form
10-Q for the quarter ended April 30, 1992).
</TABLE>
<PAGE> 10
9
<TABLE>
<S> <C>
+ (10)(iii)(A)(13)(a) --Form of Stock Option Agreement pursuant to the 1989 Plan--Incentive Stock Option
(Incorporated by reference to Exhibit (10)(iii)(A)(1)(a) of Paramount
Communications' Annual Report on Form 10-K for the fiscal year ended October 31,
1989).
+ (10)(iii)(A)(13)(b) --Form of Stock Option Agreement pursuant to the 1989 Plan--Nonqualified Stock Option
(Incorporated by reference to Exhibit (10)(iii)(A)(1)(b) of Paramount
Communications' Annual Report on Form 10-K for the fiscal year ended October 31,
1989).
+ (10)(iii)(A)(14) --1984 Stock Option Plan, as amended (the "1984 Plan") (Incorporated by reference to
Exhibit (10)(iii)(A)(1) of Paramount Communications' Quarterly Report on Form
10-Q for the quarter ended April 30, 1992).
+ (10)(iii)(A)(14)(a) --Form of Stock Option Agreement pursuant to the 1984 Plan--Incentive Stock Option
(Incorporated by reference to Exhibit (10)(iii)(A)(1)(a) of Paramount
Communications' Annual Report on Form 10-K for the three months ended October 31,
1985).
+ (10)(iii)(A)(14)(b) --Form of Stock Option Agreement pursuant to the 1984 Plan--Incentive Stock Option
with a Stock Appreciation Right (Incorporated by reference to Exhibit
(10)(iii)(A)(1)(b) of Paramount Communications' Annual Report on Form 10-K for
the three months ended October 31, 1985).
+ (10)(iii)(A)(14)(c) --Form of Stock Option Agreement pursuant to the 1984 Plan--Nonqualified Stock Option
(Incorporated by reference to Exhibit (10)(iii)(A)(1)(c) of Paramount
Communications' Annual Report on Form 10-K for the three months ended October 31,
1985).
+ (10)(iii)(A)(14)(d) --Form of Stock Option Agreement pursuant to the 1984 Plan--Nonqualified Stock Option
with a Stock Appreciation Right (Incorporated by reference to Exhibit
(10)(iii)(A)(1)(d) of Paramount Communications' Annual Report on Form 10-K for
the three months ended October 31, 1985).
+ (10)(iii)(A)(15) --1973 Key Employees Stock Purchase Plan (Incorporated by reference to Exhibit
(10)(c)(i) of Paramount Communications' Annual Report on Form 10-K for the fiscal
year ended July 31, 1981).
+ (10)(iii)(A)(16) --Amended and Restated Supplemental Executive Retirement Plan (Incorporated by
reference to Exhibit (10)(iii)(A)(1) of Paramount Communications' Quarterly
Report on Form 10-Q for the quarter ended July 31, 1992).
</TABLE>
<PAGE> 11
10
<TABLE>
<S> <C>
+ (10)(iii)(A)(17) --Deferred Compensation Plan for Board of Directors (Incorporated by reference to
Exhibit (10)(iii)(A)(6) of Paramount Communications' Annual Report on Form 10-K
for the fiscal year ended July 31, 1984).
+ (10)(iii)(A)(18) --Long-Term Performance Plan, as amended (Incorporated by reference to Exhibit
(10)(iii)(A)(6) of Paramount Communications' Annual Report on Form 10-K for the
fiscal year ended October 31, 1989).
+ (10)(iii)(A)(19) --Corporate Annual Performance Plan, as amended (Incorporated by reference to Exhibit
(10)(iii)(A)(7) of Paramount Communications' Annual Report on Form 10-K for the
fiscal year ended October 31, 1989).
+ (10)(iii)(A)(20) --Retirement Plan for non-employee directors (Incorporated by reference to Exhibit
(10)(iii)(A)(1) of Paramount Communications' Quarterly Report on Form 10-Q for
the quarter ended January 31, 1990).
+ (10)(iii)(A)(21) --Non-qualified retirement plan (Incorporated by reference to Exhibit (10)(iii)(A)(1)
of Paramount Communications' Quarterly Report on Form 10-Q for the quarter ended
April 30, 1991).
*(11) --Computation of Earnings (Loss) per Share.
*(21) --List of Subsidiaries.
*(23)(a) --Consent of Ernst & Young.
*(23)(b) --Consent of Price Waterhouse.
*(24) --Powers of Attorney.
</TABLE>
<TABLE>
<S> <C>
(b) Reports on Form 8-K - The following reports on Form 8-K were filed during the two months ended March 31, 1994:
(i) The registrant filed a Current Report on Form 8-K, dated March 17, 1994, in respect of a change in control
of registrant. The items reported in such Current Report were Item 1 (Changes in Control of Registrant)
and Item 7 (Exhibits).
(ii) The registrant filed a Current Report on Form 8-K, dated March 18, 1994, in respect of a change in
registrant's certifying accountant and a change in fiscal year of the registrant. The items reported in
such Current Report were Item 4 (Changes in Registrant's Certifying Accountant), Item 7 (Exhibits) and
Item 8 (Change in Fiscal Year).
</TABLE>
- - -----------------
* Filed herewith.
+ This exhibit constitutes a management contract or compensatory plan or
arrangement.
<PAGE> 12
11
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
PARAMOUNT COMMUNICATIONS INC.
By GEORGE S. SMITH, JR.
----------------------------------
George S. Smith Jr.
Senior Vice President
and Chief Financial Officer
Date: June 29, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------------------------
Signature Title Date
- - --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Frank J. Biondi, Jr.* Director and Chief )
Executive Officer )
(Principal Executive Officer) )
)
George S. Abrams* ) )
Philippe P. Dauman* ) )
Martin S. Davis* ) )
William C. Ferguson* ) )
Irving R. Fischer* ) )
H. Wayne Huizenga* ) )
Ken Miller* ) )
Ronald L. Nelson ) Directors ) June 29, 1994
Donald Oresman* ) )
James A. Pattison* ) )
Brent D. Redstone* ) )
Sumner M. Redstone* ) )
Frederic V. Salerno* ) )
William Schwartz* ) )
)
)
)
GEORGE S. SMITH, JR Senior Vice President )
- - ---------------------------------------------- and Chief Financial Officer )
George S. Smith, Jr. (Principal Financial and )
Accounting Officer) )
</TABLE>
- - -----------------
* By signing his name hereto, Philippe P. Dauman signs this document as
a Director of the registrant and on behalf of the persons indicated
above pursuant to powers of attorney duly executed by such persons and
filed herewith.
By PHILIPPE P. DAUMAN
-----------------------------------
Philippe P. Dauman
(Attorney-in-Fact)
<PAGE> 13
F-1
FINANCIAL STATEMENTS
REPORTS OF INDEPENDENT
ACCOUNTANTS / AUDITORS F-2
SELECTED FINANCIAL DATA F-4
CONSOLIDATED STATEMENT OF
EARNINGS F-5
FINANCIAL REPORTING BY
BUSINESS SEGMENTS -
REVENUES AND OPERATING
INCOME (LOSS) F-6
MANAGEMENT'S DISCUSSION AND
ANALYSIS F-7
CONSOLIDATED BALANCE SHEET F-16
CONSOLIDATED STATEMENT OF
CHANGES IN STOCKHOLDERS'
EQUITY F-17
CONSOLIDATED STATEMENT OF
CASH FLOWS F-18
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS F-19
<PAGE> 14
F-2
REPORT OF INDEPENDENT ACCOUNTANTS
Stockholders and Board of Directors
Paramount Communications Inc.
In our opinion, the accompanying consolidated balance sheet and the
related consolidated statements of earnings, of changes in stockholders' equity
and of cash flows present fairly, in all material respects, the financial
position of Paramount Communications Inc. at March 31, 1994, and the results of
its operations, changes in its stockholders' equity and its cash flows for the
eleven month period then ended in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit of these statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for the opinion expressed above.
Price Waterhouse
New York, New York
June 3, 1994
<PAGE> 15
F-3
REPORT OF INDEPENDENT AUDITORS
Stockholders and Board of Directors
Paramount Communications Inc.
We have audited the accompanying consolidated balance sheet of
Paramount Communications Inc. as of April 30, 1993 and October 31, 1992, and
the related consolidated statements of earnings, changes in stockholders'
equity, and cash flows for the six-month period ended April 30, 1993 and for
each of the two years in the period ended October 31, 1992. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Paramount Communications Inc. at April 30, 1993 and October 31, 1992, and the
consolidated results of its operations and its cash flows for the six-month
period ended April 30, 1993 and for each of the two years in the period ended
October 31, 1992 in conformity with generally accepted accounting principles.
As discussed in Notes A and K, in the six-month period ended April 30,
1993, the Company adopted Statement of Financial Accounting Standards (SFAS)
No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions." As discussed in Notes A and J, effective May 1, 1993, the Company
adopted SFAS No. 109, "Accounting for Income Taxes."
Ernst & Young
New York, New York
August 27, 1993,
except for Notes A and J, as to which the date is
September 10, 1993
<PAGE> 16
F-4
SELECTED FINANCIAL DATA
The table below summarizes recent financial information for Paramount
Communications. For further information, refer to the audited financial
statements and the notes thereto contained elsewhere herein.
<TABLE>
<CAPTION>
Eleven Months Six Months
Ended or at March 31 Ended or at April 30 Year Ended or at October 31
-------------------- -------------------- -----------------------------------
1994 1993 1992 1991 1990 1989
- - ------------------------------------------------------------------------------------------------------------------------
(Dollar amounts in millions, except per share)
<S> <C> <C> <C> <C> <C> <C>
Revenues $4,433.5 $1,898.1 $4,264.9 $3,895.4 $3,869.0 $3,391.6
Earnings (loss) from continuing
operations before income taxes 8.8 (16.8) 397.3 179.7 381.0 19.1
Earnings (loss) from continuing
operations before extraordinary
item and cumulative effect of
accounting changes 5.7 (9.1) 274.2 127.6 264.4 17.3
Discontinued operations 1,453.9
Extraordinary item (8.8)
Cumulative effect of accounting
changes (66.9) (56.5)
Net earnings (loss) 5.7 (76.0) 265.4 127.6 264.4 1,414.7
Earnings (loss) per share
Earnings (loss) from continuing
operations before extraordinary
item and cumulative effect of
accounting changes .05 (.08) 2.31 1.08 2.20 .14
Discontinued operations 12.12
Extraordinary item (.08)
Cumulative effect of accounting
changes (.57) (.48)
Net earnings (loss) .05 (.65) 2.23 1.08 2.20 11.78
Cash dividends declared per
common share .60 .40 .775 .70 .70 .70
Working capital 974.3 1,461.6 1,864.8 2,141.8 2,119.0 2,787.3
Total assets 7,608.0 6,874.8 7,057.0 6,654.7 6,541.0 7,060.0
Current maturities of long-term debt 35.6 109.8 10.0 198.3 21.7 20.6
Long-term debt, net of current
maturities 998.4 707.3 812.1 519.9 712.1 723.8
Stockholders' equity 4,073.1 3,902.1 4,015.5 3,854.8 3,783.8 3,666.8
Book value per common share 33.17 33.01 34.19 32.73 32.24 30.56
Capital expenditures (including
capitalized leases) 148.2 55.9 120.0 172.9 187.9 94.2
Number of common stockholders 25,000 26,000 26,000 29,000 30,000 30,000
- - ------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements for information on transactions
and accounting changes which have affected the comparability of the periods
presented above.
<PAGE> 17
F-5
CONSOLIDATED STATEMENT OF EARNINGS
<TABLE>
<CAPTION>
Eleven Months Six Months
Ended March 31 Ended April 30 Year Ended October 31
-------------- -------------- -----------------------
1994 1993 1992 1991
- - ----------------------------------------------------------------------------------------------------------------------------------
(In millions, except per share)
<S> <C> <C> <C> <C>
REVENUES $ 4,433.5 $ 1,898.1 $4,264.9 $3,895.4
Cost of goods sold 3,179.3 1,286.8 2,739.8 2,638.7
Selling, general and administrative expenses 1,153.4 621.4 1,129.0 1,098.9
- - ----------------------------------------------------------------------------------------------------------------------------------
4,332.7 1,908.2 3,868.8 3,737.6
- - ----------------------------------------------------------------------------------------------------------------------------------
OPERATING INCOME (LOSS) 100.8 (10.1) 396.1 157.8
Other income (expense) -- Note D (45.7) (3.7) (6.6) 0.1
Interest and other investment income (expense) --
net -- Note L
Interest expense (107.7) (47.9) (113.8) (112.0)
Interest and other investment income 61.4 44.9 121.6 133.8
- - ----------------------------------------------------------------------------------------------------------------------------------
(46.3) (3.0) 7.8 21.8
- - ----------------------------------------------------------------------------------------------------------------------------------
EARNINGS (LOSS) BEFORE INCOME TAXES 8.8 (16.8) 397.3 179.7
Provision (benefit) for income taxes -- Notes A and J 3.1 (7.7) 123.1 52.1
- - ----------------------------------------------------------------------------------------------------------------------------------
EARNINGS (LOSS) BEFORE EXTRAORDINARY ITEM
AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE 5.7 (9.1) 274.2 127.6
Extraordinary item -- Note E (8.8)
Cumulative effect of accounting change -- Note A (66.9)
- - ----------------------------------------------------------------------------------------------------------------------------------
NET EARNINGS (LOSS) $ 5.7 $ (76.0) $ 265.4 $ 127.6
- - ----------------------------------------------------------------------------------------------------------------------------------
Average common and common equivalent
shares outstanding -- Note A 120.4 118.8 119.2 118.5
Earnings (loss) per share -- Note A
Earnings (loss) before extraordinary item and
cumulative effect of accounting change $ .05 $ (.08) $ 2.31 $ 1.08
Net earnings (loss) .05 (.65) 2.23 1.08
- - ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
<PAGE> 18
F-6
FINANCIAL REPORTING BY BUSINESS SEGMENTS
A summary description of the Company's business segments is as follows. See
Note N for additional disclosures related to business segments.
ENTERTAINMENT
Produces, finances and distributes motion pictures, television programming and
prerecorded videocassettes and operates motion picture theaters, independent
television stations, sports and entertainment facilities and regional theme
parks.
PUBLISHING
Publishes and distributes hardcover and paperback books, educational textbooks
and materials, and provides information services for business and professions.
REVENUES AND OPERATING INCOME (LOSS)
<TABLE>
<CAPTION>
Revenues
-------------------------------------------------------------------------------------
Eleven Months Ended March 31 Six Months Ended April 30 Year Ended October 31
---------------------------- -------------------------- ----------------------
1994 1993 1993 1992 1992 1991
- - -----------------------------------------------------------------------------------------------------------------------
(Unaudited) (Unaudited)
(In millions)
<S> <C> <C> <C> <C> <C> <C>
Business Segments
Entertainment $ 2,822.9 $ 2,248.9 $ 1,280.8 $ 1,408.3 $ 2,657.4 $ 2,380.2
Publishing 1,610.6 1,504.3 617.3 590.2 1,607.5 1,515.2
- - -----------------------------------------------------------------------------------------------------------------------
Total $ 4,433.5 $ 3,753.2 $ 1,898.1 $ 1,998.5 $ 4,264.9 $ 3,895.4
- - -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Operating Income (Loss)
------------------------------------------------------------------------------------
Eleven Months Ended March 31 Six Months Ended April 30 Year Ended October 31
---------------------------- ------------------------- ---------------------
1994 1993 1993 1992 1992 1991
- - ----------------------------------------------------------------------------------------------------------------------
(Unaudited) (Unaudited)
(In millions)
<S> <C> <C> <C> <C> <C> <C>
Business Segments
Entertainment $ 98.5 $191.4 $121.9 $164.9 $279.6 $ 66.2
Publishing 92.2 173.3 (90.9) (55.0) 182.0 156.2
- - ----------------------------------------------------------------------------------------------------------------------
Total 190.7 364.7 31.0 109.9 461.6 222.4
Corporate Expenses (89.9) (62.9) (41.1) (32.1) (65.5) (64.6)
- - ----------------------------------------------------------------------------------------------------------------------
$ 100.8 $301.8 $(10.1) $ 77.8 $396.1 $157.8
- - ----------------------------------------------------------------------------------------------------------------------
</TABLE>
Revenues by business segment include revenues that are directly associated with
a particular segment. Revenues between business segments (amounts are
insignificant), which are accounted for on substantially the same basis as
revenues from unaffiliated customers, have been eliminated. No single customer
accounts for 10% or more of consolidated revenues.
Export sales to unaffiliated customers were $657.1, $290.7, $606.8 and $690.7
million, respectively, for the eleven months ended March 31, 1994, the six
months ended April 30, 1993 and the years ended October 31, 1992 and 1991.
These sales were principally made in Europe, Asia and Canada.
During the eleven months ended March 31, 1994, the Company recorded a
$84.3-million charge against Publishing's operating income and a $22.3-million
charge against Corporate Expenses. During the six months ended April 30, 1993,
the Company recorded a $35-million and a $5-million charge, respectively,
against Publishing's operating loss and Corporate Expenses and during the year
ended October 31, 1991, recorded a $52-million charge against Entertainment's
operating income. For further details related to these charges see
Management's Discussion and Analysis.
<PAGE> 19
F-7
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
ENTERTAINMENT
ELEVEN MONTHS 1994 VERSUS 1993
Revenues increased 26% to $2,822.9 million from $2,248.9 million while
operating income decreased 49% for the eleven months ended March 31, 1994,
compared with the same prior-year period.
FEATURES
Revenues from features product increased 20% in the eleven months ended March
31, 1994, to $1,135.7 million from $949.2 million. The theatrical component of
features revenues increased 69%, to $418.5 million from $247.4 million, led by
the domestic and international box office success of The Firm, Indecent
Proposal and Sliver. Home video revenues increased 8% in the current period
because of the domestic and foreign videocassette success of Indecent Proposal,
The Firm, Sliver and increased sales from library sell-through promotional
programs, which were partially offset by the absence of a significant
sell-through title included in the same prior-year period. Pay cable revenues
declined 17% in the current period because of a weaker mix of newly available
titles compared to the same prior-year period. Revenues from network and
domestic and international syndication sales of features product rose 7% in the
current period, primarily due to a more successful mix of titles available for
syndication.
Features posted an operating loss for the current period, compared with
operating income in the same prior-year period, primarily because of the
release of fewer profitable pictures. Theatrical results for the eleven months
ended March 31, 1994 included higher feature write-downs primarily related to
the releases of Jimmy Hollywood, Blue Chips, Coneheads, Searching for Bobby
Fischer, The Thing Called Love, Flesh and Bone, Addams Family Values and
Intersection, which were partially offset by contributions from Indecent
Proposal, The Firm and Sliver. In addition, results for the current period were
negatively impacted by higher scenario reserves related to increased
development activity. Home video operations registered slightly lower results
in the current-year because of a less profitable mix of titles. Pay cable
operating income increased slightly in the current year primarily because of an
improved overall profit rate on library titles. Operating income from network
and domestic and international syndication sales of features product rose on
the increase in revenues.
TELEVISION
Television programming revenues increased 19%, to $732.7 million in 1994 from
$616.0 million in 1993. Revenues from network series product increased 29% in
the current period, as contributions from higher network license fees driven by
increased series production along with basic cable sales of Wings and increased
syndication sales of network library titles were partially offset by lower
network license fees for Cheers, for which the last episode was delivered in
May 1993. Revenues from first-run series product rose 17%, as increases from
Star Trek: Deep Space Nine and Star Trek: The Next Generation, along with
contributions from Leeza, more than offset lower revenues from The Arsenio Hall
Show, which has been subsequently canceled.
Television programming operating income declined 62% in the current-year period
compared with the prior-year period. Results from network series product
decreased significantly because of increased investment in new programming and
lower profits on library shows. First-run series operating income decreased as
the impact of the higher revenues were more than offset by increased investment
in new programming, principally The Untouchables and lower results from The
Arsenio Hall Show.
STATION AND NETWORK
Operating income at the Station and Network group decreased 55% in the eleven
months ended March 31, 1994. Paramount Stations Group registered significantly
higher profits principally due to a 29% increase in revenues because of
contributions from the September 1993 acquisition of WKBD-TV in Detroit as well
as higher advertising sales. USA Networks, the Company's 50%-owned cable
operations, generated an operating loss in the current year compared with
operating income in the prior year. The sharply lower results were due largely
to a $78-million pre-tax charge at USA Network, the majority of which was
recorded in December 1993, to adjust the carrying value of certain broadcast
rights to net realizable value because of the under performance of certain
series programming, of which the Company recorded its share. The current year
also includes continued start-up costs incurred for the Sci-Fi Channel.
THEATERS
Theatrical exhibition revenues decreased 1%, to $161.5 million from $163.6
million for the eleven months ended March 31, 1994. Revenues at Famous
Players, the Company's Canadian chain, decreased 1% in the current year because
attendance gains driven by improved product were more than
<PAGE> 20
F-8
MANAGEMENT'S DISCUSSION AND ANALYSIS
offset by unfavorable exchange rates. Famous Players posted operating income
in the current year compared with an operating loss in the prior year primarily
because of higher current-year operating margins. Operating income at
Cinamerica, the Company's 50%-owned domestic theater operation, decreased in
the current year because of lower attendance and the absence of gains on the
sale of theaters recorded in the prior-year, which were partially offset by
higher average ticket prices. International theater operations, which are
primarily jointly-owned, recorded higher operating income, principally because
of increased attendance levels, partially offset by unfavorable exchange rates.
Overall theatrical exhibition operating income increased 19% for the eleven
months ended March 31, 1994.
MADISON SQUARE GARDEN
Revenues for Madison Square Garden increased by 12% in the current-year period,
to $299.9 million from $268.2 million. The sports teams' revenues increased
16% in the current-year period, led by greater Knickerbockers ticket sales
generated by higher attendance and ticket prices, as well as higher NBA playoff
revenues; revenues for the Rangers increased in the current year-period due to
the receipt of expansion revenues, partially offset by the absence of playoff
revenue. The current- year period also included higher revenue from an
increased number of live entertainment events in the Arena and The Paramount,
increased MSG Network advertising sales and subscriber levels, and greater
concession revenues, but were negatively impacted by the absence of revenues
from the Democratic National Convention recognized in the same prior-year
period.
Operating income rose 365% in the current-year period primarily because
of increased profits at MSG Network due to higher revenues and higher
concession income as a result of an increase in events, which were partially
offset by an increase in programming and operating expenses. These results
were partially offset by a decrease in operating income from the sports teams,
where higher team compensation and operating expenses exceeded revenue gains
achieved.
PARAMOUNT PARKS
Revenues for Paramount Parks, which were acquired in several transactions
during the quarters ended October 31, 1992 and July 31, 1993, increased to
$309.1 million in the current-year period from $63.2 million in the same
prior-year period. Operating income increased in the eleven months ended March
31, 1994 reflecting the inclusion of a full eleven months of operations versus
a partial eight months in the prior year.
SIX MONTHS 1993 VERSUS 1992
Revenues decreased 9% to $1,280.8 million from $1,408.3 million and operating
income decreased 26% for the six months ended April 30, 1993, compared with the
same prior-year period.
FEATURES
Revenues from features product decreased 28% in the six months ended April 30,
1993, to $503.3 million from $696.5 million. The theatrical revenue component
of features declined 48% principally because of the release of fewer successful
pictures. Home video revenues decreased 29% in the current-year period despite
strong contributions from the domestic and foreign videocassette sales of
Patriot Games, Star Trek VI: The Undiscovered Country and Boomerang, and the
continued international success of Ghost. Pay cable revenues decreased 24% in
the current six-month period because strong contributions from the availability
of The Addams Family, Star Trek VI: The Undiscovered Country and Wayne's World
were more than offset by the absence of recognition of additional license fees
recorded in the prior-year six-month period for films made available in prior
periods. Revenues from network features rose 61% because of the availability
of more successful titles.
Features operating income decreased 94% in the current six-month period
compared with the same prior-year period. Theatrical results declined
primarily because of the release of fewer profitable pictures. Theatrical
results included higher feature write-downs, primarily related to the releases
of Leap of Faith, Jennifer Eight and The Temp, which more than offset
contributions from the international box office performances of Patriot Games
and Boomerang. Theatrical results also decreased in the current period due to
the absence of recognition of a one-time payment received in the prior-year
period in connection with the signing of a long-term film processing agreement,
and from higher scenario reserves. Home video operations registered lower
profits and pay cable results decreased in the current-year period primarily
because of the decline in revenues described above. Operating income from
network features rose primarily because of the increase in revenues. Income
from domestic and international features syndication increased in the
current-year period because of 30% higher revenues along with a more profitable
mix of titles.
TELEVISION
Television programming revenues increased 8%, to $345.7 million in the six
months ended April 30, 1993, compared
<PAGE> 21
F-9
MANAGEMENT'S DISCUSSION AND ANALYSIS
with $319.2 million for the same prior-year period. Revenues from the network
series decreased 14% despite higher syndication sales of Cheers. Revenues from
first-run series were up 19%; higher sales of Star Trek: The Next Generation,
Entertainment Tonight and Hard Copy, along with contributions from Star Trek:
Deep Space Nine, were partially offset by lower revenues from The Arsenio Hall
Show.
Television programming results increased significantly, posting an operating
profit in the current-year period compared with an operating loss in the same
prior-year period. Profits from network series rose because of the
aforementioned higher revenues from Cheers and the domestic licensing of Wings
to USA Network. Income from first-run syndication increased, generated by the
higher revenues previously noted. In addition, the current-year period
reflects higher income from library products, principally Star Trek, as well as
from television movies-of-the-week.
STATION AND NETWORK
Operating results at the Station and Network group declined 22% in the six
months ended April 30, 1993. Paramount Stations Group registered higher
profits, principally due to an 11% increase in revenues, to $82.9 million from
$74.8 million resulting from higher advertising sales. At USA Networks
(jointly owned with MCA Inc.), operating income declined primarily because of
start-up costs incurred for the Sci-Fi Channel.
THEATERS
Theatrical exhibition revenues decreased 12% in the current-year period, to
$95.7 million from $108.3 million. International theater operations recorded
higher revenue primarily because of increased attendance levels, principally
from operations in Europe. Revenues at Famous Players, the Company's Canadian
chain, declined 16% in the current six-month period. At Cinamerica, the
Company's 50%-owned domestic theater operation (jointly owned with Time Warner
Inc.), results for the six months equaled the prior year. Theatrical
exhibition operating income rose 28%, primarily because of the increase in
revenues and profitability from international theater operations.
MADISON SQUARE GARDEN
Revenues for Madison Square Garden increased 9% in the current-year period, to
$203.4 million from $185.8 million. The sports teams registered increased
revenues of 6%, as higher ticket sales and National Basketball Association
licensing and promotion revenues for the Knickerbockers were partially offset
by lower revenues from the Rangers, where the absence of playoff income and the
absence of league expansion revenues recorded in the prior-year period more
than offset higher regular season ticket sales. The current period also
included higher revenue from live entertainment events in the Arena as well as
increased boxing telecast revenues and MSG Network affiliate sales.
Operating income decreased 12% in the current-year period, primarily due to
lower results from the Rangers resulting from the decrease in revenues and
higher team compensation. Results at MSG Network declined, as the increase in
sales was more than offset by higher programming and operating expenses. These
results were partially offset by higher income from the Knickerbockers and
lower operating expenses.
PARAMOUNT PARKS
Results for the current period include modest seasonal losses from Paramount
Parks, the Company's theme park operations, which were acquired in the fourth
quarter of fiscal 1992. Paramount Parks' operating season began in late March
1993.
FISCAL 1992 VERSUS FISCAL 1991
Revenues increased 12% to $2,657.4 million from $2,380.2 million and operating
income increased 322% in fiscal 1992 compared with fiscal 1991. Results for
the prior year included a $52-million charge, the majority of which was related
to a provision for write-downs of certain motion picture and television
development commitments and entertainment reorganization costs.
FEATURES
Revenues from features increased 6% to $1,259.4 million in the year ended
October 31, 1992 from $1,190.3 million in the prior year. The theatrical
revenue component of features declined 3% from those achieved in the comparable
prior-year period, despite the strong domestic box office performance of
Wayne's World, The Addams Family, Star Trek VI: The Undiscovered Country and
Patriot Games, as well as the success of The Naked Gun 2 1/2: The Smell of Fear
in foreign markets. Home video revenues in the current year equaled the prior
year, benefiting from the release of Wayne's World and The Addams Family in the
domestic videocassette market, sales of Ghost in the international
videocassette market and The Naked Gun 2 1/2: The Smell of Fear in the domestic
and foreign markets. Pay cable revenues increased 42% in fiscal 1992
principally because of the recognition of additional license fees for films
made available in prior periods. Revenues from network
<PAGE> 22
F-10
MANAGEMENT'S DISCUSSION AND ANALYSIS
features rose 14% in the current year, led by the availability of Indiana Jones
and the Last Crusade.
Features recorded operating income in fiscal 1992 compared with an operating
loss in fiscal 1991. Theatrical results for the current year increased
significantly from those achieved in the prior year, primarily attributable to
lower feature write-downs, the contributions from the performances of the above
mentioned pictures, as well as lower scenario reserves and a one-time payment
received in connection with the signing of a long-term film processing
agreement. Home video operations registered higher profits in the current
year, benefiting from the profitability of the aforementioned releases. Pay
cable profitability increased significantly because of the higher revenues
described above. Operating income from network features increased slightly in
the current year on the increase in revenues. Domestic and international
features syndication posted increased profits over the prior year because of
26% higher revenues on titles available for showing.
TELEVISION
Television programming revenues increased 13% to $655.0 million in fiscal 1992
from $578.5 million in the prior-year. Revenues from first-run syndication
increased 20%, as higher sales from Star Trek: The Next Generation,
Entertainment Tonight, Hard Copy and The Maury Povich Show were partially
offset by lower sales from Geraldo and The Arsenio Hall Show. Revenues from
network series approximated the prior year. Television product also benefited
from increased syndication and licensing revenues from library products,
principally Star Trek.
Television programming profits were up 87% in fiscal 1992 from the prior year,
led by the increases in revenues from first-run syndication and library
products. These results were partially offset by a decline in income from
network series, reflecting lower Cheers syndication renewal sales and increased
investments in new programming.
STATION AND NETWORK
Operating income at the Station and Network group rose 6% in fiscal 1992
compared to the prior year. Paramount Stations Group registered lower profits,
primarily stemming from higher programming costs occasioned by the use of more
conservative film amortization assumptions, which were partially offset by a 7%
increase in revenues, to $157.2 million from $147.1 million resulting from
higher advertising sales. Profits were higher at USA Networks because of
increased revenues at USA Network, primarily due to higher advertising and
affiliate revenues, which were partially offset by start-up costs incurred for
the Sci-Fi Channel.
THEATERS
Theatrical exhibition revenues decreased 2%, from $196.7 million in fiscal 1991
to $192.7 million in fiscal 1992, stemming principally from lower attendance
levels. Operating income declined 5%, primarily because of lower results at
Cinamerica stemming principally from the decreased attendance levels.
Additionally, results at Famous Players declined slightly. These results were
partially offset by higher profits at international theater operations which
benefited from continued circuit expansion, higher average admission and
concession prices and increased attendance levels.
MADISON SQUARE GARDEN
Revenues for Madison Square Garden increased by 28% in fiscal 1992, to $288.9
million from $225.6 million in fiscal 1991. The sports teams registered
increased revenues of 26% because of higher ticket sales, additional playoff
games, National Hockey League expansion revenues and National Basketball
Association licensing and promotional revenues. Fiscal 1992 also included
higher revenue from live entertainment events at The Paramount, higher suite
license and concession revenues, improved revenues from SRO/Pace, increased MSG
Network affiliate and advertising sales and revenues from the Democratic
National Convention.
Madison Square Garden registered operating income in fiscal 1992 compared with
an operating loss in fiscal 1991. Results for the Knickerbockers were up
primarily because of increased revenues, which were partially offset by higher
operating expenses. The Rangers registered lower profits; increased team
compensation and higher operating expenses more than offset the increase in
revenues. Results at MSG Network benefited from the increase in sales, which
were partially offset by increases in programming and production costs. In
addition to the increased profits arising from the other higher revenues
described above, Madison Square Garden's results for fiscal 1992 include lower
operating expenses.
PARAMOUNT PARKS
Operating results for the current year reflect contributions from Kings
Entertainment Company and Kings Island Company, later renamed Paramount Parks,
which were acquired in August and October 1992, respectively.
PUBLISHING
ELEVEN MONTHS 1994 VERSUS 1993
Revenues increased 7% to $1,610.6 million compared with $1,504.3 million in the
prior-year period, while operating
<PAGE> 23
F-11
MANAGEMENT'S DISCUSSION AND ANALYSIS
income decreased 47%. During the two months ended March 31, 1994, the
publishing operations recorded charges of $84.3-million against its operating
income. These charges relate primarily to reserves for certain royalty advance
contracts. The operating group discussions presented below reflect these
charges. Additionally, publishing operations include contributions from the
February 1994 acquisition of Macmillan Publishing Company and certain other
assets of Macmillan Inc. (the "Macmillan Acquisition").
CONSUMER
Revenues increased 21% to $355.3 million from $293.7 million in the current
eleven-month period, compared with the same prior-year period primarily due to
contributions from frontlist titles at the Simon & Schuster trade division and
at Pocket Books. Additionally, the current-year benefited from higher sales
from the audio releases of successful consumer group titles, and higher
international revenues partially offset by weaker frontlist and backlist demand
for children's books.
Consumer publishing posted a 152% decrease in operating results in the current
eleven-month period. Increased revenues were partially offset by higher
product support and development and operating expenses, including $46.7 million
of the aforementioned charges.
BUSINESS, TECHNICAL AND PROFESSIONAL
Revenues declined 3% to $347.4 million in the current period from $359.7
million in the prior eleven-month period. Lower sales of multimedia programs
and reference products were partially offset by increased sales of computer
titles and contributions from the Macmillan Acquisition.
Operating results decreased 136% in the current-year period because of lower
revenues, increased product support and development and operating expenses,
including $13.4 million of the aforementioned charges.
EDUCATION
Revenues increased 7% in the current eleven months, to $764.6 million from
$717.7 million, compared with the same prior-year period. Elementary education
revenues rose 2% to $252.2 million compared with $247.9 million in the
prior-year eleven-month period due to increased adoption opportunities and the
introduction of new reading, social studies and religion products, along with
higher sales of multicultural and phonics programs. Secondary education
revenues rose 16%, to $148.1 million in the current period from $127.4 million
in the prior-year period primarily due to the success of the latest science,
language arts and social studies products in the current eleven-month period,
partially offset by a decrease in math products. Revenues at higher education
increased slightly in the current eleven months from frontlist sales in
education and social science disciplines and contributions from the Macmillan
Acquisition. Educational technology revenues rose 34%, to $75.1 million from
$56.1 million in the prior-year eleven-month period. The increased revenues
were primarily due to increased sales of computer learning stations and related
software products.
Operating income increased 3% in the current eleven months as higher revenues
were partially offset by increased expenses, including $19.9 million of the
aforementioned charges.
INTERNATIONAL
Revenues rose 14% in the current-year period to $165.7 million compared with
revenues of $145.9 million in the prior-year eleven-month period primarily due
to sales gains in Asia, UK Academic, Mexico and Canada, along with
contributions from the acquisition of a German computer book publisher and the
Macmillan Acquisition.
Operating income increased 8% in the current eleven-month period as increased
sales were partially offset by increased product support and development and
operating expenses, including $2.4 million of the aforementioned charges.
Additionally, publishing operations reflect increased corporate administrative
expenses in the current eleven-month period, partially attributable to $1.9
million of the aforementioned charges.
SIX MONTHS 1993 VERSUS 1992
Revenues for publishing operations rose 5% to $617.3 million in the current
period compared with $590.2 million in the prior-year period. Publishing
operations, which traditionally record profits in the quarters ended July 31
and October 31, posted 65% higher operating losses for the six months ended
April 30, 1993, compared with the prior-year period. The current-year period
includes a $35-million charge, related to the write-down of certain real estate
sites, expected to be sold, to fair value and relocation costs for several
operating sites.
<PAGE> 24
F-12
MANAGEMENT'S DISCUSSION AND ANALYSIS
CONSUMER
Revenues increased 7% in the current-year period to $178.2 million from $167.0
million in the prior year; stronger frontlist and backlist sales of hardcover
titles and increased international sales along with increased frontlist
paperback sales, were partially offset by lower sales of children's books and
backlist sales of certain reference books.
Consumer publishing posted higher operating results in the current-year period
as increased revenues were partially offset by increased product support and
development and operating expenses.
BUSINESS, TECHNICAL AND PROFESSIONAL
Revenues of $154.5 million increased 6% from $145.1 million in the prior-year
period as higher sales of computer titles, multimedia programs and medical
publications were partially offset by lower tax software and professional
service revenues.
Operating income approximated the comparable year-earlier period as improved
revenues were partially offset by increased product support and development and
operating expenses.
EDUCATION
Revenues rose slightly in the current-year period to $226.2 million from $224.9
million in the prior-year period. Elementary education revenues declined 3%
from $74.4 million to $71.8 million as lower sales of prior years' programs and
fewer new product releases were partially offset by increased sales of computer
learning stations. At secondary education, revenues were flat as higher sales
from social studies programs were more than offset by decreased sales in
mathematics, science and language arts programs. Higher education revenues
rose by 3% to $133.8 million in the current-year period from $129.7 million in
the prior-year period because of increased sales of vocational books, from the
success of new editions, and frontlist sales of college texts.
Operating losses increased 25% in the current-year period primarily because of
increased seasonal operating losses at the elementary and secondary education
groups. The slight improvement in education group revenues was more than
offset by increased product support expenses, primarily due to the acceleration
of promotional spending for elementary programs and increased state adoption
opportunities for secondary programs, along with higher product development and
operating expenses.
INTERNATIONAL
Revenues of $68.0 million improved 8% from $63.2 million in the prior-year
period from sales gains at all units, led by Asia, Canada, Mexico and Japan.
Operating income declined slightly despite the increased revenues, due to
higher expenses.
Additionally, overall publishing operations benefited from lower corporate
administrative expenses.
FISCAL 1992 VERSUS FISCAL 1991
Revenues increased 6% to $1,607.5 million in fiscal 1992 compared with
$1,515.2 million in fiscal 1991, while operating income rose 17%.
CONSUMER
Revenues of $387.2 million increased 6% from $364.1 million in fiscal 1991
primarily because of a stronger publishing program of paperback books which
resulted in higher sales of initial releases and reorders, combined with
stronger frontlist and reorder sales and a greater number of bestsellers for
hardcover titles and higher sales of certain reference titles.
Operating income rose 108% primarily because of the increased revenues.
BUSINESS, TECHNICAL AND PROFESSIONAL
Revenues rose 29% to $320.1 million in fiscal 1992 from $247.4 million in
fiscal 1991 primarily because of contributions from recently acquired Prentice
Hall Computer Publishing.
Operating income increased by 166% because of the higher revenues.
EDUCATION
Revenues for fiscal 1992 of $760.5 million were 2% lower compared with fiscal
1991. Elementary education group revenues declined by 9% to $328.3 million
from $362.3 million in fiscal 1991 as decreased sales of textbooks, principally
due to fewer adoption opportunities, reduced funding at the local and state
levels and lower sales of prior years' programs, as well as reduced sales from
educational film and video products, were partially offset by sales increases
on volume growth of learning stations and increased frontlist sales of
workbooks and kits. Secondary education revenues
<PAGE> 25
F-13
MANAGEMENT'S DISCUSSION AND ANALYSIS
decreased by 2% to $133.4 million in the current year principally due to fewer
adoption opportunities. Revenues of $298.8 million at higher education rose 6%
in the current year from $280.9 million in fiscal 1991 because of strong sales
gains from college books, reflecting the effect of volume improvements, and
vocational publications.
Operating income increased 5% as decreased revenues were more than offset by
lower product support and operating expenses, despite expansion costs incurred
in anticipation of planned growth at Computer Curriculum Corporation.
INTERNATIONAL
Revenues improved by 12% in the current year to $154.9 million from $138.7
million in the prior year primarily because of sales gains from acquired
Prentice Hall Computer Publishing titles as well as volume improvements of
locally produced products.
Operating income rose by 20% as improved revenues were partially offset by
increased product support and development and operating expenses incurred
primarily to service and promote the acquired Prentice Hall Computer Publishing
products.
Additionally, overall publishing operations reflect higher corporate
administrative expenses.
INTEREST AND OTHER INVESTMENT INCOME
(EXPENSE) -- NET
Earnings for the eleven months ended March 31, 1994 reflect net interest and
other investment expense of $46.3 million, compared with net interest and other
investment income of $7.3 million in the prior-year eleven-month period. This
decrease stems primarily from lower interest and other investment income
because of lower average cash equivalents and short-term investments and
interest rates. The lower average cash equivalents and short-term investments
were primarily a result of acquisitions and the funding of the working capital
requirements of the Company. In addition, interest expense increased because of
an approximately $20 million charge to adjust certain interest rate swaps to
current fair market value.
Net interest and other investment expense increased slightly in the six
months ended April 30, 1993, compared with the same prior-year period. The
six-month period ended April 30, 1993 benefited from lower interest expense
primarily because lower average effective interest rates on the Company's debt
more than offset the effect of higher average debt outstanding. Interest and
other investment income declined in the six-month period ended April 30, 1993
due to lower average cash equivalents and short-term investments. The lower
average cash equivalents and short-term investments were primarily a result of
acquisitions, the repurchase of shares of the Company's Common Stock and the
funding of the working capital requirements of the Company.
In addition to the results of the operating units, earnings reflect lower net
interest and other investment income for the year ended October 31, 1992
compared with 1991. This decrease stemmed from lower average cash equivalents,
short-term investments and interest rates. The lower average cash equivalents
and short-term investments were primarily a result of expenditures for
acquisitions, the repurchase of shares of the Company's Common Stock and the
funding of the working capital requirements of the Company.
OTHER INCOME (EXPENSE)
Earnings for the eleven months ended March 31, 1994, include a pre-tax charge
of $27.2 million for costs incurred in the Company's merger with Viacom Inc.,
consisting principally of finance, legal, consulting and other fees, and an
$18.8 million increase in reserves previously established for discontinued
operations.
In addition, in the eleven months ended March 31, 1994, an unconsolidated
affiliate of the Company sold an equity investment of which the Company
recorded its appropriate share, amounting to a pre-tax gain of $11.0 million.
OTHER
The effective rate for income taxes was 35.2% in the eleven months ended March
31, 1994, compared with a 30.6% rate (as restated - see Note A on page F-19)
for the comparable prior-year period. The increase is the result of the amount
of foreign income subject to tax at lower foreign rates as a percentage of
total worldwide income and increases in income subject to federal, state and
local income taxes. The pre-tax loss of $16.8 million in the six months ended
April 30, 1993 gives rise to an income tax benefit at an effective rate of
45.8%. For the comparable prior year six-month period, the effective rate for
income taxes on pre-tax earnings of $68.7 million was 29.1%. The increase in
the effective rate is the result of less income subject to tax at lower foreign
rates, increases in income subject to state and local income taxes and the
adoption of Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes."
<PAGE> 26
F-14
MANAGEMENT'S DISCUSSION AND ANALYSIS
Corporate expenses includes costs related to the start-up of the Paramount
Technology Group, a new business unit responsible for the integration of
emerging technologies, including new product development, throughout the
Company's entertainment and publishing operations. In connection with the
Company's merger with Viacom Inc., corporate expenses include for the eleven
months ended March 31, 1994, a $5-million charge for shareholder litigation and
a $17.3 million charge for restricted stock upon the resignation of certain key
employees. Corporate expenses include a $5-million charge in the six-month
period ended April 30, 1993 in connection with the Company's planned relocation
of its corporate headquarters.
LIQUIDITY AND CAPITAL RESOURCES
In March 1994, Viacom Inc. acquired, pursuant to a tender offer (the "Viacom
Offer"), 61,657,432 shares of the Company's Common Stock, constituting a
majority of the shares outstanding, at a price of $107 per share in cash. The
Viacom Offer was made pursuant to the Amended and Restated Agreement and Plan
of Merger dated as of February 4, 1994 (as subsequently amended, the "Merger
Agreement") between Viacom Inc. ("Viacom") and the Company. The Company will
become a wholly owned subsidiary of Viacom at the effective time of a merger
between the Company and a subsidiary of Viacom which is expected to occur in
July 1994 (see Note B on Page F-21).
Although Viacom expects that it will be able to refinance its indebtedness and
meet its obligations without the need to sell any assets, Viacom is continuing
to review opportunitites for the sale of non-strategic assets as such
opportunities may arise, including the exploration of the sale of the operations
of Madison Square Garden and certain non-core publishing assets.
The Company depended primarily on internal cash flow and external borrowings to
finance its operations during the eleven months ended March 31, 1994. In
connection with the Viacom merger described above and in Note B to the
consolidated financial statements, subsequent to its January 1994 dividend, the
Company has discontinued its regular quarterly dividend payment.
In May 1993, the Company purchased the remaining 80% it did not own of Canada's
Wonderland, Inc., later renamed Paramount Canada's Wonderland, Inc., a Canadian
theme park, for approximately $52 million. The Company subsequently liquidated
Paramount Canada's Wonderland debt obligations of approximately $31 million.
In September 1993, the Company purchased television station WKBD-TV in Detroit
(WKBD) from Cox Enterprises Inc. for approximately $105 million. In February
1994, the Company acquired Macmillan Publishing Company and certain other
assets of Macmillan Inc., (the "Macmillan Acquisition") a leading book
publisher, for approximately $553 million.
The Company and BHC Communications, Inc., which is majority-owned by
Chris-Craft Industries, Inc., are forming the Paramount Television Network
which will provide prime-time television programming primarily to broadcast
affiliates nationwide in competition with the three major networks and the Fox
Broadcasting Network. The network is expected to begin operations in January
1995.
In July 1993, the Company redeemed $100 million of 8 1/2% senior notes due
1996. Also, in July 1993, the Company completed a public offering of $150
million of 5 7/8% senior notes due 2000 and $150 million of 7 1/2% senior
debentures due 2023. A portion of the net proceeds was used to refinance the
previously mentioned redemption of the Company's 8 1/2% senior notes. The
remainder of such proceeds was used to fund the acquisitions of television
station WKBD-TV in Detroit and the remaining 80% interest in Paramount Canada's
Wonderland theme park. Total debt as a percentage of total capitalization
increased to 20% at March 31, 1994 from 17% at April 30, 1993 and October 31,
1992. In the past, the Company has been able to increase its borrowings as
required.
Trade receivables increased 10% compared with April 30, 1993 primarily due to
increased domestic and foreign television syndication sales of network and
first-run product. Trade receivables decreased at April 30, 1993 compared with
October 31, 1992 by 15%, which is principally attributable to the Company's
publishing operations. Educational publishing, which normally contributes more
than half of annual publishing revenues, records most of its sales in the
Company's July and October quarters, corresponding to the typical school-year
buying cycle.
Total inventories increased 13% at March 31, 1994 compared with April 30, 1993
principally due to higher in production and released inventory at Paramount
Pictures, along with higher broadcast rights attributable to the WKBD
acquisition. Total inventories increased 17% at April 30, 1993 compared with
October 31, 1992; 65% of this increase is
<PAGE> 27
F-15
MANAGEMENT'S DISCUSSION AND ANALYSIS
attributable to Paramount Pictures due to production of first-run and
network television-series product. In addition, 20% of the overall increase was
attributable to New York Yankees broadcast rights payments at Madison Square
Garden in connection with the 1993 major league baseball season.
Prepaid income taxes increased 130% at March 31, 1994 compared with April 30,
1993 as a result of the impact of net operating loss carryforwards and merger
related provisions.
The balance sheet at March 31, 1994, reflects the Macmillan Acquisition and the
acquisitions of the remaining 80% interest in Paramount Canada's Wonderland
theme park and television station WKBD-TV in Detroit and certain merger related
provisions, which contributed to changes in certain balance sheet accounts as
compared to April 30, 1993.
Capital expenditures amounted to $148, $56, $120 and $168 million for the
eleven months ended March 31, 1994, the six months ended April 30, 1993 and the
years ended October 31, 1992 and 1991, respectively.
ACCOUNTING CHANGES
Effective November 1, 1992, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions." This statement requires that the projected
future cost of providing postretirement benefits, such as health care and life
insurance, be recognized as an expense as employees render service instead of
when the benefits are paid. The Company's previous practice was to recognize
the cost of such postretirement benefits when paid.
The Company elected to record the cumulative effect of the accounting change as
a charge against income as of November 1, 1992, resulting in a one-time charge
of $66.9 million, net of income taxes of $34.5 million, or $.57 per share. For
further detail, see Notes A and K to the consolidated financial statements.
In February 1992, the Financial Accounting Standards Board (FASB) issued SFAS
No. 109, "Accounting for Income Taxes." Effective May 1, 1993, the Company
adopted the provisions of this standard by restating its prior period financial
statements beginning November 1, 1988. The effect of adopting SFAS No. 109 was
to decrease the loss before cumulative effect of accounting change and net loss
by $1.8 million ($.01 per share) for the six months ended April 30, 1993;
increase earnings before extraordinary item and net earnings by $4.0 million
($.04 per share) for the year ended October 31, 1992; and, increase net
earnings by $5.4 million ($.05 per share) for the year ended October 31, 1991.
The cumulative effect of adopting SFAS No. 109 as of October 31, 1990,
decreased the beginning balance of 1991's retained earnings by $45.4 million.
Under SFAS No. 109, the liability method is used in accounting for income
taxes. Under this method, deferred tax assets and liabilities are determined
based upon differences between financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse. Prior to the adoption
of SFAS No. 109, income tax expense was determined using the deferred method.
Deferred tax expense was based on items of income and expense that were
reported in different years in the financial statements and tax returns and
were measured at the tax rate in effect in the year the differences originated.
For further detail, see Notes A and J to the consolidated financial statements.
EFFECTS OF ACCOUNTING FOR
POSTEMPLOYMENT BENEFITS
In November 1992, the FASB issued SFAS No. 112, "Employers' Accounting for
Postemployment Benefits," which is effective for the Company in the period
ending December 31, 1994. Under this statement, the cost of benefits provided
to employees after employment but before retirement is to be recognized in the
financial statements on an accrual basis during the service period of the
employee. It is expected that implementation of this statement will not have a
material impact on the financial statements of the Company.
ACCOUNTING FOR CERTAIN INVESTMENTS IN
DEBT AND EQUITY SECURITIES
In May 1993, the FASB issued SFAS No. 115, "Accounting for Certain Investments
in Debt and Equity Securities," which is effective for the Company in the
period ending December 31, 1994. This statement sets forth the accounting for
certain investments in debt and equity securities based upon management's
ability and intent, at the time of purchase, to trade, hold to maturity or make
available for sale such investments. It is expected that implementation of
this statement will not have a material impact on the financial statements of
the Company.
<PAGE> 28
F-16
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
March 31 April 30 October 31
------------- ---------- -----------
1994 1993 1992
- - ----------------------------------------------------------------------------------------------------------------------
(In millions)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents -- Notes A and M $ 239.3 $ 372.6 $ 324.3
Short-term investments -- Notes A and M 67.3 569.7 912.0
Trade receivables -- net -- Note L 914.3 829.6 972.9
Inventories -- Notes A and F 699.2 617.3 580.2
Prepaid income taxes 303.5 131.7 139.7
Prepaid expenses and other -- Note L 491.9 400.2 342.7
---------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 2,715.5 2,921.1 3,271.8
---------------------------------------------------------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT -- Note A
Land 267.1 210.8 210.4
Buildings 665.6 591.4 590.6
Machinery, equipment and other 733.2 606.9 573.8
---------------------------------------------------------------------------------------------------------------------
1,665.9 1,409.1 1,374.8
Less allowance for depreciation 409.2 336.1 315.5
---------------------------------------------------------------------------------------------------------------------
1,256.7 1,073.0 1,059.3
---------------------------------------------------------------------------------------------------------------------
OTHER ASSETS
Investment in affiliated companies -- Notes A and G 211.2 243.9 228.9
Noncurrent receivables and inventories -- Notes A and F 773.1 689.8 604.7
Intangible assets -- net -- Note A 2,093.5 1,517.5 1,528.1
Deferred costs and other -- Note A 558.0 429.5 364.2
---------------------------------------------------------------------------------------------------------------------
3,635.8 2,880.7 2,725.9
---------------------------------------------------------------------------------------------------------------------
$7,608.0 $6,874.8 $7,057.0
---------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 35.6 $ 109.8 $ 10.0
Trade accounts payable 201.6 194.7 143.7
Income taxes payable 19.6 26.6 139.2
Accrued expenses and other -- Note L 1,484.4 1,128.4 1,114.1
---------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 1,741.2 1,459.5 1,407.0
---------------------------------------------------------------------------------------------------------------------
DEFERRED LIABILITIES -- Note L 795.3 805.9 822.4
LONG-TERM DEBT, net of current maturities -- Notes A, H and M 998.4 707.3 812.1
STOCKHOLDERS' EQUITY -- Note I
Common Stock, recorded at $1.00 par value; 600,000,000 shares
authorized; shares outstanding, 122,792,910 at March 31, 1994
(excluding 25,069,138 shares held in treasury), 118,199,396 at
April 30, 1993 (excluding 29,665,980 shares held in treasury)
and 117,459,926 at October 31, 1992 (excluding 30,405,450
shares held in treasury) 122.8 118.2 117.5
Paid-in surplus 957.7 712.8 665.7
Retained earnings -- Notes A, G and J 3,016.5 3,082.5 3,228.6
Cumulative translation adjustments (23.9) (11.4) 3.7
---------------------------------------------------------------------------------------------------------------------
4,073.1 3,902.1 4,015.5
---------------------------------------------------------------------------------------------------------------------
$7,608.0 $6,874.8 $7,057.0
---------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
<PAGE> 29
F-17
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
For the Period From October 31, 1990 to March 31, 1994
-------------------------------------------------------------------
Cumulative Total
Common Paid-in Retained Translation Stockholders'
Stock Surplus Earnings Adjustments Equity
- - ----------------------------------------------------------------------------------------------------------------------------------
(In millions)
<S> <C> <C> <C> <C> <C>
BALANCE AT OCTOBER 31, 1990, NET OF TREASURY $117.4 $575.9 $3,075.0 $ 15.5 $3,783.8
Common Stock issued
Exercise of stock options and grants to employees 1.0 51.8 52.8
Dividend reinvestment and stock
purchase plan 0.1 3.3 3.4
Acquisition of stock for the treasury (0.7) (3.7) (23.8) (28.2)
Common Stock dividends ($.70 per share) (82.4) (82.4)
Translation adjustments (4.4) (4.4)
Tax benefit from exercise of stock options 2.2 2.2
Net earnings for the year 127.6 127.6
- - ----------------------------------------------------------------------------------------------------------------------------------
BALANCE AT OCTOBER 31, 1991, NET OF TREASURY 117.8 629.5 3,096.4 11.1 3,854.8
Common Stock issued
Exercise of stock options and grants to employees 0.7 38.1 38.8
Dividend reinvestment and stock
purchase plan 0.1 3.6 3.7
Acquisition of stock for the treasury (1.1) (6.4) (41.7) (49.2)
Common Stock dividends ($.775 per share) (91.5) (91.5)
Translation adjustments (7.4) (7.4)
Tax benefit from exercise of stock options 0.9 0.9
Net earnings for the year 265.4 265.4
- - ----------------------------------------------------------------------------------------------------------------------------------
BALANCE AT OCTOBER 31, 1992, NET OF TREASURY 117.5 665.7 3,228.6 3.7 4,015.5
Common Stock issued
Exercise of stock options and grants to employees 1.3 41.6 42.9
Dividend reinvestment and stock
purchase plan 1.9 1.9
Acquisition of stock for the treasury (0.6) (3.5) (22.9) (27.0)
Common Stock dividends ($.40 per share) (47.2) (47.2)
Translation adjustments (15.1) (15.1)
Tax benefit from exercise of stock options 7.1 7.1
Net loss for the six months ended April 30, 1993 (76.0) (76.0)
- - ----------------------------------------------------------------------------------------------------------------------------------
BALANCE AT APRIL 30, 1993, NET OF TREASURY 118.2 712.8 3,082.5 (11.4) 3,902.1
Common Stock issued
Exercise of stock options and grants to employees 4.6 207.6 212.2
Dividend reinvestment and stock
purchase plan 2.8 2.8
Common Stock dividends ($.60 per share) (71.7) (71.7)
Translation adjustments (12.5) (12.5)
Tax benefit from exercise of stock options 34.5 34.5
Net earnings for the eleven months ended March 31, 1994 5.7 5.7
- - ----------------------------------------------------------------------------------------------------------------------------------
BALANCE AT MARCH 31, 1994, NET OF TREASURY $122.8 $957.7 $3,016.5 $(23.9) $4,073.1
- - ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
<PAGE> 30
F-18
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Eleven Months Six Months
Ended March 31 Ended April 30 Year Ended October 31
-------------- -------------- -------------------------
1994 1993 1992 1991
- - -------------------------------------------------------------------------------------------------------------------------------
(In millions)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Earnings (loss) before extraordinary item and
cumulative effect of accounting change $ 5.7 $ (9.1) $ 274.2 $ 127.6
Non-cash expenses
Depreciation 93.0 37.1 71.7 59.1
Deferred income taxes (151.1) 28.9 (3.2) (37.5)
Amortization of intangible assets 47.2 4.3 44.4 39.2
Amortization of pre-publication costs 77.4 24.0 87.0 88.0
Gain from sale of affiliate equity investment (11.0)
Other non-cash charges 145.4
Provision for real estate write-down and relocation 40.0
Undistributed net earnings of unconsolidated affiliates (12.6) (11.3) (19.7) (15.7)
Theatrical and television inventories and broadcast rights
Gross additions (1,121.2) (526.8) (909.6) (953.6)
Amortization 1,032.5 387.0 834.7 945.2
Decrease (increase) in network features and syndication licenses (21.5) 4.2 (78.2) (47.1)
Increase in pre-publication costs (80.8) (39.6) (87.7) (77.8)
Decrease (increase) in trade receivables (25.8) 194.6 (8.4) (44.6)
Decrease (increase) in inventories (other than theatrical
and television) 16.5 (23.5) 19.4 19.2
Increase in prepaid expenses (89.2) (67.6) (13.4) (45.0)
Increase (decrease) in trade accounts payable (10.1) 51.0 8.5 (24.3)
Increase (decrease) in income taxes payable 5.7 (112.6) 12.4 (29.8)
Increase (decrease) in accrued expenses and other 228.4 (50.7) 34.4 (10.3)
Other -- net (124.3) (91.1) (48.4) 91.7
- - -------------------------------------------------------------------------------------------------------------------------------
NET CASH FLOWS PROVIDED FROM (USED FOR)
OPERATING ACTIVITIES 4.2 (161.2) 218.1 84.3
- - -------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTMENT AND OTHER ACTIVITIES
Expenditures for property, plant and equipment (excluding
capitalized leases) (148.2) (55.9) (120.0) (167.5)
Proceeds on disposal of property, plant and equipment 5.1 1.1 11.8 2.2
Purchase price of acquired businesses (net of acquired cash) (738.8) (0.1) (585.1) (86.9)
Decrease (increase) in investment in affiliated companies 23.6 (3.7) 10.8 8.3
Decrease (increase) in short-term and other investments 424.8 317.1 209.0 (467.1)
Increase in investments maturing after one year (43.6)
Decrease in investments maturing after one year 49.1 205.5
Decrease in notes receivable 6.2 1.3 8.9 17.3
- - -------------------------------------------------------------------------------------------------------------------------------
NET CASH FLOWS PROVIDED FROM (USED FOR) INVESTMENT
AND OTHER ACTIVITIES (427.3) 259.8 (415.5) (531.8)
- - -------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds of long-term debt 323.7 492.4
Payments of long-term debt (142.6) (5.9) (395.7) (26.9)
Loss on early extinguishment of debt (13.4)
Issuance of Common Stock (excluding grants to employees) 180.4 29.8 23.8 14.5
Acquisition of stock for the treasury (27.0) (49.2) (15.2)
Dividends (71.7) (47.2) (91.5) (82.4)
- - -------------------------------------------------------------------------------------------------------------------------------
NET CASH FLOWS PROVIDED FROM (USED FOR)
FINANCING ACTIVITIES 289.8 (50.3) (33.6) (110.0)
- - -------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (133.3) 48.3 (231.0) (557.5)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 372.6 324.3 555.3 1,112.8
- - -------------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 239.3 $ 372.6 $ 324.3 $ 555.3
- - -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
<PAGE> 31
F-19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A-- SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of Paramount
Communications Inc. (Company) and its majority-owned affiliates. As a result
of the Viacom Offer described in Note B, the Company became a majority-owned
subsidiary of Viacom Inc. in March 1994. The Company's investments in its
20-50% owned investees are carried on the equity basis. The income taxes of
the investees are included in the provision for income taxes.
Accounting Changes
Effective November 1, 1992, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions." This statement requires that the projected
future cost of providing postretirement benefits, such as health care and life
insurance, be recognized as an expense as employees render service instead of
when the benefits are paid. The Company's previous practice was to recognize
the cost of such postretirement benefits when paid.
The Company elected to record the cumulative effect of the accounting change as
a charge against income as of November 1, 1992, resulting in a one-time charge
of $66.9 million, net of income taxes of $34.5 million, or $.57 per share.
In February 1992, the Financial Accounting Standards Board issued SFAS No. 109,
"Accounting for Income Taxes." Effective May 1, 1993, the Company adopted the
provisions of this standard by restating its prior period financial statements
beginning November 1, 1988. The effect of adopting SFAS No. 109 was to
decrease the loss before cumulative effect of accounting change and net loss by
$1.8 million ($.01 per share) for the six months ended April 30, 1993; increase
earnings before extraordinary item and net earnings by $4.0 million ($.04 per
share) for the year ended October 31, 1992; and, increase net earnings by $5.4
million ($.05 per share) for the year ended October 31, 1991. The cumulative
effect of adopting SFAS No. 109 as of October 31, 1990, decreased the beginning
balance of 1991's retained earnings by $45.4 million. Under SFAS No. 109, the
liability method is used in accounting for income taxes. Under this method,
deferred tax assets and liabilities are determined based upon differences
between financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse. Prior to the adoption of SFAS No. 109,
income tax expense was determined using the deferred method. Deferred tax
expense was based on items of income and expense that were reported in
different years in the financial statements and tax returns and were measured
at the tax rate in effect in the year the differences originated.
Change in Fiscal Year End
In June 1993, the Board of Directors approved a change in the Company's fiscal
year end to April 30 from October 31. In March 1994 , the Board of Directors
approved a change in the Company's fiscal year end to March 31 from April 30.
The accompanying consolidated financial statements include audited financial
statements for the six-month and eleven-month transition periods ended April
30, 1993 and March 31, 1994, respectively. The unaudited condensed financial
information presented below for the eleven-month period ended March 31, 1993
and the six-month period ended April 30, 1992 are for comparative purposes
only.
<TABLE>
<CAPTION>
Eleven Months Six Months
--------------- ---------------
Ended March 31 Ended April 30
1993 1992
-------------------------------------------------------------------------
(In millions, except per share)
(Unaudited)
<S> <C> <C>
Revenues $3,753.2 $1,998.5
Gross Profit 1,376.6 615.4
Operating Income 301.8 77.8
Income Taxes 94.4 20.0
Earnings before extraordinary item and
cumulative effect of accounting change 213.7 48.7
Extraordinary item (8.8)
Cumulative effect of accounting change (66.9)
Net Earnings 138.0 48.7
Earnings (Loss) Per Share
Earnings before extraordinary item and
cumulative effect of accounting change 1.80 .41
Extraordinary item (.07)
Cumulative effect of accounting change (.57)
Net earnings 1.16 .41
--------------------------------------------------------------------------
</TABLE>
<PAGE> 32
F-20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Cash and Cash Equivalents
Cash equivalents consist of highly liquid instruments with original maturities
of three months or less.
Short-Term Investments
Short-term investments consist of instruments with original maturities in
excess of three months and are carried at the lower of cost or market.
Inventories
Inventories are generally determined using the lower of cost (first-in,
first-out or average cost method) or net realizable value.
Theatrical and Television Inventories, Revenues and Costs
Feature films are produced or acquired for distribution, normally, first in the
theatrical market followed by videocassettes, pay cable, network television and
syndicated television. On average, the length of the revenue cycle for feature
films approximates four years. Theatrical revenues from domestic and foreign
markets are recognized as films are exhibited, revenues from the sale of
videocassettes are recognized upon delivery of the merchandise and revenues
from all television sources are recognized upon contract execution and
availability of the film for telecast.
Television series initially produced for the networks and first-run syndication
are generally licensed to domestic and foreign markets concurrently. The more
successful series are later syndicated in domestic markets and in certain
foreign markets. The length of the revenue cycle for television series will
vary depending on the number of seasons a series remains in active production.
Revenues arising from television license agreements are recognized in the year
that the films or television series are available for telecast and a
contract has been executed.
Inventories related to theatrical and television product (which include direct
production costs, production overhead, capitalized interest, and acquisition
costs) are stated at the lower of cost less amortization or net realizable
value. Inventories are amortized and participations and residuals are accrued
on an individual product basis in the proportion that current revenues bear to
the estimated remaining total lifetime revenues. Domestic syndication and
basic cable revenue estimates are not included in the estimated lifetime
revenues of network series until such sales are probable. Estimates of total
lifetime revenues and expenses are periodically reviewed. The costs of feature
and television films are classified as current assets to the extent such costs
are expected to be recovered through the respective primary markets. Other
costs relating to film production are classified as noncurrent.
The Company estimates that approximately 91% of unamortized film costs at March
31, 1994 will be amortized within the next three years.
Publishing Revenue Recognition
The Company's publishing segment follows standard industry practice of
recognizing revenue when merchandise is shipped and billed.
Broadcast Rights
Broadcast rights are recorded when the license period begins and the program
becomes available for use, and are stated at the lower of cost less
amortization or net realizable value. Broadcast rights for feature films and
syndicated programs are amortized using the straight-line method based on
program usage. Sports rights are generally charged to expense when the event
is telecast. Contract payments are generally made in installments over a term
somewhat shorter than the contract.
Property, Plant and Equipment
Property, plant and equipment are carried at cost. Provision for depreciation
on substantially all depreciable assets is computed using the straight-line
method over the estimated useful lives of the assets.
Intangible Assets
Intangible assets primarily represent the excess of cost of purchased
businesses over the value of their net underlying assets (goodwill) and are
being amortized annually by the straight-line method over appropriate periods
not exceeding forty years. Intangible assets are net of accumulated
amortization of $277.9, $233.9 and $230.1 million at March 31, 1994, April 30,
1993 and October 31, 1992, respectively.
Deferred Costs and Other
Deferred costs and other includes certain pre-publication costs being amortized
annually by the straight-line method or an accelerated basis over various
periods, the majority of which is four years.
<PAGE> 33
F-21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Unamortized Debt Discount
Debt discount is amortized over the term of the related debt using the interest
method.
Income Taxes
Provision for income taxes includes deferred taxes which represent future tax
effects of items reported for income tax purposes in periods different than for
financial purposes.
Deferred Off-Season Theme Park Expenses
Certain expenses incurred in the off-season to prepare the theme parks for the
operating season are deferred and amortized over the subsequent operating
season, which generally begins in March and ends in October.
Earnings (Loss) Per Share
Earnings (loss) per share amounts are based on the weighted average common and
dilutive common equivalent (stock options) shares outstanding during the
respective periods. Earnings (loss) per share are computed by dividing the
average common and, where dilutive, common equivalent shares outstanding into
the earnings (loss) applicable to such shares.
NOTE B -- VIACOM INC. MERGER
Pursuant to an Amended and Restated Agreement and Plan of Merger dated as of
February 4, 1994 (as subsequently amended, the "Merger Agreement") between
Viacom Inc. ("Viacom") and the Company, the Company will become a wholly owned
subsidiary of Viacom at the effective time of a merger between the Company and
a subsidiary of Viacom (the "Viacom Merger"). A special meeting of the
Company's stockholders will be held on July 6, 1994 to act on the Viacom
Merger. The approval of holders of a majority of all outstanding voting shares
of both Viacom and the Company is required to approve the Viacom Merger. The
approval by Viacom's stockholders is assured by means of a voting agreement
between the Company and National Amusements, Inc., Viacom's parent corporation
which is controlled by Sumner M. Redstone. The approval by the
Company's stockholders is assured since Viacom now owns a majority of the
outstanding shares of the Company's Common Stock.
On March 2, 1994, Viacom accepted for payment, pursuant to a tender
offer (the "Viacom Offer"), 61,657,432 shares of the Company's Common Stock,
constituting a majority of the shares outstanding, at a price of $107 per share
in cash. Pursuant to the Merger Agreement, each share of the Company's Common
Stock outstanding at the time of the Viacom Merger (other than shares held in
the treasury of the Company or owned by Viacom and other than shares held by
any stockholders of the Company who shall have demanded and perfected appraisal
rights) will be converted into the right to receive (i) 0.93065 of a share of
Viacom Class B Common Stock, (ii) $17.50 principal amount of 8% exchangeable
subordinated debentures ("8% Debentures") of Viacom, (iii) 0.93065 of a
contingent value right ("CVR"), (iv) 0.5 of a warrant to purchase one share of
Class B Common Stock of Viacom at any time prior to the third anniversary of
the Viacom Merger at a price of $60 per share, and (v) 0.3 of a warrant to
purchase one share of Class B Common Stock at any time prior to the fifth
anniversary of the Viacom Merger at a price of $70 per share. If a proposed
merger between Blockbuster Entertainment Corporation and Viacom is not
consummated prior to January 1, 1995, the 8% Debentures will be exchangeable,
at Viacom's option, for 5% cumulative preferred stock of Viacom and the
dividend payable on such preferred stock will be deemed to have accrued from
the effective time of the Viacom Merger and there will be no obligation to make
payments of interest on the 8% Debentures.
NOTE C -- ACQUISITION AND
DISPOSITION OF BUSINESSES
In May 1993, the Company purchased the remaining 80% it did not own of Canada's
Wonderland, Inc. (CWI), later renamed Paramount Canada's Wonderland, Inc., a
Canadian theme park, for approximately $52 million.
In September 1993, the Company purchased television station WKBD-TV (WKBD) in
Detroit from Cox Enterprises Inc. for approximately $105 million.
In February 1994, the Company acquired Macmillan Publishing Company and certain
other assets of Macmillan Inc.(Macmillan), a leading book publisher, for
approximately $553 million.
The acquisitions have been accounted for as purchases and the financial
statements include the results of their operations from the dates of
acquistion.
The following table summarizes, on a pro forma basis, the combined
results of operations as though CWI, WKBD and Macmillan had been acquired on
November 1, 1992. It includes estimated amounts for a reduction of interest
income due to the use of short-term investments for the acquistions,
amortization of estimated intangible assets, an adjustment to depreciation
expense an adjustment to conform WKBD's
<PAGE> 34
F-22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
accounting policies related to the accrual of certain operating
expenses to that of Paramount and an adjustment for income taxes, at the
statutory rate. These pro forma results do not necessarily reflect the actual
results of operations as they would have been had the acquistion taken place on
that date, nor are they necessarily indicative of future results.
<TABLE>
<CAPTION>
Eleven Months Six Months
Ended March 31 Ended April 30
-------------- --------------
1994 1993
- - -----------------------------------------------------------------------------
(In millions, except per share)
(Unaudited)
<S> <C> <C>
Revenues $4,697.2 $2,035.1
Loss before cumualtive effect of
accounting change (3.7) (33.6)
Net loss (3.7) (100.5)
Loss per share
Loss before cummualtive effect of
accounting change (0.03) (0.29)
Net loss (0.03) (0.85)
</TABLE>
The Company and BHC Communications, Inc., which is majority-owned by
Chris-Craft Industries, Inc., are forming the Paramount Television Network
which will provide prime-time television programming primarily to broadcast
affiliates nationwide in competition with the three major networks and the Fox
Broadcasting Network. The network is expected to begin operations in January
1995.
In November 1991, the Company acquired Macmillan Computer Publishing, later
renamed Prentice Hall Computer Publishing, a leading publisher of personal
computer and related technical books, for approximately $158 million.
In August and October 1992, the Company acquired Kings Entertainment Company
and Kings Island Company, respectively, later renamed Paramount Parks, which
own and operate regional theme parks, for a total of approximately $400
million.
The acquisitions have been accounted for as purchases and the financial
statements include the results of their operations from the dates of
acquisition.
The following table summarizes, on a pro forma basis, the combined results of
operations as though Kings Entertainment Company, Kings Island Company and
Macmillan Computer Publishing had been acquired on November 1, 1990. It
includes estimated amounts for a reduction of interest income due to the use of
short-term investments for the acquisitions, amortization of estimated
intangible assets, additional depreciation expense and an adjustment for income
taxes, at the statutory rate. These pro forma results do not necessarily
reflect the actual results of operations as they would have been had the
acquisitions taken place on that date, nor are they necessarily indicative of
future results.
<TABLE>
<CAPTION>
Year Ended October 31
---------------------------------
1992 1991
- - --------------------------------------------------------------------------
(In millions, except per share)
(Unaudited)
<S> <C> <C>
Revenues $4,464.1 $4,203.5
Earnings before extraordinary item 277.7 133.2
Net earnings 268.9 133.2
Earnings per share
Earnings before extraordinary item 2.34 1.13
Net earnings 2.26 1.13
-------------------------------------------------------------------------
</TABLE>
During the eleven months ended March 31, 1994, the six months ended April 30,
1993 and the years ended October 31, 1992 and 1991, the Company also acquired
or sold certain other businesses. The contributions of these businesses in the
aggregate were not significant to the Company's results of operations for the
periods presented, nor are they expected to have a material effect on the
Company's results on a continuing basis.
NOTE D -- OTHER INCOME (EXPENSE)
Other income (expense) for the eleven months ended March 31, 1994, includes a
pre-tax charge of $27.2 million for costs incurred in the Company's merger with
Viacom Inc., consisting principally of finance, legal, consulting and other
fees, and an $18.8 million increase in reserves previously established for
discontinued operations.
In addition, in the eleven months ended March 31, 1994, an unconsolidated
affiliate of the Company sold an equity investment of which the Company
recorded its appropriate share, amounting to a pre-tax gain of $11.0 million.
Other income (expense) also includes foreign exchange gains (losses), minority
interest and other.
<PAGE> 35
F-23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE E -- EXTRAORDINARY ITEM
In September 1992, the Company redeemed $175 million of 9 3/4% senior
debentures due 2016 for $1,061.25 per $1,000 principal amount. The premium
paid by the Company and the write-off of related unamortized discount and
issuance costs resulted in a loss of $8.8 million, net of an income tax benefit
of $4.6 million.
NOTE F -- INVENTORIES
Inventories as described in Note A are stated as follows
(in millions):
<TABLE>
<CAPTION>
March 31 April 30 October 31
-------- -------- ----------
1994 1993 1992
- - ----------------------------------------------------------------------------
<S> <C> <C> <C>
Current
Finished goods $ 278.5 $ 248.3 $230.1
Work in process 19.2 12.8 10.6
Materials and supplies 31.7 29.5 26.4
- - ----------------------------------------------------------------------------
329.4 290.6 267.1
- - ----------------------------------------------------------------------------
Theatrical and television productions
Released 226.0 176.9 169.1
Completed, not released 29.2 32.7 35.7
In process and other 46.3 61.8 75.9
- - ----------------------------------------------------------------------------
301.5 271.4 280.7
- - ----------------------------------------------------------------------------
Broadcast rights 68.3 55.3 32.4
- - ----------------------------------------------------------------------------
Total Current 699.2 617.3 580.2
- - ----------------------------------------------------------------------------
Noncurrent
Theatrical and television productions
Released 130.4 155.3 103.9
In process and other 305.9 247.0 174.8
- - ----------------------------------------------------------------------------
436.3 402.3 278.7
- - ----------------------------------------------------------------------------
Broadcast rights 136.8 107.0 104.4
- - ----------------------------------------------------------------------------
Total Noncurrent 573.1 509.3 383.1
- - ----------------------------------------------------------------------------
Total $1,272.3 $1,126.6 $963.3
- - ----------------------------------------------------------------------------
</TABLE>
NOTE G -- INVESTMENT IN
AFFILIATED COMPANIES
Investments in affiliated companies primarily include the Company's
interest in USA Networks, national advertiser-supported basic cable television
networks (50% owned -- see paragraph 4 on page 2 for additional information);
Cinamerica, a domestic motion picture theater operation (50% owned); United
Cinemas International Multiplex B.V., engaged in theatrical exhibition of
motion pictures in the United Kingdom, Ireland, Germany and Spain (49% owned);
Cinema International Corporation N.V., which owns motion picture screens in six
countries (49% owned); and as of August 1992, Canada's Wonderland, Inc., a
Canadian theme park (20% owned). In May 1993, the Company purchased the
remaining 80% it did not own of Canada's Wonderland, Inc., later renamed
Paramount Canada's Wonderland, Inc.
Summarized financial information for the above companies is as follows (in
millions):
<TABLE>
<CAPTION>
Eleven Months Ended Six Months Ended Year Ended
or at March 31 or at April 30 or at October 31
------------------- ---------------- ------------------------
1994 1993 1992 1991
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $695.1 $372.6 $783.2 $683.0
Gross profit 152.8 129.0 321.6 226.3
Net earnings (loss) (26.1) 36.2 83.2 74.4
Current assets $348.4 $326.7 $337.8
Noncurrent assets 819.5 855.8 934.2
Current liabilities 313.9 223.7 248.8
Noncurrent liabilities 437.9 493.4 595.4
----------------------------------------------------------------------------------------------
</TABLE>
Included in the operating income of the Company's Entertainment operations are
equity in earnings (loss) for the above affiliated companies of $(3.9), $24.0,
$58.7 and $47.6 million, respectively, for the eleven months ended March 31,
1994, the six months ended April 30, 1993 and the years ended October 31, 1992
and 1991. Dividends received from these affiliated companies were $14.8, $7.8,
$22.0 and $32.5 million, respectively, for the eleven months ended March 31,
1994, the six months ended April 30, 1993 and the years ended October 31, 1992
and 1991.
Included in consolidated retained earnings at March 31, 1994 is $134.2 million
of undistributed earnings of affiliates.
NOTE H -- LONG-TERM DEBT
Long-term debt includes (in millions):
<TABLE>
<CAPTION>
March 31 April 30 October 31
-------- -------- ----------
1994 1993 1992
- - ---------------------------------------------------------------------------
<S> <C> <C> <C>
8 1/2% senior notes due 1996
(prepaid July 1993) $ 99.8 $ 99.8
5 7/8% senior notes due 2000 $ 149.4
7 1/2% senior notes due 2002 246.6 246.3 246.0
8 1/4% senior debentures due 2022 246.9 246.8 246.7
7 1/2% senior debentures due 2023 149.5
7% subordinated debentures due 2003,
net of unamortized discount of
$50.8 at March 31, 1994, $53.7
at April 30, 1993 and $55.1 at
October 31, 1992 (effective
average interest rate of 10.8%) 180.6 177.7 176.3
Revolving loan agreement borrowings 25.0
Other notes and debentures due
1994 to 1996 (effective average
interest rate of 8.24%) 12.1 12.2 12.2
Obligations under capital leases 23.9 34.3 41.1
-------------------------------------------------------------------------
1,034.0 817.1 822.1
Less current maturities 35.6 109.8 10.0
-------------------------------------------------------------------------
$ 998.4 $707.3 $812.1
-------------------------------------------------------------------------
</TABLE>
<PAGE> 36
F-24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Maturities of long-term debt (including the present value of obligations under
capital leases as set forth in Note K) during the five years ending March 31,
1999 are (in millions):
<TABLE>
<S> <C>
- - --------------------------------------------------------
1995 $ 35.6
1996 20.0
1997 3.0
1998 0.4
1999 0.4
- - --------------------------------------------------------
</TABLE>
The Company has complied with restrictions and limitations required under terms
of various loan agreements.
At March 31, 1994 the Company had $125 million of unused revolving loan
agreement facilities.
NOTE I -- CAPITAL STOCK
The authorized capital stock of the Company includes 75,000,000 shares of
Preferred Stock, all of which are undesignated.
Each share of Common Stock outstanding has a related Common Stock purchase
right which will become exercisable after a specified period of time only if a
person or group acquires beneficial ownership of 15% or more of the outstanding
Common Stock of the Company or announces or commences a tender or exchange
offer that would result in the offeror acquiring 30% or more of the Company's
Common Stock. Once exercisable, each right would entitle its registered holder
to purchase one share of the Company's Common Stock at a price of $200 per
share, subject to adjustment to prevent dilution. Upon the occurrence of
certain events or transactions specified in the rights agreement, the rights
holder is entitled to receive for $200 per right a number of shares of the
Company's or an acquiring company's common stock having a market value equal to
twice the right's exercise price. The rights may be redeemed by the Company
for $.01 per right prior to the tenth day after a person or group acquires 15%
or more of the outstanding Common Stock of the Company. The rights expire on
September 30, 1998, unless redeemed earlier by the Company. On March 1, 1994
the rights were amended to permit consummation of the tender offer by Viacom
Inc., without causing the rights to become exercisable. In addition, the
rights have been amended to provide that the rights expire immediately prior to
the merger between the Company and Viacom. See Note B.
Common Stock outstanding at March 31, 1994, does not include 18,975
shares reserved under the 1984 Stock Option Plan; 2,078,971 shares reserved
under the 1989 Stock Option Plan; 5,750,000 shares reserved under the 1992 Stock
Option Plan; and 3,102,224 shares reserved under the Long-Term Performance Plan.
The Company's 1973 Key Employees Stock Purchase Plan and 1984, 1989 and 1992
Stock Option Plans provide for the issuance of options to key employees to
purchase Common Stock of the Company at a price not less than fair market value
on the date of grant. Options may not be granted under these plans that expire
more than ten years from the date of grant. The Company may establish
installment exercise terms for a stock option so that the option becomes fully
exercisable in a series of cumulative portions. The Company may also
accelerate the period for the exercise of any stock option or portion thereof.
Each option granted under the Company's 1984, 1989 and 1992 Stock Option Plans
contains a Limited Right which entitles the holder thereof, only upon the
occurrence of certain specified events constituting a change in control of the
Company and only after the Compensation Committee of the Board of Directors of
the Company so determines, to receive cash in lieu of exercising the option.
<PAGE> 37
F-25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Transactions involving outstanding stock options under these plans were:
<TABLE>
<CAPTION>
Number of Common Shares Option Price
----------------------------------------- --------------------------------
1973 Plan 1984 Plan 1989 Plan Per Share Aggregate
------------------------------------------------------------------------------------------------------------------------------
(in millions)
<S> <C> <C> <C> <C> <C>
Outstanding at October 31, 1990 100,000 4,243,191 1,717,305 $7.75-$55.63 $223.7
Granted 2,967,650 36.94- 42.13 119.9
Issued (30,000) (750,710) 11.80- 43.13 (24.1)
Rescinded (320,700) (487,970) 31.69- 55.00 (36.1)
------------------------------------------------------------------------------------------------------------------------------
Outstanding at October 31, 1991 70,000 3,171,781 4,196,985 7.75- 55.63 283.4
Granted 468,500 37.50- 47.13 20.0
Issued (40,000) (295,198) (221,183) 7.75- 41.81 (20.1)
Rescinded (45,075) (325,825) 20.19- 55.00 (15.7)
------------------------------------------------------------------------------------------------------------------------------
Outstanding at October 31, 1992 30,000 2,831,508 4,118,477 13.94- 55.63 267.6
Granted 442,500 44.19- 50.69 19.7
Issued (30,000) (703,091) (309,099) 13.94- 45.81 (27.8)
Rescinded (600) (36,035) 33.88- 55.00 (1.9)
------------------------------------------------------------------------------------------------------------------------------
Outstanding at April 30, 1993 -0- 2,127,817 4,215,843 15.25- 55.63 257.6
Granted 200,000 51.56- 56.38 10.7
Issued (2,035,492) (2,390,747) 15.25- 55.00 (177.6)
Rescinded (73,350) (520,759) 20.19- 55.00 (23.2)
------------------------------------------------------------------------------------------------------------------------------
Outstanding at March 31, 1994 -0- 18,975 1,504,337 31.69- 56.38 $67.5
------------------------------------------------------------------------------------------------------------------------------
Exercisable at
October 31, 1992 30,000 2,831,508 2,287,869
April 30, 1993 -0- 2,127,817 2,238,430
March 31, 1994 -0- 18,975 197,500
Reserved for future grants at
October 31, 1992 660,340
April 30, 1993 253,875
March 31, 1994 574,634
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
No options have been granted under the 1992 Stock Option Plan, and at March 31,
1994, 5,750,000 shares were reserved for future grants under this plan.
The Company follows the practice of recording amounts received upon the
exercise of options by crediting Common Stock and paid-in surplus. No charges
are reflected in the consolidated statement of earnings as a result of the
grant or exercise of stock options. The Company records compensation expense
related to stock appreciation rights of each plan and share unit features of
the 1973 Plan based on the change in the quoted market price of the Common
Stock for the period. The exercise prices of options are subject to
anti-dilution provisions. The Company realizes an income tax benefit from the
exercise or early disposition of certain stock options. This benefit results
in a decrease in current income taxes payable and an increase in paid-in
surplus.
During the six months ended April 30, 1993, 125,000 shares of Common Stock of
the Company were granted to certain key employees subject to restrictions which
will lapse on certain dates through February 1997. The average market price of
these shares on the dates on which they were granted ranged from $43.06 to
$44.19. During the six months ended April 30, 1993 and the year ended October
31, 1991, 50,000 and 292,000, respectively, of previously granted shares were
rescinded. At March 31, 1994, the unvested portion of previously granted
shares totaling $1.7 million is included as a reduction of stockholders'
equity. Compensation expense is recorded over the period during which services
are performed.
During the eleven months ended March 31, 1994, the six months ended April 30,
1993 and the year ended October 31, 1992, 27,794, 61,094 and 64,205 shares,
respectively, of Common Stock of the Company were granted to employees at an
average market price of $80.81, $43.50 and $37.63 under the terms of the
Company's Long-Term Performance Plan. At March 31, 1994, April 30, 1993 and
October 31, 1992, there were 3,102,224, 3,130,018 and 3,191,112 shares,
respectively, of Common Stock reserved for future grants under this plan.
<PAGE> 38
F-26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE J--INCOME TAXES
As described in Note A, effective May 1, 1993, the Company adopted SFAS No.
109, "Accounting for Income Taxes" by restating its prior period financial
statements beginning November 1, 1988.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Company's deferred income tax assets and liabilities were as follows (in
millions):
<TABLE>
<CAPTION>
March 31 April 30 October 31
-------- -------- ----------
1994 1993 1992
- - -------------------------------------------------------------------------------
<S> <C> <C> <C>
Deferred tax assets:
Costs of motion picture and
television production $ 92.9 $ 89.2 $ 75.0
Employee compensation and other
payroll related expenses 34.1 44.5 60.7
Provisions for real estate
write-down, relocation and
publishing charges 99.3 40.5 24.8
Sales returns and allowances 64.4 46.4 45.8
Discontinued operations 37.1 34.2 29.0
Postretirement benefit obligation 35.5 34.5
Preacquisition net operating loss
carryforwards of subsidiaries
and other 31.9 50.0 60.3
Net operating loss carry forward 87.0
Other 93.6 32.1 42.0
- - -------------------------------------------------------------------------------
575.8 371.4 337.6
Valuation allowance for deferred
tax assets (31.9) (50.0) (60.3)
- - --------------------------------------------------------------------------------
Total deferred tax assets 543.9 321.4 277.3
- - -------------------------------------------------------------------------------
Deferred tax liabilities:
Income on motion picture and
television production (2.6) (12.4) (13.1)
Expenses related to renovation
project (9.5) (9.2) (9.2)
Self insurance (20.2) (10.5) (3.1)
Deferred seasonal expenses (44.0) (41.9) (26.8)
Other (5.9) (18.4) (17.9)
- - -------------------------------------------------------------------------------
Total deferred tax liabilities (82.2) (92.4) (70.1)
- - -------------------------------------------------------------------------------
Net deferred tax assets $461.7 $229.0 $207.2
- - -------------------------------------------------------------------------------
</TABLE>
The net deferred tax assets at March 31, 1994 consist of $268.9 million
classified in current assets and $192.8 million classified as noncurrent
assets. At March 31, 1994, the Company has net operating loss carryforwards
of $339.9 million which begin to expire in 1996, $91.0 million of which
relates to acquired net operating losses subject to limitations, for which a
full valuation has been established .
Provision (benefit) for income taxes includes (in millions):
<TABLE>
<CAPTION>
Eleven Months Six Months Year Ended
Ended March 31 Ended April 30 October 31
-------------- -------------- --------------
1994 1993 1992 1991
- - ------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Current
Federal $ 97.5 $(54.1) $ 62.4 $ 26.1
Foreign 46.6 16.1 55.1 47.5
State and other 10.1 1.4 8.8 16.0
- - ------------------------------------------------------------------------
154.2 (36.6) 126.3 89.6
- - ------------------------------------------------------------------------
Deferred
Federal (158.6) 27.7 4.0 (28.0)
Foreign 7.5 1.2 (7.2) (4.2)
State and other (5.3)
- - ------------------------------------------------------------------------
(151.1) 28.9 (3.2) (37.5)
- - ------------------------------------------------------------------------
$ 3.1 $ (7.7) $123.1 $ 52.1
- - ------------------------------------------------------------------------
</TABLE>
The components of earnings (loss) before income taxes were as follows (in
millions):
<TABLE>
<CAPTION>
Eleven Months Six Months Year Ended
Ended March 31 Ended April 30 October 31
-------------- -------------- -----------------
1994 1993 1992 1991
- - -------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Domestic $(132.4) $(47.8) $301.8 $ 68.0
Foreign 141.2 31.0 95.5 111.7
- - -------------------------------------------------------------------------
$ 8.8 $(16.8) $397.3 $179.7
- - -------------------------------------------------------------------------
</TABLE>
<PAGE> 39
F-27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A reconciliation between the provision (benefit) for income taxes computed by
applying the statutory Federal income tax rate to earnings (loss) before income
taxes and the actual provision (benefit) for income taxes is as follows (in
millions):
<TABLE>
<CAPTION>
Eleven Months Six Months Year Ended
Ended March 31 Ended April 30 October 31
-------------- -------------- ---------------
1994 1993 1992 1991
- - ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Provision (benefit)
for income taxes
at statutory rate $ 3.1 $(5.7) $135.1 $ 61.1
Increase (decrease) in
taxes arising from
effect of
Income (principally
foreign) taxed at lower rates (17.1) (1.2) (13.4) (19.6)
Amortization of
intangible assets 13.6 1.3 13.1 8.8
U. S. state and local
income taxes 6.6 1.0 5.3 7.0
Tax exempt interest (5.4)
Restoration of reserves
no longer required (3.9) (21.4)
Statutory rate change (5.9)
Other 2.8 0.8 4.4 0.2
- - ----------------------------------------------------------------------------------------------------------
Provision (benefit) for
income taxes $ 3.1 $(7.7) $123.1 $ 52.1
- - ----------------------------------------------------------------------------------------------------------
Effective tax rate 35.2% 45.8% 31.0% 29.0%
- - ----------------------------------------------------------------------------------------------------------
</TABLE>
Total income tax payments were $116.2, $59.6, $120.0 and $103.8 million,
respectively, for the eleven months ended March 31, 1994, the six months ended
April 30, 1993 and the years ended October 31, 1992 and 1991. The Company's
share of the undistributed earnings of foreign subsidiaries not included in its
consolidated Federal income tax return, that could be subject to additional
income taxes if remitted, was approximately $771 million at March 31, 1994. No
provision has been made for taxes that could result from the remittance of such
undistributed earnings since the Company intends to reinvest these earnings
indefinitely; determination of the related unrecognized deferred U.S. income
tax liability is not practicable.
In August 1993, the Budget Reconciliation Act of 1993 (the "Act") was enacted
into law. One of the provisions of the Act increased the corporate income tax
rate to 35% effective January 1, 1993. This increase, from the previous 34%
rate, had no material effect on the Company. The Company expects to benefit
from a section of the Act permitting tax deductions derived from the
amortization of certain intangible assets acquired after July 25, 1991, which
deductions have not previously been claimed on tax returns filed by the
Company. However, the Company believes that any tax benefits generated by the
amortization of intangible assets previously acquired by it will not be
material.
Furthermore, to the extent that the Company is affected by several other
provisions of the Act, the results should not be material.
NOTE K -- COMMITMENTS AND CONTINGENCIES
Leases
Total rental expense was $89.9, $45.7, $87.0 and $80.0 million, respectively,
for the eleven months ended March 31, 1994, the six months ended April 30, 1993
and the years ended October 31, 1992 and 1991.
At March 31, 1994, the minimum lease payments under capital leases and
noncancellable operating leases were as follows (in millions):
<TABLE>
<CAPTION>
Year Ending March 31
---------------------
Capital Operating
Leases Leases
- - --------------------------------------------------------------------
<S> <C> <C>
1995 $13.5 $73.9
1996 9.4 57.3
1997 3.6 50.0
1998 0.8 44.1
1999 0.7 41.2
Thereafter 4.2 452.1
- - --------------------------------------------------------------------
Total minimum lease payments 32.2 $718.6
- - --------------------------------------------------------------------
Less amounts representing interest 8.3
- - --------------------------------------------------------------------
Present value of net minimum lease payments $23.9
- - --------------------------------------------------------------------
</TABLE>
Many of the leases also require the lessee to pay property taxes, insurance and
ordinary repairs and maintenance.
Employee Benefit Plans
The cost of pension benefits for eligible employees, measured by length of
service, compensation and other factors, is currently being funded through
trusts established under the plans. In general, the Company's funding policy
is to make contributions to the plans as necessary to meet minimum funding
requirements.
<PAGE> 40
F-28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The components of net periodic pension cost for the Company's plans were as
follows (in millions):
<TABLE>
<CAPTION>
Eleven Months Six Months Year Ended
Ended March 31 Ended April 30 October 31
-------------- -------------- ---------------
1994 1993 1992 1991
- - ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Service cost-benefits
earned $ 20.7 $ 9.2 $ 18.1 $ 17.2
Interest cost on projected
benefit obligation 32.6 18.9 34.1 32.4
Less return on plan assets (41.6) (25.2) (41.2) (59.4)
Net amortization
and deferral 1.8 3.9 1.9 19.7
- - ------------------------------------------------------------------------------------------
Net periodic pension cost $ 13.5 6.8 $ 12.9 $ 9.9
- - ------------------------------------------------------------------------------------------
</TABLE>
In addition, the Company had other pension expense for the eleven months ended
March 31, 1994, the six months ended April 30, 1993 and the years ended October
31, 1992 and 1991 of $10.1, $5.0, $9.2 and $9.2 million, respectively,
primarily related to multiemployer pension plans.
The funded status and amounts recognized in the Company's consolidated balance
sheet for its domestic and non-U.S. plans is as follows (in millions):
<TABLE>
<CAPTION>
March 31 April 30 October 31
-------- -------- ----------
1994 1993 1992
- - ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Actuarial present value of benefit
obligation
Vested $418.4 $345.8 $325.6
Nonvested 23.5 19.4 17.8
- - ---------------------------------------------------------------------------------------------------------------------
Accumulated benefit obligation 441.9 365.2 343.4
Effect of projected future salary
increases 71.1 57.1 55.8
- - ---------------------------------------------------------------------------------------------------------------------
Projected benefit obligation 513.0 422.3 399.2
Plan assets at fair value 471.9 453.0 432.1
- - ---------------------------------------------------------------------------------------------------------------------
Plan assets in excess of or (less than)
projected benefit obligation (41.1) 30.7 32.9
Unrecognized net (gain) loss 21.8 (34.9) (30.2)
Unrecognized prior service cost (7.1) (8.2) (9.7)
Unrecognized net asset at date
of adoption of SFAS No. 87 (7.5) (9.0) (9.7)
- - ---------------------------------------------------------------------------------------------------------------------
Net pension liability $(33.9) $(21.4) $(16.7)
- - ---------------------------------------------------------------------------------------------------------------------
</TABLE>
Plan assets consist primarily of marketable equity and fixed income securities
and the Company's Common Stock. At April 30, 1993 and October 31, 1992, the
Company's plans owned 932,076 shares of the Company's Common Stock with an
aggregate market value of $48.5 and $39.3 million, respectively. During the
eleven months ended March 31, 1994, all shares of the Company's Common Stock
owned by the Company's plans were sold, resulting in net proceeds of $74.2
million.
The weighted average discount rate and rate of increase in future compensation
levels used in determining the actuarial present value of the projected benefit
obligation for the Company's plans were 7.5% and 5.0%, respectively, for the
eleven months ended March 31, 1994, and 8.5% and 6.0%, respectively, for the
six months ended April 30, 1993 and the year ended October 31, 1992. The
expected long-term rate of return on assets used for the majority of the
Company's plans was 10.0% for the eleven months ended March 31, 1994, the six
months ended April 30, 1993 and the years ended October 31, 1992 and 1991.
Postretirement Benefits Other Than Pensions
In addition to providing pension benefits, the Company sponsors a welfare plan
which provides certain postretirement health care and life insurance benefits
for substantially all employees and their covered dependents who generally have
worked ten years and are eligible for early or normal retirement under the
provisions of the Company's retirement plan. The welfare plan is contributory
and contains cost-sharing features such as deductibles and coinsurance which
are adjusted annually. The plan is not funded. The Company continues to fund
these benefits as claims are paid.
As described in Note A, effective November 1, 1992, the Company adopted SFAS
No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions." Postretirement benefit costs for prior years, which were recorded
on a cash basis, have not been restated.
<PAGE> 41
F-29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The components of the amounts recognized in the Company's consolidated balance
sheet are as follows (in millions):
<TABLE>
<CAPTION>
March 31 April 30 November 1
-------- -------- ----------
1994 1993 1992
- - ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Accumulated postretirement benefit
obligation attributable to:
Current retirees $ 50.8 $ 51.7 $ 49.2
Fully eligible active plan
participants 20.0 20.2 19.2
Other active plan participants 34.2 34.7 33.0
Unrecognized net gain 9.4
- - ----------------------------------------------------------------------------------------------
Accumulated postretirement
benefit obligation $114.4 $106.6 $101.4
- - ----------------------------------------------------------------------------------------------
</TABLE>
The components of net periodic postretirement benefit cost for the eleven
months ended March 31, 1994 and the six months ended April 30, 1993, are as
follows (in millions):
<TABLE>
<CAPTION>
Eleven Months Six Months
Ended March 31 Ended April 30
-------------- --------------
1994 1993
- - ----------------------------------------------------------------------------------------------
<S> <C> <C>
Service cost-benefits earned $ 4.2 $2.4
Interest cost on accumulated
postretirement benefit obligation 6.5 4.2
- - ----------------------------------------------------------------------------------------------
Net periodic postretirement benefit cost $10.7 $6.6
- - ----------------------------------------------------------------------------------------------
</TABLE>
The discount rate used in determining the accumulated postretirement benefit
obligation was 7.5% for the eleven months ended March 31, 1994 and 8.5% for the
six months ended April 30, 1993. At March 31, 1994, the assumed weighted
average health care cost trend rates to be used in measuring the accumulated
postretirement benefit obligation for 1995 are 11% for retirees age 65 and over
and 13% for retirees under age 65. Both rates are assumed to decrease
gradually each year to 5.5% in 2011 and thereafter. A one percentage point
increase in each year of these health care cost trend rates would increase the
accumulated postretirement benefit obligation at March 31, 1994 by $19.2
million, and increase the sum of the service and interest cost components of
net periodic postretirement benefit cost by $2.3 million.
In addition, the Company contributes to multiemployer plans which provide
health and welfare benefits to active as well as retired employees. The cost
of these benefits for the eleven months ended March 31, 1994 and the six months
ended April 30, 1993, was $12.7 and $5.6 million, respectively.
Commitments
At March 31, 1994, the Company is obligated to make future payments for various
feature films, syndicated programs, sports events and other programming
totaling approximately $367 million. This amount includes $285 million related
to Madison Square Garden Network's agreement to televise New York Yankees
baseball games through the year 2000. These commitments had a fair value of
approximately $295 million at March 31, 1994.
Legal Proceedings
The Company is a defendant in various lawsuits wherein substantial amounts are
claimed. In the opinion of counsel, these suits should not result in judgments
that in the aggregate would have a material adverse effect on the Company's
financial statements.
NOTE L -- SUPPLEMENTAL INFORMATION
Trade receivables are net of allowance for doubtful accounts of $47.9, $64.1
and $65.5 million at March 31, 1994, April 30, 1993 and October 31, 1992,
respectively.
Prepaid expenses and other includes royalties advances of $171.4, $182.8 and
$161.6 million in addition to deferred theatrical advertising and print costs
of $149.8, $89.9 and $95.3 million at March 31, 1994, April 30, 1993 and
October 31, 1992, respectively.
The details of accrued expenses and other are as follows (in millions):
<TABLE>
<CAPTION>
March 31 April 30 October 31
-------- -------- ----------
1994 1993 1992
- - -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Participations payable and accrued
syndication expenses $ 419.8 $ 334.6 $ 363.0
Deferred television contracts income 99.7 90.6 86.9
Accrued compensation and other
employee benefit related items 174.9 114.7 140.6
Reverse repurchase liability 75.1 50.1
Other 790.0 513.4 473.5
- - -----------------------------------------------------------------------------------------------------------
$1,484.4 $1,128.4 $1,114.1
- - -----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 42
F-30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Deferred liabilities includes participations payable and deferred syndication
expenses of $144.5, $193.7 and $189.2 million, at March 31, 1994, April 30, 1993
and October 31, 1992, respectively.
The details of interest and other investment income (expense) -- net are as
follows (in millions):
<TABLE>
<CAPTION>
Eleven Months Six Months Year Ended
Ended March 31 Ended April 30 October 31
-------------- -------------- ---------------------
1994 1993 1992 1991
- - --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest expense
Interest on
indebtedness
and other $(105.8) $(44.9) $(104.1) $(108.6)
Imputed interest
on long-term
liabilities (8.6) (5.8) (14.7) (14.6)
Less capitalized
interest 6.7 2.8 5.0 11.2
- - --------------------------------------------------------------------------------------------------------------
(107.7) (47.9) (113.8) (112.0)
- - --------------------------------------------------------------------------------------------------------------
Interest and other
investment income
Interest and other
income on
investments 35.7 28.6 88.4 106.9
Imputed interest
on long-term
receivables 25.7 16.3 33.2 26.9
- - --------------------------------------------------------------------------------------------------------------
61.4 44.9 121.6 133.8
- - --------------------------------------------------------------------------------------------------------------
$ (46.3) $ (3.0) $ 7.8 $ 21.8
- - --------------------------------------------------------------------------------------------------------------
</TABLE>
Imputed interest relates principally to network and syndication licenses of
motion picture and television products. Capitalized interest relates to
projects under construction and theatrical and television productions in
process. Interest paid on borrowings was $84.6, $40.8, $91.0 and $99.5
million, respectively, for the eleven months ended March 31, 1994, the six
months ended April 30, 1993 and the years ended October 31, 1992 and 1991.
NOTE M --FINANCIAL INSTRUMENTS
The Company adopted SFAS No. 107, "Disclosures about Fair Value of Financial
Instruments" in the six months ended April 30, 1993. This statement requires
disclosure of estimated fair values for all financial instruments for which it
is practicable to estimate fair value.
The Company has used various methods and assumptions to estimate the fair value
of its financial instruments at March 31, 1994 and April 30, 1993. For cash
and cash equivalents, the carrying amount approximates fair value because of
the short maturities of these instruments. Quoted market prices or dealer
quotes for the same or similar instrument were used for short-term investments
and the majority of long-term debt. Other techniques, such as estimated cash
flows and termination cost have been used to estimate the fair value of the
remaining financial instruments. These values represent a general
approximation of possible value and may not be indicative of the amounts that
could be realized in a current market exchange.
The carrying amounts and fair values of the Company's recorded financial
instruments at March 31, 1994 and April 30, 1993 are as follows (in millions):
<TABLE>
<CAPTION>
March 31, 1994 April 30, 1993
-------------------- -----------------
Carrying Fair Carrying Fair
Amount Value Amount Value
- - --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 239.3 $239.3 $372.6 $372.6
Short-term investments 67.3 67.3 569.7 577.4
Long-term debt
(including current
maturities) (1) 1,010.1 959.8 782.8 859.8
Reverse repurchase liability -0- -0- 75.1 75.1
- - --------------------------------------------------------------------------------------------
</TABLE>
(1) Excludes obligations under capital leases classified as long-term debt.
Periodically, the Company enters into interest rate swap agreements. These
agreements generally allow the Company to exchange fixed rates for variable
rates without the exchange of cash with respect to the underlying principal
amounts. Net interest payments or receipts, which were not material, are
recorded as adjustments to interest expense. At March 31, 1994, the fair market
value of the Company's interest rate swaps was a net payable position of
approximately $25 million. The Company has established reserves for this
diminution in value. The fair value of interest rate swaps at April 30, 1993
was not material.
The Company has guaranteed third party securities and commitments relating
primarily to joint venture obligations, theater leases and standby letters of
credit totaling approximately $343 and $320 million at March 31, 1994 and April
30, 1993, respectively. These guarantees had a fair value of $314 and $293
million at March 31, 1994 and April 30, 1993, respectively.
<PAGE> 43
F-31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE N -- FINANCIAL REPORTING BY BUSINESS SEGMENTS
A summary description of the Company's business segments and their respective
Revenues and Operating Income (Loss) for the eleven months ended March 31, 1994
and 1993, the six months ended April 30, 1993 and 1992 and the years ended
October 31, 1992 and 1991 is presented on page F-6.
Depreciation, capital expenditures and identifiable assets were as follows (in
millions):
<TABLE>
<CAPTION>
Depreciation Capital Expenditures (1)
------------------------------------------------------ -------------------------------
Eleven Months Six Months Eleven Months Six Months
Ended March 31 Ended April 30 Year Ended October 31 Ended March 31 Ended April 30
-------------- -------------- --------------------- -------------- --------------
1994 1993 1992 1991 1994 1993
- - -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Business Segments
Entertainment $69.9 $24.6 $49.0 $38.1 $119.0 $46.0
Publishing 21.3 11.6 20.9 19.1 26.6 8.7
- - -----------------------------------------------------------------------------------------------------------------
Total 91.2 36.2 69.9 57.2 145.6 54.7
Corporate and Other
Non-Segment Items 1.8 0.9 1.8 1.9 2.6 1.2
- - -----------------------------------------------------------------------------------------------------------------
$93.0 $37.1 $71.7 $59.1 $148.2 $55.9
- - -----------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Capital Expenditures (1)
---------------------------
Year Ended October 31
---------------------------
1992 1991
- - ---------------------------------------------------
<S> <C> <C>
Business Segments
Entertainment $94.3 $146.6
Publishing 24.6 25.8
- - ---------------------------------------------------
Total 118.9 172.4
Corporate and Other
Non-Segment Items 1.1 0.5
- - ---------------------------------------------------
$120.0 $172.9
- - ---------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Identifiable Assets
--------------------------------------
March 31 April 30 October 31
-------- -------- -----------------
1994 1993 1992 1991
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Business Segments
Entertainment $3,792.9 3,377.8 $3,221.9 2,493.7
Publishing 2,886.4 2,321.3 2,396.5 2,226.4
- - ------------------------------------------------------------------------
Total 6,679.3 5,699.1 5,618.4 4,720.1
Corporate and Other
Non-Segment Items 928.7 1,175.7 1,438.6 1,934.6
- - ------------------------------------------------------------------------
$7,608.0 6,874.8 $7,057.0 6,654.7
- - ------------------------------------------------------------------------
</TABLE>
- - ----------------
(1) Including capitalized leases.
Identifiable assets are those which can be directly identified or associated
with the segments. Corporate and other non-segment items principally include
cash and cash equivalents, short-term investments, notes receivable, prepaid
income taxes and corporate property and equipment.
<PAGE> 44
F-32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE O -- QUARTERLY RESULTS (UNAUDITED)
The following summarizes the quarterly operating results of the Company for the
eleven months ended March 31, 1994, the six months ended April 30, 1993 and the
year ended October 31, 1992 (in millions, except per share):
<TABLE>
<CAPTION>
Earnings (Loss) Per Share
-------------------------
Earnings Earnings
(Loss) Before (Loss) Before
Extraordinary Extraordinary
Item and Item and
Cumulative Cumulative
Operating Earnings Effect of Net Effect of Net
Cost of Income (Loss) Before Accounting Earnings Accounting Earnings
Quarter Ended Revenues Goods Sold (Loss) Income Taxes Change (Loss) Change (Loss)
- - ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ELEVEN MONTHS ENDED
MARCH 31, 1994
July 31, 1993 $1,351.7 $ 842.4 $ 190.6 $ 185.2 $ 120.4 $ 120.4 $ 1.01 $ 1.01
October 31, 1993 1,391.8 918.4 159.7 148.9 96.8 96.8 .80 .80
January 31, 1994 1,013.5 784.2 (52.3) (56.3) (36.6) (36.6) (.31) (.31)
Two Months
Ended March 31, 1994 676.5 634.3 (197.2) (269.0) (174.9) (174.9) (1.45) (1.45)
- - -------------------------------------------------------------------------------------------------------------------------
$4,433.5 $3,179.3 $ 100.8 $ 8.8 $ 5.7 $5.7 $ .05 $ .05
- - ------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED
APRIL 30, 1993
January 31, 1993 $ 943.7 $ 648.8 $1.8 $ (1.2) $ 0.1 $ (66.8) $ -0- $ (.57)
April 30, 1993 954.4 638.0 (11.9) (15.6) (9.2) (9.2) (.08) (.08)
- - -------------------------------------------------------------------------------------------------------------------------
$1,898.1 $1,286.8 $ (10.1) $ (16.8) $ ( 9.1) $ (76.0) $ (.08) $ (.65)
- - -------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
1992
January 31, 1992 $1,070.6 $ 761.4 $ 27.6 $ 27.1 $ 19.4 $ 19.4 $ .16 $ .16
April 30, 1992 927.9 621.7 50.2 41.6 29.3 29.3 .25 .25
July 31, 1992 1,063.9 629.2 156.9 166.6 114.3 114.3 .96 .96
October 31, 1992 1,202.5 727.5 161.4 162.0 111.2 102.4 .94 .86
- - ------------------------------------------------------------------------------------------------------------------------
$4,264.9 $2,739.8 $ 396.1 $ 397.3 $ 274.2 $ 265.4 $ 2.31 $ 2.23
- - ------------------------------------------------------------------------------------------------------------------------
</TABLE>
During the two months ended March 31, 1994, the Company recorded a $84.3
million and $22.3 million charge, respectively, against Publishing's operating
income and Corporate Expenses. For further details related to these charges,
see Management's Discussion and Analysis of Financial Condition and Results of
Operations.
During the two months ended March 31, 1994, the Company recorded a charge of
$27.2 million and $18.8 million, respectively, for costs incurred in the
Company's merger with Viacom Inc. and to provide for additional costs
applicable to operations previously discontinued. The Company also recorded a
charge of approximately $20 million to adjust certain interest rate swaps to
current fair market value. In addition, the Company recorded a gain of $11.0
million from its share of an equity investment that was sold by an
unconsolidated affiliate of the Company (see Note D).
<PAGE> 45
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibits No. Description Page
------------ ----------- ----
<S> <C> <C>
(3)(a) Restated Certificate of Incorporation and
Amendments thereto (Incorporated by reference).
(3)(b) Amended and restated By-laws.....................
(4)(a) Instruments with respect to issues of long-term
debt have not been filed as exhibits to this Annual
Report on Form 10-K as the authorized principal
amount on any one of such issues does not exceed
10% of the total assets of Paramount Communications
and its subsidiaries on a consolidated basis.
Paramount Communications agrees to furnish a copy
of each such instrument to the Commission upon
request.
(4)(b) Shareholder rights agreement dated as of
September 7, 1988, as amended, between Paramount
Communications Inc. and Chemical Bank, as Rights
Agent (Incorporated by reference).
(10)(i)(a) Amended and Restated Agreement and Plan of
Merger, dated as of February 4, 1994, as further
amended as of May 26, 1994, among Paramount
Communications Inc., Viacom Inc. and Viacom Sub
Inc., a wholly owned subsidiary of Viacom
(Incorporated by reference).
(10)(i)(b) Voting agreement dated as of January 21, 1994,
between National Amusements, Inc. and Paramount
Communications Inc. (Incorporated by reference).
+(10)(iii)(A)(1) Amended and restated agreement, dated as of
October 1, 1985 and restated as of June 23, 1989,
between Paramount Communications and Martin S.
Davis (Incorporated by reference).
+(10)(iii)(A)(2) Amendment dated as of February 11, 1994, to the
Amended and Restated Agreement dated as of October
1, 1985 and restated as of June 23, 1989 between
Paramount Communications and Martin S. Davis
(Incorporated by reference).
+(10)(iii)(A)(3) Amended and restated agreement, dated as of
November 17, 1987 and restated as of June 23, 1989,
between Paramount Communications and Ronald L.
Nelson (Incorporated by reference).
+(10)(iii)(A)(4) Amendment, dated as of December 21, 1992, to the
amended and restated agreement, dated as of
November 17, 1987 and restated as of June 23, 1989,
between Paramount Communications and Ronald L.
Nelson (Incorporated by reference).
+(10)(iii)(A)(5) Agreement, dated as of January 12, 1993, between
Paramount Communications and Ronald L. Nelson
(Incorporated by reference).
+(10)(iii)(A)(6) Amendment dated as of February 11, 1994, to the
Agreement dated as of January 12, 1993 between
Paramount Communications and Ronald L. Nelson
(Incorporated by reference).
+(10)(iii)(A)(7) Amended and restated agreement, dated as of
October 1, 1985 and restated as of June 23, 1989,
between Paramount Communications and Donald Oresman
(Incorporated by reference).
</TABLE>
<PAGE> 46
<TABLE>
<CAPTION>
Exhibits No. Description Page
------------ ----------- ----
<S> <C> <C>
+(10)(iii)(A)(8) Amendment dated as of February 11, 1994, to the
Amended and Restated Agreement dated as of October
1, 1985 and restated as of June 23, 1989 between
Paramount Communications and Donald Oresman
(Incorporated by reference).
+(10)(iii)(A)(9) Agreement, dated as of September 10, 1992,
between Paramount Communications and Rudolph L.
Hertlein (Incorporated by reference).
+(10)(iii)(A)(10) Agreement, dated as of June 2, 1989, between
Paramount Communications and Lawrence E. Levinson
(Incorporated by reference).
+(10)(iii)(A)(11) Agreement, dated April 5, 1993, between
Paramount Communications and Robert Greenberg
(Incorporated by reference).
+(10)(iii)(A)(12) 1992 Stock Option Plan (the "1992 Plan")
(Incorporated by reference).
+(10)(iii)(A)(13) 1989 Stock Option Plan, as amended (the "1989
Plan") (Incorporated by reference).
+(10)(iii)(A)(13)(a) Form of Stock Option Agreement pursuant to the
1989 Plan--Incentive Stock Option (Incorporated by
reference).
+(10)(iii)(A)(13)(b) Form of Stock Option Agreement pursuant to the
1989 Plan--Nonqualified Stock Option (Incorporated
by reference).
+(10)(iii)(A)(14) 1984 Stock Option Plan, as amended (the "1984
Plan") (Incorporated by reference).
+(10)(iii)(A)(14)(a) Form of Stock Option Agreement pursuant to the
1984 Plan--Incentive Stock Option (Incorporated by
reference).
+(10)(iii)(A)(14)(b) Form of Stock Option Agreement pursuant to the
1984 Plan--Incentive Stock Option with a Stock
Appreciation Right (Incorporated by reference).
+(10)(iii)(A)(14)(c) Form of Stock Option Agreement pursuant to the
1984 Plan--Nonqualified Stock Option (Incorporated
by reference).
+(10)(iii)(A)(14)(d) Form of Stock Option Agreement pursuant to the
1984 Plan--Nonqualified Stock Option with a Stock
Appreciation Right (Incorporated by reference).
+(10)(iii)(A)(15) 1973 Key Employees Stock Purchase Plan
(Incorporated by reference).
+(10)(iii)(A)(16) Amended and Restated Supplemental Executive
Retirement Plan (Incorporated by reference).
+(10)(iii)(A)(17) Deferred Compensation Plan for Board of
Directors (Incorporated by reference).
</TABLE>
<PAGE> 47
<TABLE>
<CAPTION>
Exhibits No. Description Page
------------ ----------- ----
<S> <C> <C>
+(10)(iii)(A)(18) Long-Term Performance Plan, as amended
(Incorporated by reference).
+(10)(iii)(A)(19) Corporate Annual Performance Plan, as amended
(Incorporated by reference).
+(10)(iii)(A)(20) Retirement Plan for non-employee directors
(Incorporated by reference).
+(10)(iii)(A)(21) Non-qualified retirement plan (Incorporated by
reference).
(11) Computation of Earnings (Loss) per Share . . . . .
(21) List of Subsidiaries . . . . . . . . . . . . . . .
(23)(a) Consent of Ernst & Young . . . . . . . . . . . . .
(23)(b) Consent of Price Waterhouse . . . . . . . . . . .
(24) Powers of Attorney . . . . . . . . . . . . . . . .
</TABLE>
- - ---------
+ This exhibit constitutes a management contract or compensatory plan or
arrangement.
<PAGE> 1
EXHIBIT (3)(b)
<PAGE> 2
As Amended through
March 18, 1994.
AMENDED AND RESTATED
BY-LAWS
OF
PARAMOUNT COMMUNICATIONS INC.
ARTICLE I
OFFICE
SECTION 1. The principal office of the Corporation in the State of
Delaware shall be the principal office in the State of Delaware of The
Prentice-Hall Corporation System, Inc. or any successor corporation.
SECTION 2. The Corporation may have other offices at such other
place or places within or without the State of Delaware as the Board of
Directors may from time to time appoint or the business of the Corporation may
require.
ARTICLE II
STOCKHOLDERS
SECTION 1. All meetings of the stockholders of the Corporation
shall be held at such place or places either within or without the State of
Delaware as shall be fixed by the Board of Directors and specified in the
notices of said meetings.
SECTION 2. Annual meetings of stockholders shall be held at a
date, time and place as shall be fixed by resolution of the Board of Directors
and as shall be stated in the notice of meeting, for the election of a Board of
Directors and for the transaction of such other business as may properly be
brought before the meeting.
SECTION 3. Special meetings of the stockholders shall be called at
any time by the Secretary or any other officer, whenever directed by the Board
of Directors or by the Chief Executive Officer. The purpose or purposes of the
proposed meeting shall be included in the notice provided for in Section 6 of
Article II.
SECTION 4. At all meetings of stockholders any stockholder shall
be entitled to vote in person or by proxy, but no proxy shall be voted after
three years from its date, unless such proxy provides for a longer period.
Proxies shall be in writing, but except as otherwise provided by law, need not
be sealed, witnessed or acknowledged, and shall be filed with the Secretary
prior to or at the commencement of the meeting to which they relate.
<PAGE> 3
SECTION 5. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business, except as otherwise provided by statute or by the
Certificate of Incorporation; but if at any regularly called meeting of
stockholders there be less than a quorum present, the stockholders present may
adjourn the meeting from time to time without further notice other than
announcement at the meeting until a quorum shall be present or represented. At
such adjourned meeting at which a quorum shall be present or represented any
business may be transacted which might have been transacted at the original
meeting. If the adjournment is for more than 30 days, or if, at the
adjournment, a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
SECTION 6. Written notice of all meetings of the stockholders of
the Corporation stating the place, date and hour of the meeting shall be given
not less than ten (10) nor more than sixty (60) days before the date of the
meeting, to each stockholder entitled to vote at such meeting either personally
or by mailing such notice postage prepaid and addressed to him at his post
office address as such address shall appear on the stock books of the
Corporation, except as otherwise provided by law.
SECTION 7. The Chairman of the Board, or in the Chairman's absence
or at his direction, the President, or in the President's absence or at his
direction, any executive officer of the Corporation shall call all meetings of
the stockholders to order and shall act as Chairman of such meeting.
SECTION 8. The Secretary of the Corporation shall act as Secretary
of all meetings of the stockholders or, in his absence, the Chairman of the
meeting may appoint any person to act as secretary.
SECTION 9. The officer who has charge of the stock ledger of the
Corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten days prior to the meeting, either at a place within the
city where the meeting is to be held, which place shall be specified in the
notice of meeting, or, if not so specified, at the place where the meeting is
to be held. The list shall also be produced at the time and kept at the place
of the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
SECTION 10. The Board of Directors, in advance of all meetings of
the stockholders, may appoint two judges of stockholder votes, who may be
stockholders or their proxies, but not Directors of the Corporation or
candidates for office. In the event that the Board of Directors
2
<PAGE> 4
fails to so appoint judges of stockholder votes or, in the event that one or
more judges of stockholder votes previously designated by the Board of
Directors fails to appear or act at the meeting of stockholders, the Chairman
of the meeting may appoint one or more judges of stockholder votes to fill such
vacancy or vacancies. Judges of stockholder votes appointed to act at any
meeting of the stockholders, before entering upon the discharge of their
duties, shall be sworn faithfully to execute the duties of judge of stockholder
votes with strict impartiality and according to the best of their ability and
the oath so taken shall be subscribed by them. Judges of stockholder votes
shall, subject to the power of the Chairman of the meeting to open and close
the polls, take charge of the polls and, after the voting, shall make a
certificate of the result of the vote taken.
SECTION 11. When a quorum is present at any meeting, the vote of
the holders of a majority of the stock having voting power present in person or
represented by proxy and voting shall decide any question brought before such
meeting, unless the question is one upon which by express provision of statute
or of the Certificate of Incorporation, a different vote is required, in which
case such express provision shall govern and control the decision of such
question.
ARTICLE III
DIRECTORS
SECTION 1. The property and business of the Corporations shall be
managed by a Board of Directors of not less than 8 nor more than 26 Directors.
The number of Directors shall be fixed from time to time by resolution of the
Board of Directors. Directors need not be stockholders. Directors shall
(except as hereinafter provided for the filling of vacancies) be elected by the
holders of the capital stock, by a plurality vote thereof, at the annual
meeting of stockholders and shall hold office for one year and until their
successors are respectively elected and qualify. The Board of Directors may at
any time by amendment of the By-Laws increase or decrease the number of
Directors of the Corporation.
SECTION 2. Vacancies in the Board of Directors from any cause
whatever, including vacancies created by reason of any amendment to these
By-Laws increasing the number of Directors or any increase pursuant to these
By-Laws, shall be filled by a majority of the remaining Directors through less
than a quorum and the Directors so chosen shall hold office until their
successor shall be duly elected and qualify. The powers of Directors to fill
vacancies in the Board of Directors are subject, in case the remaining
Directors shall constitute less than a majority of the whole Board, to the
rights of the stockholders as provided by law.
SECTION 3. A meeting of the Board of Directors shall be held
immediately after the annual meeting of the stockholders and regular meetings
of the Board of Directors shall be held at such times as may from time to time
be fixed by resolution of the Board of Directors. No notice need be given of
regular meetings of the Board.
3
<PAGE> 5
SECTION 4. Special meetings of the Board of Directors may be
called by the Chairman of the Board or Secretary or by any two (2) Directors by
giving notice orally or in writing personally received by each Director at
least twelve hours prior to the time of the holding of the meeting or by actual
delivery of any form of written notice including telegraph, telex or
transmission by telecopy, graphic scanning or any other means of transmission
to his address as shown upon the books of the Corporation at least two (2) days
prior to the time of the holding of the meeting, or mailed to each Director at
his address as shown on the books of the Corporation at least four (4) days
prior to the time of the holding of the meeting.
SECTION 5. The Board of Directors may hold its meetings and keep
the books of the Corporation outside the State of Delaware, at such place or
places as may from time to time be determined by resolution of the Board or by
written consent of all its members.
SECTION 6. A majority of the Directors shall constitute a quorum
for the transaction of business.
SECTION 7. The business of the Corporation shall be managed by its
Board of Directors which may exercise all powers of the Corporation and do all
such lawful acts and things as are not by statute or by the Certificate of
Incorporation or by these By- Laws directed or required to be executed or done
by the stockholders.
SECTION 8. The Board of Directors may, by resolution passed by a
majority of the whole Board, designate three or more Directors to constitute a
finance committee, one of whom shall be designated as Chairman. The committee
shall hold office until the next election of the Board of Directors. Any
vacancy occurring in the committee shall be filled by the Board of Directors.
Regular meetings of the committee shall be held at such times and on such
notice and at such places as it may from time to time determine. Special
meetings of the committee shall be called by any member of the committee. The
committee shall advise with and aid the officers of the Corporation in
connection with financial matters, and shall generally perform such duties and
exercise such powers as may from time to time be delegated to it by the Board
of Directors. The fact that the finance committee has acted shall be
conclusive evidence that the Board of Directors was not in session at such time
or that a quorum of the Board had failed to attend the regular or special
meeting thereof.
The finance committee shall keep regular minutes of its transactions and
shall cause them to be recorded in a book kept in the office of the Corporation
designated for that purpose, and shall report the same to the Board of
Directors at their regular meeting. The committee shall make and adopt its own
rules for the government thereof and shall elect its own officers.
SECTION 9. The Board of Directors may, by resolution passed by
a majority of the whole Board, designate three or more Directors to constitute
an executive committee, one of whom shall be designated Chairman. The
committee shall hold office until the next election of the Board of Directors.
Any vacancy occurring in the committee shall be filled by the Board of
4
<PAGE> 6
Directors. Regular meetings of the committee shall be held at such times and
on such notice and at such places as it may from time to time determine. The
committee shall act, advise with and aid the officers of the Corporation in all
matters concerning its interest and the management of its business, and shall
generally perform such duties and exercise such powers as may from time to time
be delegated to it by the Board of Directors, and shall have authority to
exercise all the powers of the Board of Directors, so far as may be permitted
by law, in the management of the business and the affairs of the Corporation
whenever the Board of Directors is not in session or whenever a quorum of the
Board of Directors fails to attend any regular or special meeting of such
Board. Without limiting the generality of the foregoing grant of authority,
the executive committee is expressly authorized to declare dividends, whether
regular or special, to authorize the issuance of stock of the Corporation and
to adopt a certificate of ownership and merger pursuant to Section 253 or any
successor provision of the Delaware General Corporation Law. The committee
shall have power to authorize the seal of the Corporation to be affixed to all
papers which may require it. The fact that the executive committee has acted
shall be conclusive evidence that the Board of Directors was not in session at
such time or that a quorum of the Board had failed to attend the regular or
special meeting thereof.
The executive committee shall keep regular minutes of its transactions
and shall cause them to be recorded in a book kept in the office of the
Corporation designated for that purpose, and shall report the same to the Board
of Directors at their regular meeting. The committee shall make and adopt its
own rules for the government thereof and shall elect its own officers.
SECTION 10. AUDIT COMMITTEE
(a) Number, Appointment, Term of Office
The Board of Directors shall appoint from among its members an
audit committee (the "Audit Committee") which shall consist of not less
than three Directors, all of whom shall be independent directors.
(b) Functions and Powers
The Audit Committee shall have the following responsibilities,
functions and powers:
(i) To review prior to issuance all annual
financial reports of the Corporation with the independent
auditors of the Corporation and with such other persons as the
Audit Committee may deem appropriate for the purpose of being
assured that the accounting principles employed in connection
with such reports fairly present the financial position of the
Corporation in accordance with generally accepted accounting
principles; such review shall include consideration of the
appropriateness of the establishment of, maintenance of, or
reduction of any material allowance for possible loss accounts
of the Corporation and provisions
5
<PAGE> 7
thereto; such consideration shall include a review of the
rationale with respect to the establishment, maintenance or
reduction of such an allowance account; the consistency with
the prior fiscal years of the method of computing and
establishing the provision for losses; and the documentation
for such provision for losses;
(ii) To review (before or promptly after issuance)
financial information (including quarterly financial reports)
material to the Corporation publicly disseminated by the
Corporation; all officers of the Corporation shall promptly
call the attention of the Audit Committee to any such
information disseminated or to be disseminated;
(iii) To meet with the Corporation's independent
auditors on a regular basis and to review with them their audit
reports and findings with respect to audits conducted by them
of the Corporation's financial statements. In connection
therewith, the Audit Committee may retain the independent
auditors of the Corporation to perform such additional services
for the Corporation in connection with annual audits or
otherwise as the Audit Committee deems necessary or
appropriate, including the audit or examination of any aspects
of the business operations or financial or accounting policies
and procedures of the Corporation;
(iv) To review from time to time with the
Corporation's independent auditors and management the
Corporation's policies and procedures with respect to internal
auditing, accounting and financial controls; and to provide the
Board of Directors with the recommendations of the Audit
Committee with respect to any changes in such policies and
procedures which the Audit Committee determines to be
necessary, desirable or appropriate;
(v) To determine, whenever there exists any
disagreement or controversy between the independent auditors
and the management of the Corporation, the position of the
Corporation, subject to the authority of the Board of
Directors, with respect to such disagreement or controversy;
(vi) To review the engagement of the Corporation's
independent auditors, including the fee, scope and timing of
the audit, and any other services rendered; to recommend to the
Board of Directors at least annually the retention or change of
the independent auditors of the Corporation and to recommend,
in the event of a change, new auditors;
(vii) To review and monitor the implementation of
existing policies and procedures to prevent the improper use of
any assets of the Corporation or its subsidiaries;
6
<PAGE> 8
(viii) To maintain appropriate procedures reasonably
designed to insure compliance with the Corporation's existing
corporate policy with respect to compensating balances and,
thereafter, to review and monitor the implementation of that
policy. The Corporation's policy, with respect to compensating
balances, prohibits the maintenance of cash deposits of funds
of the Corporation or its affiliates or subsidiaries, in banks,
or investments in certificates of deposit and comparable money
instruments issued by banks, for the purpose of conferring a
material direct or indirect economic or other benefit on any
officer, director or employee of the Corporation, or any other
individual;
(ix) To adopt appropriate procedures for the review
of appraisals made at the request of the Corporation or any of
its subsidiaries; where appropriate, such procedures will
provide for, among other things, a review of the purpose for
which the appraisal is to be used, the basis of the appraisal,
and the appraiser's competence and independence;
(x) To review and monitor the implementation of
existing policies and, if necessary, to adopt and maintain
additional policies and procedures with respect to conflicts of
interest between the Corporation or its subsidiaries and any
officer or director of the Corporation or any of its
subsidiaries;
(xi) To make an appropriate review of any matters
involving allegations of illegal activities of officers or
directors of the Corporation with respect to the funds or
assets of the Corporation, and to report to the Board of
Directors its findings and recommendations with respect
thereto;
(xii) To engage attorneys, auditors, investigators
and other professional advisors as from time to time it deems
appropriate, subject to the approval of the Board of Directors,
to assist the Audit Committee in the performance of its
functions and powers; and the Corporation shall pay the
reasonable fees and expenses of such advisors as approved by
the Audit Committee after consultation with the Board of
Directors;
(xiii) To meet with the internal auditor, the Audit
Committee may request that the internal auditor submit written
reports from time to time; the internal auditor shall not be
dismissed without the approval of the Audit Committee; and
(xiv) To include in the minutes of the Board of
Directors recommendations of the Audit Committee and the
actions of the Board of Directors with respect thereto.
7
<PAGE> 9
(c) Meetings
Regular meetings of the Audit Committee shall be held as the
Audit Committee shall from time to time determine. Notice of regular
meetings need not be given. Special meetings of the Audit Committee, at
which any and all business may be transacted as could be transacted at a
regular meeting, shall be held whenever called by any two members of the
Audit Committee. The Secretary shall give notice to each member of the
Audit Committee of each special meeting.
Except as otherwise expressly required by these By-Laws, a
majority of the Audit Committee shall be present at any meeting of the
Audit Committee in order to constitute a quorum for the transaction of
business at such meeting, and the vote of a majority of the members
present at any such meeting at which a quorum is present shall be
necessary for the passage of any resolution or for an act to be the act
of the Audit Committee. Subject to the provisions of these By-Laws, the
Audit Committee by resolution adopted by a majority of all the members
thereof shall fix its rules of procedure.
SECTION 11. The Board of Directors may from time to time establish such
other committees to serve at the pleasure of the Board with such members and
duties as the Board shall from time to time establish. Any Director may belong
to any number of committees of the Board, including the finance committee and
the executive committee, and the Chairman of the Board shall be a member, ex
officio, of both the finance committee and the executive committee and may be a
member of any other committees. The Board may also establish such other
committees with such members (whether or not directors) and such duties as the
Board may from time to time determine.
SECTION 12. Except as otherwise provided by law, any Director may be
removed with or without cause at any time by the affirmative vote of the
holders of record of a majority of all the issued and outstanding stock
entitled to vote for the election of Directors of the Corporation at a special
meeting of the stockholders called for that purpose.
SECTION 13. Unless otherwise restricted by the Certificate of
Incorporation or these By-Laws, any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee thereof may be taken
without a meeting if all members of the Board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the Board of Directors.
SECTION 14. The members of the Board of Directors or any committee
thereof may participate in a meeting of such Board or committee, as the case
may be, by means of conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear each other,
and participation in a meeting pursuant to this subsection shall constitute
presence in person at such a meeting.
8
<PAGE> 10
SECTION 15. Subject to any exclusive rights of holders of any class or
series of stock having a preference over the Common Stock as to dividends or
upon liquidation to elect Directors upon the happening of certain events,
nominations of candidates for election as Directors of the Corporation at any
meeting of stockholders of the Corporation may be made by the Board of
Directors or a proxy committee appointed by the Board of Directors or by any
stockholder entitled to vote at such meeting who complies with this Section 15.
Not less than 60 days prior to the date of the anniversary of the annual
meeting held in the prior year, in the case of an annual meeting, or, in the
case of a special meeting called for the purpose of electing Directors, not
more than 10 days following the earlier of the date of notice of such special
meeting or the date on which a public announcement of such meeting is made, any
stockholder who intends to make a nomination at the meeting shall deliver
written notice to the Secretary of the Corporation setting forth (i) the name
and address of the stockholder who intends to make the nomination and of the
person or persons to be nominated; (ii) a representation that the stockholder
is a holder of record of stock of the Corporation specified in such notice, is
or will be entitled to vote at such meeting and intends to appear in person or
by proxy at the meeting to nominate the person or persons specified in the
notice; (iii) a statement that the nominee (or nominees) is willing to be
nominated and (iv) such other information concerning each such nominee as would
be required under the rules of the Securities and Exchange Commission in a
proxy statement soliciting proxies for the election of such nominee and in a
Schedule 14B (or other comparable required filing then in effect) under the
Securities Exchange Act of 1934. In the event that a person is validly
designated as a proposed nominee in accordance with this Section 15 (including
a bona fide statement that the nominee is willing to be nominated) and shall
thereafter become unable or unwilling to stand for election to the Board of
Directors, the stockholder who made such designation may designate promptly in
the manner set forth above a substitute proposed nominee, notwithstanding the
minimum time period set forth in this Section 15. No person may be elected as
a Director at a meeting of stockholders unless nominated in accordance with
this Section 15, and any purported nomination or purported election not made in
accordance with the procedures as set forth in this Section 15 shall be void.
In addition to any other requirements relating to amendments to these By-Laws,
no proposal by any stockholder to repeal or amend this Section 15 shall be
brought before any meeting of the stockholders of the Corporation unless
written notice is given of (i) such proposed repeal or the substance of such
proposed amendment; (ii) the name and address of the stockholder who intends to
propose such repeal or amendment; and (iii) a representation that the
stockholder is a holder of record of stock of the Corporation specified in such
notice, is or will be entitled to vote at such meeting and intends to appear in
person or by proxy at the meeting to make the proposal. Such notice shall be
given in the manner and at the time specified above in this Section 15. Any
proposal to repeal or amend or any such purported repeal or purported amendment
of this Section 15 not made or adopted in accordance with the procedures set
forth in this Section 15 shall be void.
9
<PAGE> 11
ARTICLE IV
OFFICERS
SECTION 1. The Board of Directors shall elect a Chairman of the Board, a
President, one or more Vice Presidents, a Secretary and a Treasurer and may
elect such other officers as it deems appropriate, all of whom shall hold
office for one year and until their successors are elected and qualified. The
Chief Executive Officer may designate such assistant officers as the Chief
Executive Officer may determine, such assistant officers to serve at the
pleasure of the Chief Executive Officer.
SECTION 2. Said officers shall have all the usual powers and shall
perform all the usual duties incident to their respective offices.
SECTION 3. Unless otherwise provided in these By-Laws, in the absence or
disability of any officer of the Corporation, the Board of Directors may,
during such period, delegate his powers and duties to any other officer or to
any Director and the person to whom such powers and duties are delegated shall,
for the time being, hold such office.
SECTION 4. Any vacancy in any office shall be filled for the unexpired
term by a majority vote of the Board of Directors.
SECTION 5. The Board of Directors may create such other offices as it
may determine, and appoint officers to fill the same and define their duties
and fix their tenure of office.
SECTION 6. The Board of Directors may in its absolute discretion remove
any officer of the Corporation.
ARTICLE V
DIVISIONS
SECTION 1. Such of the business, affairs and properties of the
Corporation as the Board of Directors shall from time to time determine may be
set apart and constituted as a division or as divisions of the Corporation,
such division or divisions to be known by such name or names as shall be
determined by the Board of Directors.
SECTION 2. Each division established pursuant to Section 1 of this
Article V shall have a Board of Directors (hereinafter the "Divisional Board")
of so many members as the Board of Directors of the Corporation shall
determine, initially elected by a majority of the Board as soon as possible
after the establishment of the division, and thereafter annually at the first
meeting of the Board of Directors of the Corporation following the annual
meeting of the stockholders of the Corporation. Those members of any
Divisional Board who are also members of the Board of Directors of the
Corporation shall constitute a committee of the Board of Directors of the
10
<PAGE> 12
Corporation appointed pursuant to Section 11 of Article III of the By-Laws and
all other persons who shall serve a division in the capacities set forth in
this Article are hereby appointed agents of the Corporation with the powers and
duties herein set forth. The members of a Divisional Board shall serve until
their respective successors shall have been duly elected and shall qualify. At
least a majority of the members of a Divisional Board shall be persons who are
members of the Board of Directors of the Corporation. Members of a Divisional
Board shall be subject to removal at any time with or without cause by majority
vote of the Board of Directors of the Corporation. In the event of the death,
resignation, removal or retirement of any one or more of the members of a
Divisional Board or in the event of the increase in the number of the members
of a Divisional Board, any vacancy thus created may from time to time be filled
by majority vote of the Board of Directors of the Corporation.
The properties, business and affairs of a division shall be conducted and
managed by and under the control of the Divisional Board appointed therefor
which may exercise as to the properties, business and operations of such
division all of the powers of the Corporation which are not by law required to
be exercised by the Board of Directors of the Corporation or by the
stockholders.
The first meeting of each newly elected Divisional Board shall be held
without notice immediately following the first meeting of the Board of
Directors of the Corporation after the annual meeting of the stockholders of
the Corporation and at the same place; such first meeting may in the
alternative be held at such place and time as shall be fixed by the consent in
writing of all the members of such Divisional Board. Regular meetings of each
Divisional Board may be held without notice at such time and place as shall
from time to time be determined by each Divisional Board. Special meetings of
each Divisional Board may be called by the President of the division on three
(3) days notice. Such notice shall fix the time and place of such meeting and
shall be given to each member of the Divisional Board either personally or by
mail or by telegram. Special meetings shall be called by the President of the
division or the Secretary of the division in like manner and with like notice
upon the written request of two (2) members of the Divisional Board.
Each Divisional Board shall keep regular minutes of its proceedings and
all action taken by each Divisional Board shall be reported to the Board of
Directors of the Corporation from time to time at the request of the latter
Board.
At all meetings of a Divisional Board the presence of a majority of such
Divisional Board, at least a majority of whom shall be Directors of the
Corporation, shall be requisite and sufficient to constitute a quorum for the
transaction of business. The act of a majority of the members of a Divisional
Board present at any meeting at which there is a quorum shall be the act of
such Divisional Board, except as may be otherwise specifically provided by law,
by the Certificate of Incorporation or by these By-Laws. If a quorum shall not
be present at any meeting of a Divisional Board, the Directors present thereat
may adjourn the meeting from time to time, without notice other than an
announcement at the meeting, until a quorum of such Divisional
11
<PAGE> 13
Board shall be present, and at such adjourned meeting at which a quorum is
present any business may be transacted which might have been transacted at the
meeting pursuant to the original notice.
Any action required or permitted to be taken at any meeting of a
Divisional Board may be taken without a meeting if prior to such action a
written consent thereto is signed by all members of such Divisional Board and
such written consent is filed with the minutes of the proceedings of such
Divisional Board.
Each Divisional Board shall elect, as executive officers of the Division,
a President, one or more Vice Presidents, a Secretary and a Treasurer, and in
its discretion one or more Assistant Secretaries and Assistant Treasurers and
such subordinate officers as may from time to time be deemed desirable. Any
officer of a division may be removed, with or without cause, by action of its
Divisional Board at a meeting called for that purpose. Such officers shall be
elected annually by each Divisional Board at its first meeting following the
annual meeting of stockholders of the Corporation and each shall hold office
until the corresponding meeting of such Divisional Board in the next year and
until his successor shall have been duly elected and qualified or until he
shall have died or resigned or shall have been removed. The powers and duties
of the executive officers of a division shall be, with respect to the business,
affairs and properties of such division, as set forth in Article IV of these
By-Laws with respect to the executive officers of the Corporation, with such
additions or changes as may from time to time be specified by the Board of
Directors of the Corporation.
The Board of Directors of the Corporation shall have power to fix the
compensation of the officers of the division. It may authorize any officer,
upon whom the power of appointing subordinate officers may have been conferred,
to fix the compensation of such subordinate officers.
All checks and drafts on a division's bank accounts and all bills of
exchange and promissory notes, and all acceptances, obligations and other
instruments for the payment of money executed on behalf of a division shall be
signed by such officer or officers, agent or agents, as shall be thereunto
authorized from time to time by the Divisional Board of such division, which
may in its discretion authorize any such signatures to be facsimile.
All contracts, agreements, endorsements, assignments, transfers, stock
powers or other instruments of a division may be executed and delivered by the
Chairman of the Board of a division or the President of a division or any Vice
President of a division or by such other officer or officers, or agent or
agents of a division, as shall be thereunto authorized from time to time by a
Divisional Board; and the Secretary of a division or any Assistant Secretary of
a division, the Treasurer of a division or any Assistant Treasurer of a
division may affix the seal of the Corporation thereto and attest the same.
12
<PAGE> 14
ARTICLE VI
CHECKS AND NOTES
SECTION 1. All checks, drafts, and orders for the payment of money shall
be signed by such officer or officers as the Board of Directors may from time
to time determine. All endorsements for deposit shall be made in the name of
the Corporation.
SECTION 2. All promissory notes of the Corporation and acceptances must
be authorized by the Board of Directors and signed by such officer or officers
or other person or persons as the Board of Directors may designate.
ARTICLE VII
FISCAL YEAR, RESERVES AND DIVIDENDS
SECTION 1. The Corporation's fiscal year shall be the 11 month period
ending March 31, 1994. Subsequently, the Corporation's fiscal year shall be
conformed to that of Viacom Inc. or any successor thereto.
SECTION 2. The Board of Directors shall have power to set apart out of
any of the funds of the Corporation available for dividends a reserve or
reserves for any proper purposes and to vary, increase or decrease or abolish
any such reserve so created.
ARTICLE VIII
SEAL
SECTION 1. The seal of the Corporation shall be circular in form with
the name of the Corporation and the state in which it is incorporated.
ARTICLE IX
STOCK
SECTION 1. The shares of stock of the Corporation shall be represented
by certificates, provided that the Board of Directors may provide by resolution
or resolutions that some or all of any or all classes or series of the
Corporation's stock shall be uncertificated shares. Any such resolution shall
not apply to shares represented by a certificate until such certificate is
surrendered to the Corporation. Notwithstanding the adoption of such a
resolution by the Board of Directors, every holder of stock represented by
certificates and upon request every holder of uncertificated shares shall be
entitled to have a certificate signed by, or in the name of the Corporation by
the Chairman of the Board of Directors, or the President or a Vice President,
and by the Treasurer, or the Secretary of the Corporation, or as otherwise
permitted by law, representing the number of shares registered in certificate
form. Any or all the signatures on the certificate may be a facsimile.
13
<PAGE> 15
SECTION 2. Transfers of stock shall be made on the books of the
Corporation by the holder of the shares in person or by his attorney upon
surrender and cancellation of certificates for a like number of shares, or as
otherwise provided by law with respect to uncertificated shares.
SECTION 3. The Board of Directors shall have power and authority to make
all such rules and regulations as they may deem expedient concerning the issue,
transfer and registration of certificates of stock or of uncertificated shares,
and may appoint a transfer agent and a registrar of transfers, and may require
all such certificates to bear the signature of such transfer agent and of such
registrar of transfers.
SECTION 4. The Board of Directors shall have power to fix in advance a
date which shall be not less than ten (10) days and not exceeding sixty (60)
days preceding the date of any meeting of stockholders and not exceeding sixty
(60) days preceding the date for payment of any dividend, or the date for the
allotment of rights, or the date when any change or conversion or exchange of
capital stock shall go into effect, as a record date for the determination of
the stockholders entitled to notice of, and to vote at, any such meeting, or
entitled to receive payment of any such dividend, or to any such allotment of
rights, or to exercise the rights in respect of any such change, conversion or
exchange of capital stock, and in such case only such stockholders as shall be
stockholders of record on the date so fixed shall be entitled to such notice
of, and to vote at, such meeting, or to receive payment of such dividend, or to
receive such allotment of rights, or to exercise such rights, as the case may
be, notwithstanding any transfer of any stock on the books of the Corporation
after any such record date fixed as aforesaid.
SECTION 5. In case any certificate of stock is lost, mutilated or
destroyed, the Board of Directors may issue a new certificate in place thereof
upon such terms and conditions as it may deem advisable and as may be permitted
by the laws of the State of Delaware.
ARTICLE X
WAIVER OF NOTICE
SECTION 1. Whenever any notice whatever is required to be given under
the provisions of these By-Laws or of any law, a waiver thereof in writing,
signed by the persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto.
ARTICLE XI
AMENDMENTS
SECTION 1. The stockholders may at any meeting amend, alter or repeal
any of these By-Laws by the affirmative vote of the holders of the majority of
the shares of capital stock issued and outstanding, provided the substance of
the proposed amendment shall have been stated in the notice of the meeting, or
by unanimous vote of all the stockholders without such notice.
14
<PAGE> 16
SECTION 2. The Board of Directors may at any meeting amend, alter or
repeal any of these By-Laws (to the extent that action by the stockholders is
not required by law) by the affirmative vote of the majority of the Board.
ARTICLE XII
INDEMNIFICATION OF OFFICERS AND DIRECTORS
SECTION 1. To the fullest extent permitted by the laws of the State of
Delaware:
(a) The Corporation shall indemnify any person (and his
heirs, executors or administrators) who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding (brought in the right of the Corporation or otherwise), whether
civil, criminal, administrative or investigative, and whether formal or
informal, including appeals, by reason of the fact that he is or was a
director, officer, employee or agent of the Corporation, or is or was serving
at the request of the Corporation as a director, officer, partner, trustee,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, for and against all expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person or such heirs, executors or administrators in
connection with such action, suit or proceeding, including appeals.
(b) The Corporation shall pay expenses incurred in
defending any action, suit or proceeding described in subsection (a) of this
Section in advance of the final disposition of such action, suit or proceeding,
including appeals.
(c) The Corporation may purchase and maintain insurance
on behalf of any person described in subsection (a) of this Section against any
liability asserted against him, whether or not the Corporation would have the
power to indemnify him against such liability under the provisions of this
Section or otherwise.
(d) The provisions of this Section shall be applicable
to all actions, claims, suits or proceedings made or commenced after the
adoption hereof, whether arising from acts or omissions to act occurring before
or after its adoption. The provisions of this Section shall be deemed to be a
contract between the Corporation and each director, officer, employee or agent
who serves in such capacity at any time while this Section and the relevant
provisions of the laws of the State of Delaware and other applicable law, if
any, are in effect, and any repeal or modification thereof shall not affect any
rights or obligations then existing with respect to any state of facts or any
action, suit or proceeding then or theretofore existing, or any action, suit or
proceeding thereafter brought or threatened based in whole or in part on any
such state of facts. If any provision of this Section shall be found to be
invalid or limited in application by reason of any law or regulation, it shall
not affect the validity of the remaining provisions hereof. The rights of
indemnification provided in this Section shall neither be exclusive of, nor be
deemed in limitation of, any rights to which any such officer, director,
employee or agent may otherwise be entitled or permitted by contract, the
Certificate of Incorporation, vote of stockholders or
15
<PAGE> 17
directors or otherwise, or as a matter of law, both as to actions in his
official capacity and actions in any other capacity while holding such office,
it being the policy of the Corporation that indemnification of the specified
individuals shall be made to the fullest extent permitted by law.
(e) For purposes of this Section, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to an employee
benefit plan; and references to "serving at the request of the corporation"
shall include any service as a director, officer, employee or agent of the
corporation which imposes duties on, or involves services by, such director,
officer, employee, or agent with respect to an employee benefit plan, its
participants, or beneficiaries.
16
<PAGE> 1
EXHIBIT (11)
<PAGE> 2
EXHIBIT (11)
PARAMOUNT COMMUNICATIONS INC.
COMPUTATION OF EARNINGS PER SHARE
ELEVEN MONTHS ENDED MARCH 31, 1994
(IN MILLIONS, EXCEPT PER SHARE)
<TABLE>
<CAPTION>
NET NET EARNINGS
EARNINGS SHARES PER SHARE
-------- ------ ---------
<S> <C> <C> <C>
Net earnings and average common shares outstanding . . . . . . . . . . $ 5.7 120.0
Assumed exercise of dilutive options . . . . . . . . . . . . . . . . . 1.4
Assumed purchase of treasury stock using
the average market price . . . . . . . . . . . . . . . . . . . . . . (1.0)
------ -----
Primary earnings per share $ 5.7 120.4 $.05
====
Reverse dilutive effect of options included
in primary calculation . . . . . . . . . . . . . . . . . . . . . . . (0.4)
-----
120.0
Calculation of fully diluted earnings per share
I) Assumed exercise of outstanding
options - Schedule A . . . . . . . . . . . . . . . . . . . . 1.5
II) Assumed purchase of treasury
stock - Schedule A . . . . . . . . . . . . . . . . . . . . . (1.0)
III) Reflect actual exercises as of the
beginning of the period . . . . . . . . . . . . . . . . . . . 1.3
------ -----
Fully diluted earnings per share $5.7 121.8 $.05
====== ===== ====
</TABLE>
-1-
<PAGE> 3
EXHIBIT (11)
PARAMOUNT COMMUNICATIONS INC.
SCHEDULE A - ASSUMED EXERCISE OF OUTSTANDING OPTIONS
ELEVEN MONTHS ENDED MARCH 31, 1994
(IN MILLIONS)
<TABLE>
<CAPTION>
POTENTIAL
------------------------------
ADDITIONAL CASH
SHARES PROCEEDS
---------- --------
<S> <C> <C>
I) Options
-------
Options under the 1984 stock option plan . . . . . . . . . . . . . . . . . . . . . $ 0.7
Options under the 1989 stock option plan . . . . . . . . . . . . . . . . . . . . . 1.5 66.8
---- --------
1.5 67.5
II) Treasury Stock Purchase
-----------------------
Use of proceeds to purchase stock at average price
for the period $65.15 (higher than period-end price) . . . . . . . . . . . . . . (1.0) (67.5)
---- --------
0.5 $ -0-
==== ========
</TABLE>
-2-
<PAGE> 4
EXHIBIT (11)
PARAMOUNT COMMUNICATIONS INC.
COMPUTATION OF LOSS PER SHARE
SIX MONTHS ENDED APRIL 30, 1993
(IN MILLIONS, EXCEPT PER SHARE)
<TABLE>
<CAPTION>
E.P.S
--------------------------
LOSS BEFORE LOSS BEFORE
CUMULATIVE EFFECT CUMULATIVE EFFECT
OF ACCOUNTING NET OF ACCOUNTING NET
CHANGE LOSS SHARES CHANGE LOSS
------ ---- ------ ----------------- ----
<S> <C> <C> <C> <C> <C>
Loss and average common shares outstanding . . . . . . . . . $ (9.1) $(76.0) 117.8
Assumed exercise of dilutive options . . . . . . . . . . . . 5.4
Assumed purchase of treasury stock using
the average market price . . . . . . . . . . . . . . . . . (4.4)
------ ------ ------
Primary loss per share (9.1) (76.0) 118.8 $(.08)(1) $(.65)(1)
==== =====
Reverse dilutive effect of options included
in primary calculation . . . . . . . . . . . . . . . . . . (1.0)
------
117.8
Calculation of fully diluted loss per share
I) Assumed exercise of outstanding
options - Schedule A . . . . . . . . . . . . . . 5.6
II) Assumed purchase of treasury
stock - Schedule A . . . . . . . . . . . . . . (4.1)
III) Reflect actual exercises as of the
beginning of the year . . . . . . . . . . . . . 0.1
------ ------ -----
Fully diluted loss per share $ (9.1) $(76.0) 119.4 $(.08)(1) $(.65)(1)
====== ====== ===== ===== =====
</TABLE>
- - -----------------
(1) Computed using the average common shares outstanding since the assumed
exercise of options is anti-dilutive.
-3-
<PAGE> 5
EXHIBIT (11)
PARAMOUNT COMMUNICATIONS INC.
SCHEDULE A - ASSUMED EXERCISE OF OUTSTANDING OPTIONS
SIX MONTHS ENDED APRIL 30, 1993
(IN MILLIONS)
<TABLE>
<CAPTION>
POTENTIAL
--------------------------
ADDITIONAL CASH
SHARES PROCEEDS
---------- --------
<S> <C> <C>
I) Options
-------
Options under the 1984 stock option plan . . . . . . . . . . . . . . . . . . . . . 2.2 $ 72.3
Options under the 1989 stock option plan . . . . . . . . . . . . . . . . . . . . . 3.4 142.1
--- --------
5.6 214.4
II) Treasury Stock Purchase
-----------------------
Use of proceeds to purchase stock at end of period price
$52.00 (higher than average price for the period) . . . . . . . . . . . . . . . (4.1) (214.4)
---- --------
1.5 $ -0-
==== ========
</TABLE>
-4-
<PAGE> 6
EXHIBIT (11)
PARAMOUNT COMMUNICATIONS INC.
COMPUTATION OF EARNINGS PER SHARE
YEAR ENDED OCTOBER 31, 1992
(IN MILLIONS, EXCEPT PER SHARE)
<TABLE>
<CAPTION>
E.P.S
-------------------------
EARNINGS EARNINGS
BEFORE BEFORE
EXTRAORDINARY NET EXTRAORDINARY NET
ITEM EARNINGS SHARES ITEM EARNINGS
------------- -------- ------ ------------- --------
<S> <C> <C> <C> <C> <C>
Earnings and average common shares outstanding . . . . . $274.2 $265.4 118.1
Assumed exercise of dilutive options . . . . . . . . . . 5.6
Assumed purchase of treasury stock using
the average market price . . . . . . . . . . . . . . . (4.5)
----- ------ -----
Primary earnings per share 274.2 265.4 119.2 $2.31 $2.23
===== =====
Reverse dilutive effect of options included
in primary calculation . . . . . . . . . . . . . . . . (1.1)
-----
118.1
Calculation of fully diluted earnings per share
I) Assumed exercise of outstanding
options - Schedule A . . . . . . . . . . . . . 5.6
II) Assumed purchase of treasury
stock - Schedule A . . . . . . . . . . . . . . (4.5)
------ ------ -----
Fully diluted earnings per share $274.2 $265.4 119.2 $2.31 $2.23
====== ====== ===== ===== =====
</TABLE>
-5-
<PAGE> 7
EXHIBIT (11)
PARAMOUNT COMMUNICATIONS INC.
SCHEDULE A - ASSUMED EXERCISE OF OUTSTANDING OPTIONS
YEAR ENDED OCTOBER 31, 1992
(IN MILLIONS)
<TABLE>
<CAPTION>
POTENTIAL
------------------------------
ADDITIONAL CASH
SHARES PROCEEDS
---------- --------
<S> <C> <C>
I) Options
-------
Options under the 1973 stock purchase plan . . . . . . . . . . . . . . . . . . . . $ 0.4
Options under the 1984 stock option plan . . . . . . . . . . . . . . . . . . . . . 2.8 86.8
Options under the 1989 stock option plan . . . . . . . . . . . . . . . . . . . . . 2.8 111.1
---- --------
5.6 198.3
II) Treasury Stock Purchase
-----------------------
Use of proceeds to purchase stock at average price
for year $43.80 (higher than year-end price) . . . . . . . . . . . . . . . . . (4.5) (198.3)
---- --------
1.1 $ -0-
==== ========
</TABLE>
-6-
<PAGE> 8
EXHIBIT (11)
PARAMOUNT COMMUNICATIONS INC.
COMPUTATION OF EARNINGS PER SHARE
YEAR ENDED OCTOBER 31, 1991
(IN MILLIONS, EXCEPT PER SHARE)
<TABLE>
<CAPTION>
NET NET EARNINGS
EARNINGS SHARES PER SHARE
-------- ------ ------------
<S> <C> <C> <C>
Net earnings and average common shares outstanding . . . . . . . . . . $ 127.6 117.7
Assumed exercise of dilutive options . . . . . . . . . . . . . . . . . 3.5
Assumed purchase of treasury stock using
the average market price . . . . . . . . . . . . . . . . . . . . . . (2.7)
------- -----
Primary earnings per share 127.6 118.5 $1.08
=====
Reverse dilutive effect of options included
in primary calculation . . . . . . . . . . . . . . . . . . . . . . . (0.8)
-----
117.7
Calculation of fully diluted earnings per share
I) Assumed exercise of outstanding
options - Schedule A . . . . . . . . . . . . . . . . . . . . 4.0
II) Assumed purchase of treasury
stock - Schedule A . . . . . . . . . . . . . . . . . . . . . (3.1)
III) Reflect actual exercises as of the
beginning of the year
Options and purchase of treasury
stock - net . . . . . . . . . . . . . . . . . . . . . . 0.1
------ -----
Fully diluted earnings per share $ 127.6 118.7 $1.07
====== ===== =====
</TABLE>
-7-
<PAGE> 9
EXHIBIT (11)
PARAMOUNT COMMUNICATIONS INC.
SCHEDULE A - ASSUMED EXERCISE OF OUTSTANDING OPTIONS
YEAR ENDED OCTOBER 31, 1991
(IN MILLIONS)
<TABLE>
<CAPTION>
POTENTIAL
------------------------------
ADDITIONAL CASH
SHARES PROCEEDS
---------- --------
<S> <C> <C>
I) Options
-------
Options under the 1973 stock purchase plan . . . . . . . . . . . . . . . . . . . . . 0.1 $ 0.7
Options under the 1984 stock option plan . . . . . . . . . . . . . . . . . . . . . . 2.9 86.6
Options under the 1989 stock option plan . . . . . . . . . . . . . . . . . . . . . . 1.0 37.2
--- -------
4.0 124.5
II) Treasury Stock Purchase
-----------------------
Use of proceeds to purchase stock at year-end price
$40.13 (higher than average price for year) . . . . . . . . . . . . . . . . . . (3.1) (124.5)
---- -------
0.9 $ -0-
==== =======
</TABLE>
-8-
<PAGE> 1
EXHIBIT (21)
<PAGE> 2
List of Subsidiaries:
- - ---------------------
Consolidated Subsidiaries (direct subsidiaries of Paramount Communications Inc.
are designated with 'PCI' as the 'Parent or Investor') as of March 31, 1994:
<TABLE>
<CAPTION>
Unnamed Wholly-Owned
Jurisdic- Percentage Subsidiaries of Named
tion in Parent of Voting Subsidiaries Carrying
which or Securities on the Same Line of
Name Organized Investor Owned Business (1)(2)
---- --------- -------- ---------- ---------------------
Domestic Foreign
-------- -------
<S> <C> <C> <C> <C> <C>
Aetrax International
Corporation ('AIC') . . . . . . . . . . . Delaware PPCI 87
PCCL 13
Broadcast Holdings Ltd., L.P. ('BHL') . . . Delaware PCI 95
T59 5
Computer Curriculum Corporation . . . . . . Delaware PHI 100
CPW Holdings Inc. ('CPWH') . . . . . . . . Delaware NWI 100
CPW Investments Ltd., L.P. ('CPWI') . . . . Delaware PCI 98
CPWH 2
Eighth Century Corporation ('ECC'). . . . . Delaware PCIHC 100
Famous Players Inc. . . . . . . . . . . . . Canada PPCI 100 (1b) 4
Festival Inc. ('FES') . . . . . . . . . . . Delaware T59 100
Gulf & Western International
N.V. ('GWINV') . . . . . . . . . . . . . Netherlands PCBV 100
Antilles
International Raw Materials
Limited . . . . . . . . . . . . . . . . . Bahamas PCHC 100
Kings Island Company . . . . . . . . . . . Delaware CPWI 99 (1b) 2
CPWH 1
Macmillan, Inc. . . . . . . . . . . . . . . Delaware PHI 100 (1a) 2
Madison Square Garden Corporation . . . . . Delaware PCR 100 (1b) 15
Monetas N.V. . . . . . . . . . . . . . . . Netherlands PCBV 100
Antilles
Newtel Inc. ('NI') . . . . . . . . . . . . Delaware PCI 100
Nine W Inc. ('NWI') . . . . . . . . . . . . Delaware PCIHC 100
Paramount Communications
Acquisition Corporation ('PCAC'). . . . . Delaware PCIHC 100
Paramount Communications B.V.
('PCBV') . . . . . . . . . . . . . . . . Netherlands PCHC 100
Paramount Communications (Canada)
Limited ('PCCL'). . . . . . . . . . . . . Ontario PCICI 100
</TABLE>
-1-
<PAGE> 3
<TABLE>
<CAPTION>
Unnamed Wholly-Owned
Jurisdic- Percentage Subsidiaries of Named
tion in Parent of Voting Subsidiaries Carrying
which or Securities on the Same Line of
Name Organized Investor Owned Business (1)(2)
---- --------- -------- ----- ---------------------
Domestic Foreign
-------- -------
<S> <C> <C> <C> <C> <C>
Paramount Communications Holding
Company ('PCHC') . . . . . . . . . . . Delaware PCIHC 100 (1b) 9
Paramount Communications Realty
Corporation ('PCR') . . . . . . . . . . . Delaware PCIHC 100 (1b) 12
Paramount Home Video, Inc. . . . . . . . . Delaware PPC 100
Paramount Parks Inc . . . . . . . . . . . . Delaware PCR 100
Paramount Pictures (Canada)
Inc. ('PPCI') . . . . . . . . . . . . . Ontario GWINV 66
PCCL 34
Paramount Pictures
Corporation ('PPC') . . . . . . . . . . . Delaware PCIHC 100 (1b) 17 3
Paramount Stations Group Inc. ('PSG') . . . Virginia NI 79 (1b) 2
BHL 21
Paramount Stations Group Holding
Company Inc. ('PSGHC') . . . . . . . . . Virginia PSG 100 (1b) 3
Paramount Stations Group
of Philadelphia Inc. . . . . . . . . . . Virginia PSGHC 100
Paramount Television Service, Inc. . . . . Delaware PPC 100
PCI Canada Inc. ('PCICI') . . . . . . . . . Delaware PCHC 100 (1b) 1 4
PCI's Holdings Corporation ('PCIHC') . . . Delaware PCI 100 (1a) 5
(1b) 7
Premier Advertiser Sales Inc. . . . . . . . Delaware PPC 100
Prentice-Hall Canada Inc. . . . . . . . . . Ontario PHII 100
Prentice-Hall, Inc. ('PHI') . . . . . . . . Delaware PCAC 100 (1a) 95 15
Prentice-Hall International, Inc. ('PHII'). New York PHI 100
Silver Burdett Ginn Inc. . . . . . . . . . Delaware S&S 100 (1a) 1
Simon & Schuster, Inc. ('S&S'). . . . . . . New York PCIHC 100 (1a) 14 3
Theatre 59 Ltd. ('T59') . . . . . . . . . . Delaware AIC 100 (1b) 1
--- --
177 38
=== ==
</TABLE>
-2-
<PAGE> 4
Unconsolidated subsidiaries held by Paramount Communications Inc. as of March
31, 1994:
<TABLE>
<CAPTION>
Percentage
Jurisdiction Parent of Voting
in which or Securities
Name Organized Investor Owned
---- --------- -------- ----------
<S> <C> <C> <C>
Cinema International Corporation N.V. . . . . . . . . . . Netherlands PPC 49
Cinema International B.V. . . . . . . . . . . . . . . . . Netherlands PCBV 49
Cinamerica Theatres, L.P. . . . . . . . . . . . . . . . . Delaware FES 50
United Cinemas International Multiplex B.V. . . . . . . . Netherlands PCBV 49
United International Pictures B.V. . . . . . . . . . . . . Netherlands PCBV 33
USA Networks . . . . . . . . . . . . . . . . . . . . . . . New York ECC 50
</TABLE>
(1) The subsidiaries of these companies are engaged in the following lines of
business:
<TABLE>
<CAPTION>
Domestic Foreign
-------- -------
<S> <C> <C> <C>
(a) Publishing . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117 18
(b) Entertainment . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 20
--- --
177 38
=== ==
</TABLE>
(2) In addition to subsidiaries referred to in (1), the names of certain
subsidiaries, which if considered in the aggregate as a single subsidiary
would not constitute a significant subsidiary, have been omitted.
-3-
<PAGE> 1
EXHIBIT (23)(a)
<PAGE> 2
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statements (Numbers 33-48534, 33-48535, 33-46900, 33-28441, 33-22743, 2-66018,
2-88448 and 33-10554 on Form S-8 and Numbers 2-83427 and 33-51656 on Form S-3)
of Paramount Communications Inc. and in the related Prospectuses of our report
dated August 27, 1993, except for Notes A and J, as to which the date is
September 10, 1993, with respect to the consolidated balance sheet of
Paramount Communications Inc. as of April 30, 1993 and October 31, 1992, and
the related consolidated statements of earnings, changes in stockholders'
equity and cash flows for the six-month period ended April 30, 1993 and for
each of the two years in the period ended October 31, 1992 included in this
Transition Report (Form 10-K) for the eleven-month period ended March 31, 1994.
ERNST & YOUNG
New York, New York
June 24, 1994
<PAGE> 1
EXHIBIT (23)(b)
<PAGE> 1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statements on Form S-8(Numbers 33-48534,
33-48535, 33-46900, 33-28441, 33-22743, 2-66018, 2-88448 and 33-10554) and
Form S-3(Numbers 2-83427 and 33-51656) of Paramount Communications Inc. of our
report dated June 3, 1994 appearing on Page F-2 of this form 10-K.
PRICE WATERHOUSE
New York, New York
June 24, 1994
<PAGE> 2
EXHIBIT (24)
<PAGE> 3
PARAMOUNT COMMUNICATIONS INC.
POWER OF ATTORNEY TO SIGN ANNUAL REPORT ON FORM 10-K
KNOW ALL MEN BY THESE PRESENTS, that the undersigned in his capacity as set
forth below, hereby constitutes and appoints Frank J. Biondi, Jr. and Philippe
P. Dauman and each of them severally, his true and lawful attorneys and agents
with power to act with or without the other to execute the Annual Report on
Form 10-K of Paramount Communications Inc. for the eleven months ended March
31, 1994 and any amendments thereto.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
17th day of June, 1994.
/s/ FRANK J. BIONDI, JR. Director
- - -------------------------------------
<PAGE> 4
PARAMOUNT COMMUNICATIONS INC.
POWER OF ATTORNEY TO SIGN ANNUAL REPORT ON FORM 10-K
KNOW ALL MEN BY THESE PRESENTS, that the undersigned in his capacity as set
forth below, hereby constitutes and appoints Frank J. Biondi, Jr. and Philippe
P. Dauman and each of them severally, his true and lawful attorneys and agents
with power to act with or without the other to execute the Annual Report on
Form 10-K of Paramount Communications Inc. for the eleven months ended March
31, 1994 and any amendments thereto.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
17th day of June, 1994.
/s/ GEORGE S. ABRAMS Director
- - --------------------------------------
<PAGE> 5
PARAMOUNT COMMUNICATIONS INC.
POWER OF ATTORNEY TO SIGN ANNUAL REPORT ON FORM 10-K
KNOW ALL MEN BY THESE PRESENTS, that the undersigned in his capacity as set
forth below, hereby constitutes and appoints Frank J. Biondi, Jr. and Philippe
P. Dauman and each of them severally, his true and lawful attorneys and agents
with power to act with or without the other to execute the Annual Report on
Form 10-K of Paramount Communications Inc. for the eleven months ended March
31, 1994 and any amendments thereto.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
17th day of June, 1994.
/s/ PHILIPPE P. DAUMAN Director
- - -------------------------------------
<PAGE> 6
PARAMOUNT COMMUNICATIONS INC.
POWER OF ATTORNEY TO SIGN ANNUAL REPORT ON FORM 10-K
KNOW ALL MEN BY THESE PRESENTS, that the undersigned in his capacity as set
forth below, hereby constitutes and appoints Frank J. Biondi, Jr. and Philippe
P. Dauman and each of them severally, his true and lawful attorneys and agents
with power to act with or without the other to execute the Annual Report on
Form 10-K of Paramount Communications Inc. for the eleven months ended March
31, 1994 and any amendments thereto.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
17th day of June, 1994.
/s/ MARTIN S. DAVIS Director
- - -------------------------------------
<PAGE> 7
PARAMOUNT COMMUNICATIONS INC.
POWER OF ATTORNEY TO SIGN ANNUAL REPORT ON FORM 10-K
KNOW ALL MEN BY THESE PRESENTS, that the undersigned in his capacity as set
forth below, hereby constitutes and appoints Frank J. Biondi, Jr. and Philippe
P. Dauman and each of them severally, his true and lawful attorneys and agents
with power to act with or without the other to execute the Annual Report on
Form 10-K of Paramount Communications Inc. for the eleven months ended March
31, 1994 and any amendments thereto.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
17th day of June, 1994.
/s/ WILLIAM C. FERGUSON Director
- - -------------------------------------
<PAGE> 8
PARAMOUNT COMMUNICATIONS INC.
POWER OF ATTORNEY TO SIGN ANNUAL REPORT ON FORM 10-K
KNOW ALL MEN BY THESE PRESENTS, that the undersigned in his capacity as set
forth below, hereby constitutes and appoints Frank J. Biondi, Jr. and Philippe
P. Dauman and each of them severally, his true and lawful attorneys and agents
with power to act with or without the other to execute the Annual Report on
Form 10-K of Paramount Communications Inc. for the eleven months ended March
31, 1994 and any amendments thereto.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
17th day of June, 1994.
/s/ IRVING R. FISCHER Director
- - -------------------------------------
<PAGE> 9
PARAMOUNT COMMUNICATIONS INC.
POWER OF ATTORNEY TO SIGN ANNUAL REPORT ON FORM 10-K
KNOW ALL MEN BY THESE PRESENTS, that the undersigned in his capacity as set
forth below, hereby constitutes and appoints Frank J. Biondi, Jr. and Philippe
P. Dauman and each of them severally, his true and lawful attorneys and agents
with power to act with or without the other to execute the Annual Report on
Form 10-K of Paramount Communications Inc. for the eleven months ended March
31, 1994 and any amendments thereto.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
17th day of June, 1994.
/s/ H. WAYNE HUIZENGA Director
- - -------------------------------------
<PAGE> 10
PARAMOUNT COMMUNICATIONS INC.
POWER OF ATTORNEY TO SIGN ANNUAL REPORT ON FORM 10-K
KNOW ALL MEN BY THESE PRESENTS, that the undersigned in his capacity as set
forth below, hereby constitutes and appoints Frank J. Biondi, Jr. and Philippe
P. Dauman and each of them severally, his true and lawful attorneys and agents
with power to act with or without the other to execute the Annual Report on
Form 10-K of Paramount Communications Inc. for the eleven months ended March
31, 1994 and any amendments thereto.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
20th day of June, 1994.
/s/ KEN MILLER Director
- - -------------------------------------
<PAGE> 11
PARAMOUNT COMMUNICATIONS INC.
POWER OF ATTORNEY TO SIGN ANNUAL REPORT ON FORM 10-K
KNOW ALL MEN BY THESE PRESENTS, that the undersigned in his capacity as set
forth below, hereby constitutes and appoints Frank J. Biondi, Jr. and Philippe
P. Dauman and each of them severally, his true and lawful attorneys and agents
with power to act with or without the other to execute the Annual Report on
Form 10-K of Paramount Communications Inc. for the eleven months ended March
31, 1994 and any amendments thereto.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
17th day of June, 1994.
/s/ DONALD ORESMAN Director
- - -------------------------------------
<PAGE> 12
PARAMOUNT COMMUNICATIONS INC.
POWER OF ATTORNEY TO SIGN ANNUAL REPORT ON FORM 10-K
KNOW ALL MEN BY THESE PRESENTS, that the undersigned in his capacity as set
forth below, hereby constitutes and appoints Frank J. Biondi, Jr. and Philippe
P. Dauman and each of them severally, his true and lawful attorneys and agents
with power to act with or without the other to execute the Annual Report on
Form 10-K of Paramount Communications Inc. for the eleven months ended March
31, 1994 and any amendments thereto.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
18th day of June, 1994.
/s/ JAMES A. PATTISON Director
- - -------------------------------------
<PAGE> 13
PARAMOUNT COMMUNICATIONS INC.
POWER OF ATTORNEY TO SIGN ANNUAL REPORT ON FORM 10-K
KNOW ALL MEN BY THESE PRESENTS, that the undersigned in his capacity as set
forth below, hereby constitutes and appoints Frank J. Biondi, Jr. and Philippe
P. Dauman and each of them severally, his true and lawful attorneys and agents
with power to act with or without the other to execute the Annual Report on
Form 10-K of Paramount Communications Inc. for the eleven months ended March
31, 1994 and any amendments thereto.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
17th day of June, 1994.
/s/ BRENT D. REDSTONE Director
- - -------------------------------------
<PAGE> 14
PARAMOUNT COMMUNICATIONS INC.
POWER OF ATTORNEY TO SIGN ANNUAL REPORT ON FORM 10-K
KNOW ALL MEN BY THESE PRESENTS, that the undersigned in his capacity as set
forth below, hereby constitutes and appoints Frank J. Biondi, Jr. and Philippe
P. Dauman and each of them severally, his true and lawful attorneys and agents
with power to act with or without the other to execute the Annual Report on
Form 10-K of Paramount Communications Inc. for the eleven months ended March
31, 1994 and any amendments thereto.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
17th day of June, 1994.
/s/ SUMNER M. REDSTONE Director
- - -------------------------------------
<PAGE> 15
PARAMOUNT COMMUNICATIONS INC.
POWER OF ATTORNEY TO SIGN ANNUAL REPORT ON FORM 10-K
KNOW ALL MEN BY THESE PRESENTS, that the undersigned in his capacity as set
forth below, hereby constitutes and appoints Frank J. Biondi, Jr. and Philippe
P. Dauman and each of them severally, his true and lawful attorneys and agents
with power to act with or without the other to execute the Annual Report on
Form 10-K of Paramount Communications Inc. for the eleven months ended March
31, 1994 and any amendments thereto.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
17th day of June, 1994.
/s/ FREDERIC V. SALERNO Director
- - -------------------------------------
<PAGE> 16
PARAMOUNT COMMUNICATIONS INC.
POWER OF ATTORNEY TO SIGN ANNUAL REPORT ON FORM 10-K
KNOW ALL MEN BY THESE PRESENTS, that the undersigned in his capacity as set
forth below, hereby constitutes and appoints Frank J. Biondi, Jr. and Philippe
P. Dauman and each of them severally, his true and lawful attorneys and agents
with power to act with or without the other to execute the Annual Report on
Form 10-K of Paramount Communications Inc. for the eleven months ended March
31, 1994 and any amendments thereto.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
17th day of June, 1994.
/s/ WILLIAM SCHWARTZ Director
- - -------------------------------------
